Your Ultimate Guide to Programmatic Advertising Terms

Advertising is just a more systematic form of “word of mouth” to make people aware of products and services, but in the 21st century, the ways advertising works have been evolving rapidly.

Traditional media vehicles such as television commercials and newspaper advertisements are no longer the sole vehicles for marketers, and an ever-increasing proportion of advertising and marketing budgets are being poured into the online environment.

As a new generation of consumers comes into financial independence, marketing must change with them, and programmatic advertising is a key pillar of remaining competitive. So what is programmatic advertising, and how can you learn to use it effectively?

Bigger Numbers, Faster Purchases

Traditional advertising, and, to some extent, digital advertising, relied on human agents to carry out advertising buys. If a company wanted to advertise on television, or even on the Internet, they would go to an ad agency or some other marketing expert. They would negotiate their advertising needs with a person at the agency, who would then negotiate with marketing departments at a television station, network, or Internet organization for available “ad space” and then settle on a price, frequency, and time for those ads.

Programmatic advertising, or programmatic ad buying, automates the process of ad buying so that companies that are interested can act on these initiatives themselves.

Rather than having ad buyers negotiate with salespeople at appointed times and places, a business can use programmatic advertising to go directly to the available online ad spaces—as coordinated by software—and purchase available space.

In other words, a business now interfaces with software to advertise, rather than relying on human agents to talk to other human agents to buy space.

This is a trend that is predicted to make up over half the online advertising this year. If you haven’t yet looked into programmatic advertising, here are some of the essential terms you should learn to start building up your familiarity.

Audience Segments

Audience segments or segmentation refers to the classification or division of certain markets based on specific criteria. An advertiser of baby food, for example, will be interested in the audience segment of families, especially those with newborns, and have little to no interest in the single, athletic demographic.

Brand Safety

This refers to the factor for appropriateness of an ad appearing in the correct channels. A company that imports fair trade products from other countries, for example, would not want that advertising to appear on Hate Channels or websites for White Supremacy. Protecting a brand by making sure it doesn’t appear in inappropriate venues is important.

Bots

A bot is a type of automated software that mimics human actions online. Bots, like any tool, can be good or bad. Bots that chat with consumers for low-level customer inquiries, for example, are good. However, bots that impersonate humans for social media comments, or, worse yet, click on ads to deliberately misrepresent user/viewership data—known as “bot traffic”—are obviously bad. Deceptive use of bots is a growing problem that is coming under increasing scrutiny.

Cookies

Cookies are small bits of software installed on a computer after visiting a website. The primary function of cookies is to retain user/visitor information to make the visiting experience faster and more reliable upon repeated visits. Another use, however, is sharing that collected information with other parties for more comprehensive consumer data.

CPM

This stands for Cost per Thousand, where “M” is the Roman numeral for 1000. This is a form of pricing where the cost that an advertiser pays is measured by 1000 potential views, clicks, or other metrics used to measure market engagement. This is a pretty standard form of pricing, so advertisers should get familiar with CPM quickly.

DSP

This stands for Demand Side Platform, and it is the software process that makes programmatic advertising possible. A DSP is what centralizes and automates the availability and purchase of video, search, mobile, and other ads. It eliminates rate negotiation as well as manual ad insertion, thus speeding up the process for everyone.

First Party Data

First party data is information that is provided to a client or customer directly from a digital publisher or platform holder. So, for example, if someone chooses to advertise on Twitter, and gets information for the targeted audience provided by Twitter itself, this would be considered first-party data, and therefore the most reliable.

Price Floor

The price floor is the minimum CPM, which a publisher will set for ad inventory to be sold. In other words, some advertising requires that ad space is purchased at a minimum amount, and this is non-negotiable.

Real-Time Bidding

One of the most common forms of purchasing advertising space, real-time bidding, or RTB, uses software to look at availability for advertising space, and allow advertisers, in real time, to make offers for purchasing that ad space, with the highest bidder winning.

SSP

This stands for Supply Side Platform, and it works in conjunction with a DSP. This is where the people with channels of advertising, such as display, mobile or video, consolidate their channels of advertising and make them available to advertisers. This is also often where important data, such as audience segmentation, is presented so that advertisers can more precisely target their DSP efforts to the specific audience they want.

Third Party Data

Third party data refers to information that advertisers may use that is not provided by the digital publisher or platform holder but is offered and sold to advertisers. Third party data can come in the form of surveys that relate specific, requested data and information gathered through the use of cookies and other means.

Final Thoughts

Programmatic advertising is a way for businesses to more precisely target their desired market, and it’s quickly becoming the desired way to market in the digital landscape. However, it takes a little bit of homework to get the most out of what this new form of advertising can give you.

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