Types of Programmatic Advertising: Deals & Formats Explained
Programmatic advertising is a complicated topic that’s always evolving.
Because it’s made up of so many different technologies, terms, and business practices, finding a place to start learning about the types of programmatic advertising deals can be challenging for those who are new to the space.
Even programmatic authorities like Digiday have had little choice but to reassure their readers through their articles over the years that programmatic advertising is confusing – no matter how clearly it’s described (and re-described, as it undergoes changes year to year).
Despite it’s daunting and unpredictable nature, there are certain concepts that have managed to withstand the test of time – making them (arguably) the best place to begin learning about the programmatic ecosystem.
In this guide, we’ll be taking a look at the different types of programmatic advertising deals that the industry has been using for over a decade.
- What is programmatic advertising? The simple explanation
- Programmatic advertising terms to know before getting started
- The 4 different types of programmatic advertising deals explained
- Programmatic Ad Formats
- Benefits of Programmatic Advertising
- Examples of Programmatic Advertising Platforms and Companies
Programmatic advertising, also referred to as programmatic ad buying or media buying, can be described simply as using software and machines to manage the purchasing of digital ads online.
If it’s your first time learning about programmatic advertising, we highly recommend that you start by first taking a read through our complete overview of the subject – The Programmatic Advertising Ecosystem Explained.
While many types of programmatic advertising exist, all of them function through the use of automation and algorithms in one way or another.
In digital advertising, the term “programmatic” is almost entirely synonymous with “automated”.
So, how is this any different from other available types of digital advertising?
Advertising was originally managed through manual human negotiations – which led to the creation of the world’s first ad networks in an effort to make the process more efficient.
While manual negotiations over ad space still take place between very large publishers and advertisers, ad exchanges were created to automate the repetitive aspects of ad buying.
In modern digital advertising, both programmatic and non-programmatic methods of ad buying are used to leverage different advantages and meet different objectives.
To learn more about why, check out the history of programmatic advertising.
It wouldn’t be adtech if there wasn’t a big bag of jargon to pass around before the field trip.
These terms have been compiled as a “field guide” for you to reference.
Don’t be overwhelmed by this list! (Deep breaths, we’ve all been here! 😉)
The main focus of this guide is the 4 types of programmatic deals – not these terms!
But, before embarking on the journey into the tall grass of programmatic advertising, these frequently used programmatic terms are worth bringing with you – it’s dangerous to go alone!
- Ad Trafficking
- Bid Request
- Clearing Price
- CPC (Cost Per Click)
- CPM (Cost Per Mile)
- Demand Source
- First Look
- Fixed Price
- Price Floor
- Programmatic Direct
- Reserved Inventory (aka “Guaranteed Inventory”)
- Unreserved Inventory (aka “Non-Guaranteed Inventory”)
Nearly 50% of both advertisers and publishers have trouble understanding how programmatic auctions work!
(And with the list of terms you just scrolled past to get here, who can blame them?)
Why is programmatic advertising so complicated?
The reality is that it used to be much simpler than it is today.
In modern digital advertising, there are 4 main types of programmatic deals:
- RTB (Real-Time Bidding)
- PMP (Private Marketplace)
- Preferred Deals
- Programmatic Guaranteed
(Source: DoubleClick by Google)
The ad server priority (or “bidding priority”) in which different advertisers are allowed to place their bids via the above deal types – runs from lowest to highest based on the list above (with RTB being the lowest priority, while programmatic guaranteed deals are the highest priority).
Advertisers used to have only one option – to purchase ads programmatically in bulk.
However, this led to major problems in accurately appraising the true value of ad space.
To provide more control to publishers and advertisers, new methods of conducting ad buying and selling programmatically were developed.
While all of these types of programmatic advertising offer flexible options that greatly increase ad revenue, they’re also a source of confusion in modern digital advertising.
(aka Open Auction / Open Marketplace / Open Exchange)
RTB (real-time bidding) is a bidding model that allows ad inventory to be purchased and sold on an impression-by-impression basis through near-instant programmatic auction processes.
This method of bidding was originally developed to solve the problem of ad exchanges only being able to manage the buying and selling of ads programmatically via bulk-impressions.
Introduced in 2009, RTB is the oldest and most popular programmatic ad auctioning method.
RTB is also commonly referred to as “open auction” or “open marketplace” bidding, because the ad exchange platforms upon which the auctions are conducted are “open” to the public.
While RTB is one of the most popular, easiest to access/implement, and widest-reaching types of programmatic deals, one disadvantage for advertisers is that they aren’t able to tell exactly which websites their ads will appear on, prior to bidding for the impressions.
Benefits and advantages of open auction deals include:
- Publishers are able to reliably sell their remnant inventory by offering it to a wide advertiser audience (albeit, at a lower CPM than other deal types).
- Open auctions are the easiest to configure and widely accessible programmatic methods of buying and selling digital ad inventory.
- Advertisers are able to put their ads in front of relevant audiences with a high level of cost efficiency.
Due to its popularity and widespread usage over the years, RTB is often wrongfully used interchangeably with programmatic advertising as a whole.
(This is comparable to people referring to cryptocurrency as Bitcoin, because it was the original and most widely used cryptocurrency, despite many other digital currencies existing.)
It’s fundamental to understand that while RTB is a form of programmatic advertising, not all programmatic advertising is RTB!
In the context of programmatic advertising, RTB is associated with open and private marketplaces, in which advertisers compete for impressions by bidding on them.
Keeping in mind that RTB involves bidding (as the name implies) – the differences between other programmatic deal types and RTB become more easily distinguishable once the other types of programmatic deals are explored and understood.
(aka Private Auction / Closed Auction / Private Access Auction / Invitation Only Auction / Exclusive Auction)
A PMP (private marketplace) is a digital marketplace where ad impressions are bought and sold programmatically on an impression-by-impression basis between exclusive parties.
PMPs offer an auctioning model that operates almost identically to traditional RTB in every way, and PMP deals are categorised as a type of RTB.
The only real difference is – advertising demand sources may only participate in auctions for ad impressions if they’re invited to do so by a publisher.
Because PMPs involve the process of a publisher directly inviting an advertiser to purchase their ad inventory (and also sometimes includes a one-to-one negotiation over the PMP’s price floor) PMPs are also (typically) categorised as programmatic direct.
The exclusive list of demand source participants is typically controlled by the publisher through the use of a whitelist/blocklist functionality within their ad tech platform(s).
DSPs (demand side platforms) also sometimes offer advertisers access to their own PMPs, which have pre-existing connections established with exclusive publishers.
Typically, mid-to-large scale publishers with high amounts of audience reach make more frequent use of PMPs, as advertiser competition over their ad space is high enough to justify setting it aside exclusively for private auctions.
Note: If your head is spinning from the number of alternate ways to simply refer to a “private marketplace deal”… you’re not alone. We’re all in this crazy adtech boat together (and just between you and me, I think Captain Adtech has been hitting the spirits a tad over-passionately).
Benefits and advantages of PMP deals include:
- Publishers are able to mark and/or set aside their most valuable premium ad inventory, and invite their top advertising partners to bid for that ad space.
- Advertisers are able to know exactly which websites their ads will appear on (unlike open marketplaces), allowing ad performance to be measured more accurately.
- It’s possible for both publishers and advertisers to bypass the use of ad exchanges – resulting in cheaper ad prices for advertisers and more ad revenue for publishers.
Yes, you read that correctly – it’s a variation of a PMP deal with an alternate name to boot (but this should come as no surprise by now, what with Captain Adtech at the helm).
To make matters even more confusing (and yes, this is indisputably just confusing, no matter how you look at it), the term “first look”, as mentioned in the list of terms earlier, is used broadly to describe a publisher’s configuration for their bidding prioritisation, and is more closely associated with preferred deals in modern digital advertising than PMPs.
Open auction with priority is a type of PMP which is sometimes offered by certain exchange platforms – showcasing premium ad space from across top publisher websites.
PMPs that operate using open auction with priority are a bit different from normal PMPs:
- Only certain high-quality publishers are allowed to list their ad inventory in the PMP.
- Any advertiser is able to connect to this type of PMP.
- The “exclusivity” of this type of PMP is a reverse-model of a typical PMP, with publishers being “whitelisted” by the exchange platform, instead of the publishers “whitelisting” specific advertisers.
Advertisers connected to the open auction with priority PMP are allowed to bid on ad impressions that take place on a publisher’s website, before that impression can be bid on by any open marketplace auctions that publisher may be connected to.
If an advertiser bids above the price floor for an ad impression, that advertiser’s bid is accepted as the clearing price, and the auction closes before ever going to an open marketplace that the publisher may be connected to.
This model of bidding may seem similar to preferred deals, which will be covered next.
However, an easy way to tell the two apart is that in an open auction with priority, multiple advertisers are bidding against each other – while preferred deals are a negotiation process that take place on a one-to-one basis between a publisher and an advertiser.
Additionally, in general, preferred deals take an even higher priority than open auctions with priority (despite both deal types sometimes being referred to as “first looks”).
(aka Unreserved Fixed Rate / Spot Buying / Right of First Refusal / Private Access / First Look)
A preferred deal in programmatic advertising allows publishers to grant certain advertisers priority access to ad impressions generated through their digital media inventory.
This “preferred” level of access is secured by an advertiser through a one-to-one manual sales negotiation with a publisher, in which a fixed price is agreed upon for the ad impressions involved in the deal.
Preferred deals are categorised as programmatic direct.
Advertisers that have established a preferred deal arrangement with a publisher are allowed (but not forced) to purchase certain ad impressions agreed upon in the deal before those impressions are pushed to a PMP auction or an open market auction.
(The above concept is also referred to as the advertiser having no “fill commitment”.)
At first glance, the description of a preferred deal can (like so many things in adtech) cause confusion when compared to the other deal types, so let’s break it down piece by piece:
- When the preferred deal is manually negotiated between the publisher and the advertiser, a fixed price is determined (typically based on CPM or CPC).
- The fixed price that’s agreed upon is almost always higher than the price floors that the publisher has established for their closed and open marketplace deals.
- As a reminder, because the price is fixed, no auctions are taking place over these ad impressions. If the advertiser chooses to “spot buy” any of the agreed upon ad impressions as they become available, they have the exclusive right to do so.
- The ad inventory is unreserved. This means two things. Firstly, the advertiser isn’t obligated to buy these ad impressions as they become available. Secondly, the publisher may still choose to sell the ad impressions in a guaranteed deal if they so choose. In essence, neither party is “forced” to adhere to the preferred deal that’s been struck, though when the preferred deal IS used, it’s beneficial for both parties.
- The term “right of first refusal” helps to describe a preferred deal. An advertiser has the exclusive right to have their “first look” at ad impressions as they become available, prior to those impressions being sent to a PMP or open auction process.
- The only exception to a right of first refusal taking place would be ad inventory being reserved in a programmatic guaranteed deal for another advertiser.
Benefits and advantages of preferred deals deals include:
- Publishers are able to generate more revenue for their ad impressions.
- Advertisers are able to reliably place their ads in front of high-quality audiences.
- Advertisers may use a DSP platform to create highly detailed audience personas and target the most relevant ad impressions for each of their ads.
- Striking preferred deals relies on building business relationships manually, which allows both parties to collaborate on mutually beneficial optimisations over time.
- Both parties have more manual control over the complete ad serving process.
The short and simple answer is – no.
This question often arises from the use of the word “bidding” in a preferred deal – which confuses people through automatic association with the concept of an auctioning process.
Here’s an example of how the term “bidding” is used in a preferred deal:
- A publisher has a CPM price floor of $2.50.
- A publisher and an advertiser negotiate a fixed price CPM of $5.00, and strike a preferred deal for all ad impressions that are generated for a specific blog topic.
- A visitor comes to the website, and visits the specific blog topic.
- There are two other advertisers, willing to bid at CPMs of $3.00 and $3.50 via an open auction (or, for example’s sake, it could also be a PMP / closed auction) for the ad impression that’s available.
- However, the advertiser with the preferred deal gets the “first look” at the impression – and their DSP’s algorithm programmatically determines whether to place a “bid” for that impression.
- The advertiser with the preferred deal isn’t participating in the auction. If they choose to place their fixed price $5.00 “bid” for the impression, they’ll “win” or “purchase” the impression, despite never having taken part in the auctioning process.
- Even if one of the other two advertisers in the auction process had been willing to bid at a $5.50 CPM (which would be very unlikely – as the $5.00 CPM is already much more than the publisher’s price floor), the advertiser with the preferred deal still would still “win” the impression, because their “bid” is a fixed price arrangement with the publisher which takes precedence over the entire auction process.
- If the advertiser with the preferred deal chose not to bid for the impression, then the auction would initiate and proceed as normal between the other advertisers.
The key takeaway from this example is that “bidding” is not a term that’s exclusive to “auctions” in programmatic advertising – a “bid” is simply the maximum amount an advertiser is willing to pay for an impression, regardless of whether or not it takes place in an auction environment.
(aka Guaranteed Buy, Programmatic Premium)
Programmatic guaranteed refers to a type of deal in which a publisher and advertiser manually negotiate one-to-one in order to determine a fixed price for ad inventory that is purchased directly by the advertiser and reserved exclusively for them by the publisher.
Programmatic guaranteed deals are categorised as programmatic direct.
Similar to preferred deals, no auction process takes place in a guaranteed buy.
A programmatic guaranteed deal is similar to a preferred deal in that a publisher and advertiser negotiate a fixed price for (typically) premium ad inventory.
The only difference is that in a programmatic guaranteed deal, the ad inventory is reserved exclusively for the advertiser – meaning that the advertiser has “fill commitment”.
In other words, this means that the advertiser becomes obligated to purchase (or “fill”) a fixed number of impressions at a fixed price, based on the negotiation of the deal.
Dealing with reserved inventory also means that the publisher can’t sell or auction the agreed upon inventory to any other advertisers once the deal is closed.
While programmatic guaranteed deals are a form of “bulk buying” premium ad impressions in a sort of “package deal”, once the deal is struck between the publisher and the advertiser, the ads aren’t just placed throughout the publisher’s content immediately.
This is where the programmatic element of guaranteed buys come into effect:
- Similar to a preferred deal, inventory is scanned and analysed on an impression-by-impression basis by the advertiser’s DSP – which may also make use of a DMP (what’s the difference?) or other data platform to identify certain details about the impression (this can also be described as the advertiser having a “full view” of the publisher’s inventory).
- The programmatic guaranteed method of buying allows an advertiser to identify which audience an impression is associated with, based on that impression’s device ID or through cookie matching (although cookie matching is a practice which will be phased out and replaced pending the end of third party cookies).
- Unlike in preferred deals, impressions that align with the advertiser’s audience will show the advertiser’s ad immediately. The advertiser doesn’t have the liberty of freely switching off or pausing their ad campaign, because the inventory is reserved – though this also means that the campaign is sure to run according to the agreement.
- To further clarify the difference between programmatic guaranteed deals and preferred deals – while preferred deals may optionally place bids to “spot buy” certain inventory for a fixed price using dynamic audience variables, a programmatic guaranteed deal involves no selective process (outside of the DSP’s scan to confirm that the audience alignment is correct) for placing a bid , as both the price and all audience variables are predetermined prior to the deal’s conclusion.
- All of these processes, like most things programmatic, happen nearly instantly – and are repeated until all of the agreed upon inventory in the deal has been filled.
Benefits and advantages of programmatic guaranteed include:
- Publishers are able to sell their premium inventory in the most reliable way for the best possible price to reputable advertising demand sources.
- Advertisers are able to place their ads in front of highly relevant audiences according to prices and ad trafficking variables that reliably meet their campaign objectives.
- Both parties are afforded more control over all aspects of the ad serving process, similar to other programmatic direct deal formats.
Confusion Clarified: Programmatic Guaranteed vs Automated Guaranteed (aka Automated Direct, Automated Premium) – Are they the same thing?
The short and simple answer is – no.
Automated guaranteed can be considered a fifth type of deal, though modern descriptions of programmatic advertising deals often overlook this deal type or bundle its functionalities together with programmatic guaranteed deals.
Programmatic guaranteed and automated guaranteed are very commonly (wrongfully) used as interchangeable terms – to the point where it’s often left to guesswork as to whether or not a given party understands that there’s a semantic difference between the two when they refer to “automated guaranteed”.
In fact, the two phrases are used interchangeably so commonly that even the IAB (a highly reputable organisation whose purpose is to help clarify the madness of adtech) has listed the two terms as interchangeable synonyms, rather than their own categories (if you happened to meet Captain Adtech earlier in this guide – by this point they’ve completely drained the liquor reserves, nearly capsized the adtech ship, and have proceeded to sing an off-key sea shanty while dancing a jolly sailor’s jig atop the crow’s nest).
While automated guaranteed deals and programmatic guaranteed deals both seek to automate media buying – automated guaranteed focuses on creating direct deals through a third-party “shopping” platform interface, while programmatic guaranteed allows direct deals to be created through the intricate configuration of programmatic auctioning technology.
On a surface level, it can be difficult to understand the difference – but the two deal types make use of entirely different technology sets, and are designed for two different use cases.
This table outlines the differences:
|Automated Guaranteed||Programmatic Guaranteed|
|Technology Used||• Uses a website to host an ad buying (or “shopping”) interface.|
• Facilitates the direct deal by replacing/automating the traditional IO (insertion order) process of a direct buy arrangement.
• The third-party “shopping” website is connected to the publisher’s website via an ad server API.
|• Uses OpenRTB auctioning technology (what most of programmatic advertising runs on – not to be confused with an open marketplace).|
• Facilitates the direct deal using deal IDs.
• The publisher uses their SSP to connect to multiple programmatic demand sources (DSPs, ad exchanges, ad networks, etc.).
|Negotiation Process||• Negotiations are initiated through the third-party website hosting the buying interface, and are typically managed entirely through the platform (unless external negotiations take place).||• Negotiations are managed entirely on a one-to-one basis by the publisher and the advertiser.|
|Audience Targeting||• All ad impressions are purchased upfront.|
• Any targeting of specific audiences is established through options available within the buying interface, rather than conducted by assessing inventory on an impression-by-impression basis.
|• Ad impressions are evaluated for audience qualification on an impression-by-impression basis by an advertiser’s DSP and/or DMP.|
|Example Use Case||• An advertiser wants to quickly and efficiently set up an ad campaign on several publisher websites that focus on creating content relevant to the advertiser’s target audience.|
• The advertiser is able to easily find publishers to work with, conduct negotiations, upload ad creatives, and set their budget via a third-party “shopping” website via an ad buying interface.
|• An advertiser wants to build a relationship with a specific publisher, and is willing to invest the time and resources needed to work with them to complete and configure a programmatic bidding integration between the ad servers of each party.|
(Note: This process isn’t always required. Many third-party platforms also facilitate programmatic direct deals between publishers and advertisers).
• The integration is completed, and later, the advertiser and publisher are able to negotiate and create highly detailed preferred deal and programmatic guaranteed deal arrangements.
|Advantages||• Ease of access for advertisers looking to run ad campaigns across multiple publisher sources.|
• Low resource investment from both parties.
|• Ability to target very specific audiences on an impression-by-impression basis for maximum ad relevance and spend optimisation.|
Programmatic advertising deals can be used to serve ads of any digital format online – and in modern digital advertising, programmatic ad serving solutions have become the norm.
Some of the most popular ad formats that are served using programmatic deals include:
However, in the context of programmatic advertising and PPC (pay-per-click), the term “display ads” refers to ads that are “displayed” on website content in static ad “spaces”, “slots”, or “zones” – with typical placement locations including the header, sidebar, in-content, and footer regions of a webpage.
As the name implies, video ads are digital advertisements that are displayed (not to be confused with display ads) within video and streaming content platforms.
With annual ad spending on video formats reaching about $37 billion in 2021, and forecasted to reach $45 billion by 2025 worldwide, it’s an effective method that many advertisers are turning to in an effort to expand their audience reach.
With how many devices and services are linked to video ad serving – including Netflix, YouTube, Smart TVs, mobile devices, apps, as well as streaming platforms like Twitch, and even future technologies such as VR, it’s no surprise that video is a format used by a majority of mid to large sized advertisers in modern advertising.
Some video ad variants include:
- In-stream ads: which appear in the video content itself, often “popping up” during the playback of a video or stream, or appearing at the beginning or end of the content.
- Out-stream ads: which appear as embedded video players alongside non-video contents sources like blogs and other website pages.
- In-display ads: which are video thumbnails displayed within the sidebar of a video playback service (like YouTube) in the “recommended” sidebar of the webpage.
Social ads refer to social media ads – a type of digital advertising which has exploded over the past decade, with annual ad spend reaching $110 billion in 2021 and forecasted to reach $138 billion by 2025 – just over tripling video’s ad spend.
In addition to traditional ads run on social media platforms, a newer type of advertising known as programmatic influencer marketing allows advertisers to programmatically establish and run influencer campaigns from outreach to to campaign management.
Audio ads refer to advertisements placed within the context of audio content, such as podcasts and online radio.
Traditionally, the only method of advertising through these mediums was to sponsor the placement of an advertisement to be edited into the production itself, or to have an “organic mention” or “shout out” of a product or service within the content itself.
However, like most ad formats, audio has also evolved with the introduction of programmatic audio advertising – which allows relevant audio ads to be targeted and served to designated audiences, just like other forms of programmatic advertising.
However, the difference is that native ads take on a format that closely emulates the look and feel of the content they’re presented in.
For instance, native ads may appear in the “read more” section at the bottom of a blog, or as a “learn more” section within the middle of a blog post’s content.
Programmatic advertising’s role in this format of ads is to further improve audience targeting to increase audience relevance – and to make the overall ad experience more seamless.
In addition, native advertising is a particularly effective format for serving contextual ads, which are similar to native ads, but focus on serving ads to users that share topical relevance with the page’s own content.
Digital out-of-home, commonly abbreviated as (DOOH), is a type of advertising that combines digital advertising with the traditional tactics of techniques such as billboard and poster advertising (though any type of physical digital display can serve ads in this format).
In contrast to other formats of programmatic advertising, programmatic DOOH doesn’t typically target individual users – but rather, uses literal “real-world” data to make advertising decisions, such as the weather, time of day, and population density to programmatically select which ads to serve.
DOOH is considered to be the most futuristic and experimental of ad formats, though this isn’t to say that advertisers haven’t already experienced a high level of success and positive reception through the channel – with 72% of respondents in a survey responding that they thought digital billboards “are a cool way to advertise”.
When compared to traditional advertising methods, and even alternate forms of digital advertising, programmatic advertising offers a set of distinct advantages for advertisers.
- Audience targeting for programmatic ads can be enhanced by combining first and third-party data to create ideal audience personas across multiple publisher sources.
- Contextual targeting options offered by many programmatic technologies, programmatic advertising is capable of increasing audience engagement by serving ads that resonate with their immediate and historical interests.
- Real-time reporting allows advertisers to make adjustments across all of their campaigns without having to wait for performance insights to act.
- Budget optimisation is handled in an intuitive way as ad impressions are served only to designated audiences based on data – reducing ad spend on ineffective ads.
- Performance transparency has historically been an obstacle for advertisers. Programmatic allows advertisers to get a full view of their ad performance, both in fully automated exchanges and in direct sale agreements with specific publishers.
- Fraud prevention in advertising has always been a top concern for advertisers. Modern programmatic platforms are able to detect and display anomalies in ad spend to alleviate this risk. In some instances, sophisticated platforms are even able to detect and block fraudulent engagements from sources like bots and click spam.
- Saving time with intuitive campaign configuration and management interfaces allows advertisers to focus their efforts on strategic level projects within their businesses.
With all of the different types of programmatic deals, formats, and technologies that have been mentioned throughout this guide, it must come as no surprise that there are many different businesses that specialize in different parts of the programmatic ecosystem.
Some of the various softwares and platforms that make up the programmatic advertising ecosystem include:
- SSPs, DSPs, and DMPs – serve to connect users to automated exchanges and data.
- Ad networks – serve as business intermediaries between publishers and advertisers.
- Example: AirNowMedia (Network for Mobile Ads)
- Ad exchanges – host and maintain programmatic auction environments.
- Example: OpenX
- Ad servers – allow publishers and advertisers to configure their ad serving process.
- Example: AdButler (Seems familiar… 🤔)
Meanwhile, companies like the IAB (Interactive Advertising Bureau) and digital news sources like Digiday also play a role in providing regulation and sharing news surrounding updates to the shifting programmatic advertising landscape as a whole.
While some companies make use of the full programmatic advertising stack, others keep their strategy lean by only using the components that they need.
Programmatic advertising is a powerful tool in the modern advertiser’s toolkit. Browsing examples of programmatic advertising success in real-world campaigns may be useful when building a strategy that works for meeting your own advertising objectives.
By combining the right types of programmatic deals with the right software platforms, your company can build sustainable business relationships to optimise your ad revenue.
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