The 4 Types of Programmatic Advertising Explained

Due to its flexible nature and beneficial impact for both publishers and advertisers, programmatic advertising is increasingly adopted each year. As a result, the market is projected to hit a staggering $725B worldwide by 2026.

Given these striking vital insights, we could say that programmatic advertising has become one of the most powerful tools within the advertising industry. As such, this article explores the various types of programmatic advertising available, making your journey to find the best option for your business needs easier.

What Is Programmatic Advertising and How Does It Work?

In short, programmatic advertising utilizes software that facilitates the quick buying and selling of ad spaces, eliminating the need for a lengthy and burdensome process of requests for proposals, quotes, and negotiations.

Additionally, programmatic advertising enables data-driven decisions to be made much more efficiently and quickly. But you can learn more from our complete guide on Programmatic Advertising Platforms, discovering how you can choose your partner in crime for the years to come.

Moving on, let’s explore the various types of programmatic advertising and learn how to utilize them to your advantage.

The 4 Types of Programmatic Advertising Deals Explained

Programmatic advertising deals are divided into two types: auction-based and programmatic direct. Let’s examine each type.

1. Open Auction: Real-Time Bidding (RTB)

For those new to the advertising technology, RTB is an automated auction system used within the programmatic advertising ecosystem to buy and sell ad space. The auction is conducted in real-time, hence the name, and is based on a per-impression basis.

The Real-Time Bidding solution is the oldest and most popular programmatic ad auctioning method, which has come a long way and is projected to reach $33783.82 million by 2031.

The RTB auction process is completed in a matter of seconds. In contrast, each advertiser competes in a real-time auction, and the highest bidder wins, securing their ad on the website or application.

As a result, RTB benefits both advertisers by enabling them to win the bid and get their ad up and running, and publishers by allowing them to maximize the value of their available ad space.

Moreover, RTB facilitates the process for Demand-Side Platforms, which helps advertisers, and Supply-Side Platforms, which allows publishers and Ad Exchanges, giving the ability for SSPs (Supply Side Platforms) and DSPs (Demand Side Platforms) to transact on a publisher’s ad inventory.

Real-Time Bidding (RTB): Pros and Cons

RTB helps advertisers quickly buy media space and offers more control over their target audiences, thus being more cost-efficient. On the other hand, it enables publishers to identify the most effective demand sources based on latency, unique demand, bid rates, and ad space availability. As such, publishers have the upper hand on their inventory.

Real-Time Bidding Pros:

• Detailed Audience Targetingz
• Increased Financial Control;
• Real-Time Optimization.

Real-Time Bidding Cons:

• Lack of Content Control;
• Data Challenges through GDPR (General Data Protection Regulation) or CCPA.

As a result, without an RTB system and a robust SSP (Supply Side Platform), many publishers struggle to monetize their ad spaces, especially when the market becomes increasingly competitive.

For example, Sevio Ad Manager is a user-friendly platform that integrates the Open RTB protocol. This SSP solution combines some of the most advanced technologies in an easy-to-use platform that caters to publishers’ needs. It gives them more control over their inventory and offers easy-to-understand analytics to improve their revenue stream.

2. Private Auction: Private Marketplace (PMP)

As the name suggests, the Private Marketplace also uses a bidding system. However, only a select few advertisers can participate, and only if the publisher extends an invitation. As such, advertisers enter the PMP only on an invite-only basis through a private auction, a private exchange, or an invitation-only auction, thus catering to more targeted deals.

The entire auction process begins when a user visits a webpage with ad units, triggering the auction. A few moments later, a DSP (Demand Side Platform) conducts its private auction, involving a handful of pre-selected advertisers through deal IDs.

The publisher sets a floor price for its ad space, and the highest bidder wins, displaying its ad to users.

Private Marketplace (PMP): Pros and Cons

PMP’s pitfall is the lack of transparency within an open auction, primarily because it only uses invitations. However, each party knows the other, increasing relevancy within content niches and target audiences.

Private Marketplace Pros:

• Access to Premium Ad Inventory;
• Brand Safety through Appropriate Content Niche;
• Better Target Audience;
• Direct Communication and Relationships;
• Higher ROI.

Private Marketplace Cons:

• Negotiation Skills Required;
• Less Transparency;
• Management Complexity.

One good example of a PMP could be Publift (which, even though at its core is an SSP, has many features specific to PMPs), which helps publishers get the most out of their ad space through instant access to pre-existing buyer deals and private auctions.

Moreover, as they advise, Publift will take care of everything related to setup, troubleshooting, and reporting for you, allowing you to focus on acquiring premium ads, which in turn generate more revenue for you.

3. Preferred Deals (PD)

Preferred deals, as the name suggests, occur when the publisher reserves its ad space for a particular advertiser and they enter into an agreement that benefits both parties, such as those found within PMPs (Private Marketplaces). As a result, the advertiser gets the highest-performing inventory and the relevant audience for a predetermined price or CPM rate.

However, unlike others, this is one of those types of programmatic advertising that doesn’t guarantee the publisher that the advertisers will bid over the ad unit.

This programmatic arrangement starts when a user enters a website. Then, an ad request is sent to the advertising network for acceptance or denial. The advertiser that gets the first look can bid against the predetermined price (CPM) and optionally buy the ad space; thus, it is called non-guaranteed.

Preferred Deals (PD): Pros and Cons

You could think of preferred deals as a compromise between RTB’s open competition and PMPs’ controlled medium, but let’s examine the pros and cons.

Preferred Deals Pros:

• More Control Compared to RTB;
• Access to Premium Inventory;
• Potentially Lower Cost Than PMPs.

Preferred Deals Cons:

• No Guaranteed Impressions;
• Management Effort.

Any robust SSP should offer you the option to choose Preferred Deals, allowing you to select between Google Ad Manager, Sevio, or OpenX. However, it all comes down to each platform’s ease of use, as Google and OpenX are well known for offering a more tech and in-depth approach, compared to Sevio’s Ad Manager, which doesn’t require any technical knowledge.

4. Guaranteed Deals: Programmatic Guaranteed (PG)

You could say that programmatic guaranteeing is like traditional media purchasing. Yet, this programmatic advertising model utilizes AI (Artificial Intelligence) technology to automate the Request for Proposal process, serving, and tracking ads, thereby facilitating one-on-one negotiations between advertisers and publishers.

The transaction between the parties is simply conducted through a DSP; the advertiser agrees to the publisher’s price, reserves the premium inventory, and publishes the ad on their behalf.

Programmatic Guaranteed (PG): Pros and Cons

PG offers a beneficial blend of automation’s power and programmatic advertising’s efficiency. However, it has some drawbacks, so let’s break them down.

Programmatic Guaranteed Pros:

• Premium Ad Inventory;
• Higher Transparency;
• Cost-Effectiveness;
• Better Revenue Prediction.

Programmatic Guaranteed Cons:

• Limited Ad Inventory;
• No Clear Benchmarks;
• Less Flexibility.

Similar to the Preferred Deals, any SSP or DSP could offer PG. Adobe Experience League is one such platform that has Programmatic Guarantee capabilities.

RTB, PMP, PD, and PG Comparison

Real-Time Bidding vs. Programmatic Guaranteed

Since both are types of programmatic advertising deals, they are some of the most distinct by comparison.

As we know, RTB allows everyone to bid on available slots in an open auction, whereas the programmatic guarantee only allows certain advertisers to agree upon publishers’ specific ad placements.

Moreover, PG is the only type of programmatic offering advertisers the option to reserve inventory for their ads to be displayed on specific websites or apps. In contrast, in RTB, advertisers need to win the auction.

Private Marketplace vs. Programmatic Guaranteed

Often, Private Marketplace gets mistaken for Programmatic Guaranteed, but here’s the difference:

• PMP deals occur in a Real-Time Bidding system where only invited advertisers can access the marketplace.
• PG happens between two parties, and the inventory is reserved for the specific advertiser.

Programmatic Guaranteed vs. Preferred Deals

These two types are part of the programmatic direct, requiring 1:1 negotiation. Yet, the main difference is that one guarantees a done deal while the other doesn’t. Preferred Deals offer advertisers increased flexibility. They can bid on ad inventory but aren’t obligated to buy it.

How to Choose the Right Programmatic Type for Your Needs

There are four main types of programmatic advertising, and it is highly recommended that you choose the right one for your business needs; however, the process can be overwhelming. Fear not; we are here to help you make the best decision regarding your business requirements and objectives.

Here are some key factors to consider before choosing your programmatic type:

1. Campaign Goals

Brand Awareness

Real-Time Bidding might be your solution if your business goal is to increase brand awareness. Its primary goal is to reach broad audiences and increase brand recognition.

Direct Targeting

If you want to reach a specific audience, you can target them with the Private Marketplace. This programmatic type lets you target publishers with highly relevant audiences.

Premium Inventory and Brand Safety

Opt for Programmatic Guaranteed if you aim to increase flexibility while maintaining complete control over your ads.

2. Campaign Budget

Cost-Effective Reach

Real-Time Bidding (RTB) is recognized for providing cost-effective solutions while targeting a broader, yet highly relevant, audience.

Cost and Control

Preferred Deals (PD) offer businesses a middle ground between RTB’s open competition and PG’s impressions, leading PD to secure high-quality inventory at pre-negotiated rates.

Guaranteed Impressions

Programmatic Guaranteed (PG) can give you guaranteed impressions at a higher cost than other programmatic advertising types.

3. Target Audience

Open Target Audience

Real-Time Bidding (RTB) lets you target audiences based on demographics, interests, and consumer behavior. As a result, your business can reach a wider audience, thereby increasing your brand’s reach.

High Precision Targeting

The Private Marketplace is your business, so you should opt for targeted advertising. It will only reach audiences who align with your brand’s mission and vision.

Direct Negotiation

Programmatic Guaranteed (PG) enables your business to negotiate collaboration terms directly, catering to tailored audiences with unique needs.

Please remember that not a single programmatic type is universally ideal, as it all comes down to your campaign goals while cost-effectively reaching your target audience.

8 Ad Formats of Programmatic Advertising

As we’ve learned more about the possibilities and types of programmatic advertising, let’s briefly review the most common ad formats that can be used within ad campaigns.

1. Display Ads

Display ads are probably the most used ad format, as they represent the visual billboards of a business, regardless of the niche. Moreover, they can be placed in the header, footer, and sidebar of the website and can be static or dynamic.

2. Rich Media Ads

Rich media ads are engaging and fresh, offering interactivity rather than a traditional, static format. This ad could boost user engagement, increasing interactivity and brand recognition.

3. Video Ads

Video ads are popular due to users’ entertaining way of consuming content, and there are three main types:

• In-stream ads;
• Outstream ads;
• In-display ads;

4. Mobile Ads

As the name suggests, this type of ad is specifically optimized for smartphones and tablets and can be banners or interstitial ads.

5. Native Ads

Native ads seamlessly integrate within the overall content of a website or application, mimicking the website.

6. Connected TV

Connected TV is an advertising platform that utilizes a TV connection to support content streams, such as those from Apple TV, Xbox, and PlayStation.

7. Digital Out-of-Home

Digital DOOH ads utilize outdoor spaces for advertising brands in various formats, including billboards, posters, kiosks, and street furniture.

8. In-Game Ads

The video game industry is expected to reach a market volume of $363.20 billion by 2027, so it’s no wonder that in-game advertising is on the rise, too. Given that more than 3.22 billion people play games worldwide, this presents an excellent opportunity for brands to easily advertise their offerings.

This monetizing strategy can take multiple forms, from interstitial ads, native banners, contextual ads, rewarded video ads, playable ads, and advergaming.

Final Thoughts

As we’ve reached the end of this comprehensive guide, understanding the four main types of programmatic advertising deals is mandatory. As a result, your business can navigate a world filled with successful campaigns that align with its goals.

Now, more than ever, it is time to embrace data-driven decisions while automating manual labor. This will unlock your business’s full potential while elevating your marketing efforts.

So, are you ready to upgrade your ads campaigns and journey towards higher revenue?