If you are new to the Digital Marketing Industry or Having a few years of experience of working on different types of Digital Marketing like SEO, SEM, SMM, Email Marketing etc, it is totally fine to learn PROGRAMMATIC ADVERTISING without having any previous experience.
I am here to help you to understand Programmatic Advertising from Scratch. It is not possible for any expert to teach Programmatic to newbie in one or two posts. With lot of effort, I have prepared a plan and content to make this subject very clear to anyone to learn step by step . I will share my experience of learning and working on Programmatic Advertising. So, it might help you. Also, little patience needed for every learner to connect the dots.
So please follow my website posts on this topic to learn programmatic advertising.
Let us understand the first concept of REAL-TIME BIDDING and this is the first step
To understand what actually programmatic advertising is, let understand the difference between Direct Buying and Programmatic.
Let’s assume that I am the Publisher and You are an Advertiser.
There is an ad slot with 728×90 with 1 Million impressions and ready to sell. You are ready to buy that ad inventory.
An agreement is made between us to sell that ad inventory for a fixed price which is the maximum price with a defined volume of Ad Inventory and for a particular period of time.
This process is known as DIRECT BUYING AND SELLING
- In the above figure, Keeping all the campaign details and others aside, let’s understand how a transaction happens in DIRECT METHOD
- CPM $10 means, Advertiser pays 10/1000 = 0.01 for each impression and the Publisher earns the same value in the transaction
- You can see some value for each transaction and total of 1000 impression is given CPM value 10
- It is a Fixed Bid
- Likewise, the total budget is spent in this way
- Impressions sold and purchased in Bulk
- Manual Process Involved
- and many more we shall discuss it later
In Direct Method, Publisher earns revenue by receiving fixed value for each impression even though there is chance of getting higher value. If we the same impression is sold via Realtime bidding there is chances of receiving more Revenue.
REAL-TIME BIDDING METHOD
NOW, let’s compare it with Real-Time Bidding.
Before getting into its definition, let’s understand it from the transaction point of view when compared it with Direct Method
From the above picture, let’s understand what each point indicates
- In the Real-time Bidding method of transaction, every transaction happens impression basis
- Floor price is set by Publisher for their inventory. It allows only advertiser who bid greater than or equal to floor price. Whoever pays below floor price, are not eligible to purchase those impressions
- Advertisers list who are willing to buy that impression
- Maximum bid value submitted by advertiser
- Eligible advertisers are the one who pays greater than equal to floor price set by Publisher
- Once the advertisers are eligible, their bids are eligible to put and submit into auction
- Advertiser who submits the highest bid is Winner
- Clearing Price is the final value winner pays to the Publisher. Here, Clearing Price as per the First price auction model
- Clearning Price as per the Second Price auction model
- We have already discussed above that in direct method, revenue earned for each impression is same value
- In case of Real Time bidding, we shall fill value earned for each impression step by step to understand better
Step 1: In RTB, impressions are bought and sold in Real-time, impression by impression basis. So here we shall consider that 1st impression is being sent to auction in Ad Exchange
Step 2: Ad Exchange make this impression available in auction to all buyers or Advertisers who are connected and these advertisers submit their bids to Ad Exchange. In the below picture shows advertiser and their won bid value. In general there may thousands and more advertisers participate in the auction.
As an advertiser no need of purchasing that ad inventory in bulk, where you have the option to choose impression by impression basis, with variable price with less than maximum bid you set, that in REAL-TIME. This process of purchasing ad inventory is known as REAL-TIME BIDDING. This has changed the whole ecosystem the way it works.
Step 3: In this next step, system looks for the eligible advertiers or buyers among all the bids.
In this case, as the floor price is $10, so advertiser whoever bids more than equal to floor price are eligible. You can see the list advertiser in the below table with their Eligible bids
Step 4: Among the Eligible Advertisers, whoever submits highest bids wins the Auction.
In this case Advertiser4 is winner. So this advertiser ad is selected and served to respective ad slot.
Step 5: Finally how much does he pays is depends on which type of auction it is
In case 1st price auction, advertiser pays the same as he auctioned
Whereas in case of second price auction, Winner pays = Second highest bidder + 0.01
So as the second highest bid is $12 and per impression is $0.01201
Step 6: Finally, for the 1st impression, Publisher Received more than what actually he may receive in Direct method
Because every time when the impression is put on auction. He received more than actual value when compared with the direct method. So when we calculate for 1000 impressions, you can more revenue for every 1000 impressions in the case of Real-time bidding method.
I hope you understand this concept why realtime bidding brings more value when compared with direct method. Also, understand how it happens impression by impression basis.
Let’s look at this concept from an advertiser’s point of view in the next post.