I’m going to cut to the chase. You’ve probably heard of programmatic advertising, but maybe you don’t know how it works or why you should care. Here’s the hook to get you interested: companies are expected to spend $49 billion globally on programmatic advertising in 2019. So here’s my crack at explaining a billion dollar idea to you like you’re 5.

I’m not even going to attempt to give a one-sentence definition of programmatic advertising, because it’ll make your head spin. Instead, here’s the most simplified and straight forward way I can possibly imagine explaining programmatic advertising. Like, my mom gets it now. And that’s a big deal.

Here it goes.

Programmatic is still advertising. Just with computers.

There are thousands of advertisers (aka brands like Coca Cola or Uber) wanting to get their message in front of you every day. And in programmatic advertising, they use a specific kind of online platform to get their ad in front of your eyes.

Advertisers log into these platforms and they plug in information like what kind of audience they want to show their ad to (like soccer moms or people in market to buy a car) and how much money they want to spend on spreading their message. They also upload the actual ads into the platform.

So when you click a website link on your phone or computer and it opens up a new page, some code on the website notifies the platform (the platform is called a DSP — short for Demand Side Platform) that you just opened a new page.

Bidding to Win

Once the platform knows you’re on the website, it opens up an auction for all of the advertisers to bid for the opportunity to put their ad in front of YOU! And yes, they’re actually bidding like a normal old school auction, except the auction is happening “programmatically”.

In other words, all of the advertisers programmed the platform to place bids to deliver their ads every time an auction is opened. When they set up their campaign in the platform, they noted how much money they’re willing to bid to show you their ad.

The company with the highest bid wins, and poof! They pay the website and their ad gets displayed right in front of you.

It’s important to note that the platform works really fast. Like, faster than you could possibly imagine.

Ok get it? Awesome. Now I get to crush your high spirits by letting you know that I left out A LOT. We didn’t cover second price auctions, how websites get connected to the DSP in the first place, header bidding, viewability, ad fraud, or the LUMAscape.

But I’ll save that for next time.

For a deeper dive into programmatic advertising, see our more in-depth post here.

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