RTB, PMP and Programmatic Direct.
What are they and what is their relationship to programmatic purchasing?
The online advertising industry is dispersed among a number of media buying methods, making it difficult for even the most seasoned marketers to understand and categorize each of them in a watertight way.
Although terms like live programmatic, real-time bidding (RTB), and private market (PMP) all fall under the programmatic umbrella, it is worth remembering that they are quite different concepts.
What is programmatic? A brief overview.
Before going deeper into the inner workings of RTB, live programmatic and PMP and discussing the differences between them, let’s clarify what the term programmatic means first.
It is difficult to find an industry consensus on the definition of the term, but it is fairly safe to say that programmatic refers to the use of various technologies, algorithms and audience data in order to quickly and efficiently automate the process of buying and selling media online.
Programmatic is positioned as the opposite concept to traditional negotiated insertion orders, a method still used in many markets and by which advertisers would contact publishers directly to buy advertising space, online or otherwise. This is also known as manual media buying.
Programmatic vs. manual purchasing
Where do solutions like RTB, PMP and Live programmatic come from?
If we unravel the processes involved in both, we can understand why there has been an evolution from one method to another.
The traditional manual media buying process involves the following steps:
- The campaign and creatives are set up and placed on the advertiser’s ad server.
- The ad codes are delivered to the publisher.
- The publisher-side ad operations team places the codes on the publisher’s ad server.
- The campaign is officially launched and we start seeying results.
Let’s add to this the negotiation process and corporate bureaucracy. Rinse and repeat the process with each media we want to buy and soon we will identify that manual media buying presents a series of inefficiency problems:
- Limited scalability: directly in terms of time and inventory it is very difficult to reach large volumes or the variety of media we would be interested in.
- Reduced flexibility: any change in the campaign implies the repetition of the implementation process described above.
- Intermediation costs: in an attempt to mitigate the scalability problems of the inventory side, chains of intermediaries are incurred which apply their margin to the process.
By reducing the human component through automation, programmatic purchasing achieves its greatest competitive advantage: the speed and convenience of launching and modifying each campaign, even when it is already underway.
Tasks that would take minutes, or even hours, to complete with manual media buying take only milliseconds with programmatic media buying.
The three concepts that concern us (RTB, PMP, and Live programmatic) are part of the processes and technologies that the programmatic developed to address the problems that had the traditional model, and some cases bridge with the manual system by creating structures that synergize with both.
Real Time Bidding (RTB).
Real time bidding is the solution that the software industry has adopted to automate the negotiation of media prices.
We start from the basic premise that the media inventory is available in an aggregate form on the SSP (Supply side platform) for all interested buyers who access it through a DSP (Demand Side Platform). An automated auction is used to decide which of the traffic demanders gets the traffic.
Don’t misinterpret the real time variable. This system does not require continuous monitoring to be able to apply the appropriate bid at any given time when the auction takes place. The bids (usually in CPM format) are defined in advance on the purchase platform either in a fixed value or in a range value with a min and a max (this among many other ways to set dynamic bids).
In this case, the term “real-time” refers to the fact that the auction takes place at the very moment when a user is to be served with an advertisement impression. In the milliseconds that the process of loading the scripts of the online media involves, the system compares the bids and the pricing preferences for the auctioned placement and serves the ad that is most appropriate.
Generally, if a campaign is not receiving impressions, it means that a sufficiently high bid is not being applied for the required conditions. It may also be that there is not enough inventory.
As a whole, it is a system that simplifies management and negotiation costs.
The RTB process
- Buyers set their bids and pricing conditions on the buying platforms.
- When the user enters the digital medium and is going to be the object of an advertising print, the system checks bids and preferences of each buyer.
- The winner’s publicity is served.
- The process is repeated automatically with each new iteration, taking into account possible changes in bids and conditions that may have been made by buyers.
Therefore if we confuse programmatic with RTB we are confusing the global with one of the methods included in the process of programmatic purchasing. In fact many other systems use the system in RTB to be able to buy directly in their inventory fraction.
PMP (Private Markeplace).
The RTB system has a number of advantages over the manual system, but it is not without certain weaknesses. RTB adds uncertainty as a factor to value in the purchase of the medium. The manual system, assures a series of volumes and locations so the uncertainty is reduced. One of the tools that the programmer has developed to save this fault has been the PMP.
The private market (guaranteed programmatic, reserved programmatic, guaranteed automated, and similar), or PMP for short, is a variation of the RTB model that is accessed by invitation.
It is an auction process in which only a group of advertisers bid against each other to buy inventory from a publisher. This method is usually offered by publishers with higher quality inventory, and advertisers interested in such inventory can reserve or guarantee their ads before the publisher offers them in a RTB marketplace.
There are no intermediaries in the form of Ad-exchange and SSP, allowing advertisers to control and select more carefully the websites on which they wish to display their ads, but the benefits are in fact mutual; publishers receive higher rates for their inventory, and advertisers who buy inventory in a PMP receive a bonus in the form of preferential access to the publisher’s inventory before it is sold at public auctions.
Unlike traditional RTB auctions, where advertisers know little about media buying (e.g., ad placement), PMPs provide both advertisers and publishers with transparency regarding ad placement and even pricing.
Among the benefits of the PMP are:
- Transparency about purchased inventory and pricing: Both the publisher and the advertiser have a very clear idea of what kind of inventory they are buying, what CPMs are to be paid for, and what kind of creatives are being shown to users.
- Programmatic efficiency: Advertisers can quickly and effectively establish new live purchases on premium websites or even inventory packages in specific segmented verticals.
- Possible competitive advantages: Offering additional products is always an added value. This is why this system is available from many of the major programmatic providers.
- Task Deduplication: It can be quite expensive and time consuming to manage a direct sales team. PMPs can potentially replace a sales team with technology.
Programmatic Direct or Programmatic Live Purchase
In the effort to assimilate as much as possible the manual model to the programmatic one and to merge its virtues we find the Programmatic Direct Model.
Programmatic Direct buying is a one-to-one media buying process very similar to the traditional method by which sellers negotiated with advertisers in person to reach an agreement.
It is a very similar model to the PMP, with the exception that advertisers and publishers agree on a specific inventory based on a fixed CPM.
The process may require some human interaction; unlike in the case of a private market, publishers’ sales representatives may be needed to negotiate agreements directly with advertisers.
However, the publisher may also set fixed prices, and the advertiser may simply accept or not accept them, without actually negotiating the price. In such a case, the experience is just as fluid in the open auction of the RTB. Since the CPM is predetermined, there is no bidding process involving other publishers.
The rest of the process (the placement of the ads) is handled programmatically.
To illustrate the process, which may seem contradictory when mixing the manual method with the programmatic one, we can describe its steps:
- An advertiser browses through a catalogue of websites like a shop.
- They choose the locations, and set the dates of the campaign waves and the volume of impressions.
- Additional creativities and tracking pixels are configured.
- An order is placed through the platform.
- The publisher audits and verifies the campaign.
- The order is executed without the additional involvement of the Ad Ops team, except for an audit that they An advertiser browses through a catalogue of websites as a shop.
- You choose the locations, and set the flight dates and print volume.
- Additional creativities and tracking pixels are configured.
- The order is served through the platform.
- The editor audits and verifies the campaign.
- The order is executed without the additional participation of the Ad Ops team, except for the audit process.
Although this system may seem to be an involution, it is only an alternative that can bring different advantages. In this case it adds to the traditional model capabilities derived from the application of technology at operational levels:
- Automation. The ability to automate insertion orders and ad code settings, and eliminate human error throughout the process.
- Better access, presentation and control of information. In direct programmatic buying, publishers have a deeper understanding of their audiences in premium inventory, can better target optimal buyers, and negotiate prices based on the value of their traffic.
- Direct approach. Since advertisers do not have to wait for campaign data to be sent through various tools, there is greater and more immediate transparency about the impressions served and the audiences that have seen them, making advertisers happier and therefore more likely to pay a higher price for direct deals
The software industry itself encompasses a set of techniques and methods that often confuse and camouflage the different ways of working that exist within its framework. Since its beginnings in the 1990s, this sector has made an effort to narrow the gap between manual and programmatic purchases. This is a process of continuous evolution and we have yet to see what the next leap will be.