Programmatic Advertising Q&A

Q: What is programmatic advertising, and how does it work?

A: Programmatic advertising is digital advertising that has been automated. Rather than negotiate insertion orders (I/Os) manually, programmatic advertising lets publishers offer their inventory to buyers and buyers to purchase it, without any manual intervention.

How it Works:

Let’s say you visit a site. Programmatic advertising starts when your browser calls the publisher’s ad server and says, “Hey, we have a user here! Let’s see an ad.” 

The ad server evaluates available buying options -- including direct deals, ad networks, and programmatic channels -- and decides where to request the ad (as we’ll see below, it’s a bit more complicated than that). If it chooses programmatic, it sends the request to the publisher’s SSP. 

The ad server wants to find a buyer in the programmatic space. The publisher’s supply-side platform (SSP) will offer it to programmatic buyers (more on that in a bit). Those buyers use a demand-side platform (DSP), a technology that allows them to purchase inventory programmatically.

DSPs manage multiple campaigns simultaneously, but for each ad opportunity, they evaluate the user data, targeting parameters, and budget constraints to determine if one of their campaigns is a match. If a campaign matches, the DSP calculates a bid based on audience data, advertiser goals, and real-time market conditions and then submits it to the SSP.

The SSP collects all bids from participating DSPs, applies filtering (such as brand safety and publisher rules), and selects the highest valid bid that meets the publisher’s criteria. The SSP then sends the winning bid and associated ad creative URL to the ad server. The ad server then delivers the final instructions to the browser, triggering the display of the winning ad.

All of this occurs in less than a second.

It’s important to note that this is a highly generalized description of how programmatic advertising works. Other key technologies, such as header bidding, data management platforms (DMPs), pre-bid filtering, and fraud prevention tools, further refine audience targeting and ensure brand safety in programmatic transactions.

Q: What are the advantages of programmatic advertising for advertisers and publishers?

A: The advantages are myriad and benefit everyone in the industry. For publishers, programmatic provides an opportunity to monetize inventory their sales teams didn’t have a chance to sell for whatever reason. And if a publisher doesn’t have a sales team, it can still sell digital advertising via the programmatic markets.

Programmatic advertising can help publishers find premium advertisers who may not have considered advertising with them before. Suppose an advertiser purchases inventory on a site and has surprisingly good results. That advertiser may opt to invest more and even enter exclusive deals.

Programmatic advertising allows advertisers to spend their budgets across various publishers rather than place a big bet with a single publisher. This flexibility enables them to test different campaign strategies to see what works and change campaign criteria mid-flight to improve results.

Programmatic advertising also lets advertisers spend their budgets more efficiently. Let’s say you want to reach East Coast moms with a taste for luxury fashion. Programmatic enables you to focus your ad spend on users who meet that criteria across multiple sites.

Q: What is header bidding?

A: Header bidding is a solution to a challenge that once plagued the programmatic markets: waterfalling (also called daisy chaining).

Before header bidding, Ad Ops teams configured their ad servers to offer inventory sequentially -- first to buyers who had historically paid the highest average CPM and maintained consistent spending. If Buyer A had the highest average CPM, they would get the first opportunity to purchase the impression. If Buyer A passed, the ad server would offer it to Buyer B, and so on, until the impression was sold.

This sequential process (waterfalling) created significant inefficiencies. First, the more hops in the waterfall, the longer the user waits to see the content. If it takes too long, the user will get frustrated and click away before the publisher can monetize the visit.

Equally frustrating, buyers willing to pay higher prices may be stuck further down the daisy chain, which means they often never have a chance to bid. Buyer A may have a higher average CPM overall, but Buyer C might run a high-budget retargeting campaign focused on acquiring specific users. However, because Buyer C is lower in the waterfall, they never get a chance to bid, resulting in lost revenue for the publisher and a missed audience opportunity for the advertiser.

Moreover, many waterfalls are set up to offer impressions first to a direct-sold deal, then to an ad network or open market. But the same problem as above applies. This setup reduces competition among demand sources, which can drive down CPMs and cause publishers to miss out on higher-paying bids.

Header bidding eliminates these inefficiencies by allowing publishers to offer ad inventory to multiple demand partners (direct buyers, ad networks, and programmatic buyers) simultaneously rather than one at a time. This creates a real-time, competitive auction that maximizes revenue potential.

Here’s how it works:

• User visits a web page, and the browser begins loading the content, including a header bidding script.
• Header bidding runs a simultaneous auction among direct deals, ad networks, and programmatic buyers (via DSPs).
• The winning bid is sent to the publisher’s ad server, where it competes with direct-sold deals and other demand sources.
• The ad server makes the final decision and serves the winning ad to the user.

What is a supply-side platform (SSP), and how does it help publishers?

A: A Supply-Side Platform (SSP) is a technology platform that lets publishers manage, optimize, and sell their ad inventory programmatically. Publishers use SSPs such as Colossus SSP to ensure their ad impressions are sold in real time to the highest-paying advertisers while maintaining control over pricing, brand safety, and demand sources.

An SSP offers many benefits to publishers, including:

• Increasing the pool of buyers interested in a publisher’s inventory. An SSP allows publishers to sell their inventory to DSPs, ad exchanges, ad networks, and direct buyers in an automated auction.
• An SSP maximizes revenue by finding the buyer who values it most. Instead of pre-setting fixed prices, an SSP lets multiple advertisers bid on impressions in real-time, increasing competition and raising CPMs.
• Enforce brand safety and controls. To maintain ad quality, publishers can block specific categories of advertisers, set floor prices, and control ad placements.

Q: What are the different types of programmatic deals?

A: There are multiple ways advertisers and publishers can buy and sell inventory programmatically, each offers different levels of control, exclusivity, and pricing:

Q: What are Made-for-Advertising (MFA) sites, and how do they affect ad quality and campaign performance?

A: Made-for-Advertising (MFA) sites are websites that prioritize ad revenue over meaningful user experience, often by maximizing impressions and ad density while offering minimal original content.

That said, it's important to note that not all ad-heavy sites are MFA. Many legitimate websites -- including news publishers, niche hobby sites, and classifieds such as PennySaver -- have a high number of ads but also audiences that engage with the content (think of all the crafting videos you see on Facebook).

Here are the important differences between true MFA sites and legitimate ad-supported ones.