What is programmatic advertising? How automated ad buying works

There are two sides to every programmatic deal.

• Publishers own the websites and apps with ad space to sell.
• Advertisers want to show their ads to the right people.

Software on each side does the work. The publisher's platform offers each ad opportunity, the advertiser's platform decides whether it is worth bidding on and how much, and the winning ad is shown. The advertiser sets the rules in advance, such as budget, audience, locations and bids, and the software applies them to each opportunity.

Here is a made-up example. Say a dental practice sets a monthly budget, targets adults within a few miles of its office who recently visited its website and limits its ads to news and local sites. Each time someone who matches those rules loads a page with ad space for sale, the software decides whether to bid and how much. The practice's budget is spent only on the opportunities it wins.

Google's Ad Manager help page on transaction types describes the main ways inventory changes hands. The names are useful to know because agencies and platforms use them all the time. If a vendor offers you a private deal, ask which of these it is, what the price is and whether the inventory is guaranteed.

Open Auction. Auction-based transactions for inventory available to all buyers.

Private Auction. Auction-based transactions with specific buyers that the publisher has allowlisted.

Preferred Deal. Fixed-price, pre-auction transactions that the publisher negotiates with specific buyers.

Programmatic Guaranteed. Fixed-price transactions with a pre-committed set of inventory, negotiated with a single buyer.

Google's page on Programmatic Direct adds that it automates the negotiation and sales of a publisher's direct-sold inventory, covering both Programmatic Guaranteed and Preferred Deals. Order matters, too. Google's Preferred Deals overview says Preferred Deals have a fixed priority that is typically higher than Private Auction and the Open Auction, and that inventory a preferred buyer passes on may become available in those auctions.

Scale. Programmatic buying reaches a large number of sites and apps from one place, instead of one deal at a time.

Targeting. Advertisers can set rules for audiences, locations, devices and schedules, then let the software apply them to each opportunity.

Control and speed. Budgets and bids can change daily, and poor placements can be excluded as soon as you spot them.

Automation makes buying easier, and it also makes it easier to waste money if nobody is watching.

Low-quality placements. Ads can land on sites or apps that bring little value. Review your placement reports and exclude the ones that do not perform.

Fraud and unauthorized sellers. Google's Ad Manager help describes ads.txt, a file publishers use to declare who is authorized to sell their inventory, as a tool to improve transparency in programmatic advertising. Buying from authorized sellers is a basic safeguard.

Vanity metrics. Programmatic campaigns can produce huge impression counts. Judge them on site visits, leads and sales, not on reach alone.

Before you approve a campaign from any vendor, ask four questions. Which sites and apps will my ads appear on? Can I see a placement report every month? How do you guard against fraud and unsuitable content? How will you report results in leads and sales?

Automation does not change the rules on honesty. The FTC's guide to native advertising states a basic truth-in-advertising principle, that it is deceptive to mislead consumers about the commercial nature of content. If your programmatic ads run in formats that blend in with articles or feeds, make sure people can tell they are ads.

It can be, with the right expectations.

• Start with the tools you already have. A display campaign inside Google Ads gives you programmatic reach without a separate platform.
• Use it for awareness and remarketing first. Let it support your other channels, such as reminding recent site visitors about you, rather than making it the only way you find customers.
• Set a test budget and a clear goal. Decide in advance what a successful month looks like.
• Check placements weekly. Exclude anything that sends junk traffic.
• Review results monthly. Compare cost per lead with your other channels before you decide to scale up or stop.

As budgets grow, dedicated platforms and private deals become worth exploring, often with help from a specialist. Our guides on how online advertising works and comparing Google Ads with other ad platforms are good next reads.