If you’re guilty of not understanding the difference between programmatic and real-time bidding (RTB), you’re not alone. Although programmatic and RTB may seem the same to you, there is a difference between them. If you don’t understand the main features of programmatic and real-time bidding and can’t draw a line between these (admittedly) confusing terms, then you’re missing out.

What is Programmatic Media Buying?

By definition, programmatic is something that is automated and running according to a program, algorithm or schedule. When applied to digital advertising, programmatic buying is just a buying method accomplished via machine technology to enhance and optimize ad buying.

Programmatic media buying is the data-driven process of purchasing digital ad space at a large scale with the help of automated software based on complex algorithms (learn more information about what the programmatic advertising technology is). Programmatic allows hyper-personalized targeting with agile messaging across all paid advertising. It replaces the manual process of media buying with the technology-based solutions, therefore eliminating the risks associated with human error.

What are the Main Features of Programmatic Buying?

The beauty of programmatic buying is in the use of artificial intelligence (AI) technologies such as machine learning and deep learning. Machine learning uses algorithms to inspect data, learn from it, and make a prediction or a judgment over it, such as foreseeing the success of the given advertising campaign or estimating ROI or user engagement. The machine learns and evolves over time, enhancing the performance of the campaign and reacting instantly to ever-changing market dynamics. The AI algorithms find trends in individual consumers and adjust their ads and online experience accordingly.

With the implementation of deep learning algorithms, computers will be able to learn from their mistakes, track everything, and make connections and decisions that humans may not have even considered. Deep learning will allow for the building of more accurate online consumer profiles and make scrupulous predictions based on the actual use rather than proposed usage.

Therefore, programmatic buying not only provides valuable data but also delivers important insights. Advertisers receive feedback on how the audience engaged with the ad and what factors affected the ad’s success. For instance, using programmatic buying allows advertisers to know which age group their ad performed best for and what time of the day or week was relevant. Hence, advertisers can constantly adjust their targeting strategy and ensure consistent ad delivery. Besides, there is an article about things you need to know about programmatic buying.

Another unique technology offered by programmatic media buying is precise targeting. Your target audience is now available based on certain metrics obtained through algorithms. Compared to the Mad Man era when advertising was more about creativity with little understanding of the consumers, programmatic is more about placing the ad in the right context to the right people regardless of the place. Pulling the information about potential customers from first- and third-party data, advertisers can serve their ads to a specific audience segment on any website. Such targeting options as gender, age group, location, household income and relationship status allows hyper-personalized marketing approach.

What is Real-time Bidding? Programmatic buying vs RTB

Real-time bidding is a form of programmatic buying (much more information about RTB you can find here - What is RTB?). Many people tend to think that RTB is the only way to buy media programmatically; however, that is not true. Although RTB accounts for more than 90 of all programmatic buying, not all advertisers use RTB for purchasing.

Alternatively, advertisers may use programmatic direct or fixed-price programmatic (automated guaranteed), which is a more traditional form of buying ad space using programmatic technology and does not involve RTB at all. In this model, digital ad inventory is sold directly to advertisers without bidding but with some prior negotiation with a publisher. Therefore, programmatic methodology vastly surpasses the limitations of RTB.

Although programmatic is a certain technology, RTB is just one method to implement this technology. RTB can be seen as a subset of programmatic (programmatic RTB), a piece of a much bigger puzzle.

What are the Main Features of RTB?

Real-time bidding is an online auction marketplace for buying and selling impressions in real time. Such auction occurs in the time it takes for a webpage to load — mere milliseconds. RTB programmatic buying is beneficial for publishers and advertisers. Marketers achieve major efficiencies by showing their ads to the right audiences and decrease wasted impressions, while publishers enhance the value of their ad space and improve direct sales strategy and pricing.

RTB programmatic ecosystem is multilayered and consists of several components:

  • DSP (demand-side platform): A system that allows buyers of digital ad inventory to manage multiple ad exchanges and data exchanges through a single interface;
  • SSP (supply-side platform): A platform to help publishers to manage and price their inventory that is also referred to as yield managers and optimizers;
  • Ad Exchanges: A digital marketplace that connects publishers and advertisers and facilitates transactions;
  • Ad Networks: A company that aggregates ad space supply from publishers, classifies it and resells it to advertisers in bulk;
  • Agency buying/trading desks (ATD): A media buyer and re-seller that manages programmatic media and acts like an independent working unit;
  • Data partners/data providers (DMP): A system that allows publishers and advertisers to manage proprietary data;
  • Dynamic creative optimization tool: A tool that helps advertisers estimate and optimize creative elements in real-time to identify the best performing combinations for their advertising campaigns;
  • Ad verification and brand protection platforms: A platform that investigates audiences, media destinations and advertisers to assure that the ads are placed appropriately.

Also, it might be useful to read about the dots of the Programmatic Ecosystem to clarify the difference.

RTB is just a form of a much bigger technology, which is called programmatic. To understand the logic, imagine a lemon. The lemon is sour. Sour is the taste characteristic of the lemon. However, not everything that is sour is a lemon, right? RTB is programmatic, but not everything that is programmatic is RTB.

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Written by
Irina Kovalenko, CMO of SmartyAds
February 2018