What is programmatic buying of ads?

Programmatic buying refers to advertising in which ad space is purchased in real time based on pre-specified conditions, and is also known as programmatic advertising.

A typical example of programmatic buying is RTB (Real Time Bid), which uses DSP (Demand Side Platform) and SSP (Supply Side Platform) to trade advertisements in real time.

Fixed inventory buying vs programmatic buying

Programmatic buying is often compared to the purchase of fixed ad slots. For example, purchasing fixed ad slots refers to placing banner ads on a media site for a month under a contract that costs tens of thousands of yen.

By purchasing fixed ad slots in this way, your ads will be shown to users who are unlikely to be interested in the product or service you are trying to promote. Naturally, the advertiser must pay for those ads as well.

On the other hand, programmatic buying does not purchase specific fixed ad slots, but instead uses a system to automatically purchase ad slots for individuals. In other words, conditions are specified in advance, and ads are only displayed to people who meet those conditions.

With the advent of programmatic buying, it has become possible to deliver ads to specific users only, something that was not possible with the purchase of fixed ad space.

Programmatic Buying Defined

So, what kind of advertising is programmatic buying? In Japanese, it is also called performance-based advertising, and a typical definition is given in a white paper by Rocket Fuel, a company that operates a DSP business.

According to the white paper, programmatic buying is defined as advertising with the following characteristics:

Bidding on an advertising inventory source (ad inventory is traded in an auction format)
Ad inventory is traded in real time
for the opportunity to: show one specific ad, to one consumer, in one specific context

If we use this definition, search advertising offered by Google and Yahoo and social media advertising on Facebook and other platforms would also be included in the definition of programmatic advertising, but in practice this type of advertising is rarely referred to as programmatic buying.

If the above definition is taken to be a broad definition of programmatic buying, then the narrow definition of programmatic buying advertising adds the requirement that a DSP or SSP system be interposed between the advertiser and the media.

Programmatic buying and publisher issues

With programmatic buying, the system automatically purchases ad space based on pre-specified conditions and displays ads, so you have no control over which sites your ads will appear on.

In other words, without your knowledge, your company's advertisements may be displayed in terrorist videos, and the advertising revenue may become a source of income for the terrorists.

For example, on February 2017, 2, the British newspaper The Times cited the example of Mercedes-Benz advertisements appearing in Islamic State YouTube videos to point out the lack of transparency in programmatic buying of ads.

Of course, advertising companies are working to remove inappropriate content and not give advertising space to problematic content, but the nature of programmatic buying makes it difficult to fully control the media that is displayed.

TV commercials and programmatic buying ads

Programmatic buying is a method mainly used for web advertising, but in the United States, which is a leader in digital marketing, some television commercials are also being made programmatic.

According to a Nielsen survey, by 2020, roughly half of all TV advertising in the U.S. will be programmatically bought, making it a market worth roughly $880 billion.

In response to the rapid expansion of the market in the U.S., it is expected that programmatic buying of TV ad slots will also be implemented in Japan. However, as of March 2018, programmatic buying of TV ads has not yet been implemented.

There are signs of change in this industry, such as 2017 commercial broadcasters allowing online submission of TV commercial material from 21, but due to the structure of TV commercial purchasing, it may be a long way off before TV commercial slots can be purchased through programmatic buying in Japan.

Summary

So far, I have explained programmatic buying.

Programmatic buying is an advertising method in which advertising space is automatically purchased based on specified conditions.

This method is mainly used for web advertising, but in the United States some television commercial slots are also bought programmatically.

In the United States, the market for programmatic buying of television commercials is expanding rapidly, and there are hopes that programmatic buying slots for television commercials will also be available in Japan, but this has not yet become a reality.

By using programmatic buying, it is now possible to reach users under specific conditions that would not be possible by purchasing fixed ad space.

However, because the system automatically purchases advertising space and displays ads, if you do not set the conditions properly, your ads may be displayed in association with sites or videos that are not suitable for your brand, so be careful.

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XICA Co., Ltd. Marketing Team