What Is Programmatic Advertising and How Does a DSP Work?

I recently went through a £10,000 display campaign for an ecommerce brand, one placement at a time. A quarter of the budget had gone on casual-gaming apps and websites nobody spent any time on. Those placements produced plenty of cheap clicks and two of the campaign's 50 purchases.

Because the clicks were cheap, the campaign looked fine for a while. Here's the review, what we changed, and then the basics of how programmatic buying works.

What a placement review looks like

The weak placements took £2,500 of the £10,000 for 2 of the 50 attributed purchases. That's a CPA of £1,250 on those placements, against roughly £156 everywhere else, and £200 for the campaign as a whole.

Before cutting anything, I checked three things that could make good placements look bad: whether tracking was firing on those placements, how each device type performed, and whether the attribution window was hiding later sales. None of them changed the picture.

Then we made four changes together:

• Excluded the weakest placements.
• Switched to an approved list of relevant sites and apps, so new junk inventory couldn't creep back in.
• Capped frequency at three impressions per user per day, where the inventory supported it.
• Reviewed performance by device, to make sure no device type was dragging the results down.

We kept the main offer and creative the same through the next review period, so the comparison was fair. CPA improved from £200 to £170, a 15% gain. Because we made several changes at once, I count that as the result of the whole optimisation rather than crediting any one change, and we kept an eye on seasonality too.

What I'd do differently

We gave cheap clicks too much weight at the start. Low cost per click made those placements look efficient while they quietly used up a quarter of the budget. Now I look at placement-level engagement and approved conversions in the first weeks, before cheap traffic has had time to spend much money.

What programmatic advertising is

Programmatic advertising is the automated buying of ad space, one impression at a time, instead of agreeing placements directly with each publisher. You set the audience, budget and bids, and the software buys the impressions that match.

It covers display banners on sites and apps, video and native ads, connected TV, digital audio and digital outdoor screens.

How a DSP and real-time bidding work

As a buyer, you work in a demand-side platform (DSP) such as The Trade Desk, Google's Display & Video 360 or Amazon DSP. Publishers sell through a supply-side platform (SSP), and the two meet on an ad exchange.

When someone opens a page or app, the publisher's SSP describes the slot and offers it to buyers. Each DSP decides whether it fits one of its campaigns and, if so, bids. The highest eligible bid wins and the ad loads, in roughly a tenth of a second.

A DSP optimises towards the goal you give it. Set it to clicks and it will find clicks, and casual-gaming apps produce a lot of them (a mistaken tap in a game still counts).

Open auction, private deals and guaranteed buys

• Open auction: the most reach and the most uneven quality.
• Private marketplace (PMP): an invitation-only auction with selected publishers.
• Preferred deals and programmatic guaranteed: fixed prices or reserved volume with named publishers.

My default for a new advertiser is to start on an approved list and private deals, then widen into the open auction once the data shows where sales come from.

Targeting

• Your own data: customers and site visitors. The first thing I set up.
• Contextual: people reading relevant content, with no personal data needed. With fewer cookies around, this is my next choice.
• Interest and lookalike audiences: useful for scale once the first two are working.
• Controls: location, device, time of day and frequency. A cap like the three a day we used stops one person seeing your ad all day.

What programmatic costs

Media is usually priced per thousand impressions (CPM), and prices vary a lot by format, audience and quality. Platform, data and verification fees sit on top, so ask for the full cost, not just the media price.

Judge it on cost per sale, not CPM or cost per click. The placements in our campaign looked efficient on both. On cost per purchase they cost eight times as much as the rest of the campaign.

Keeping programmatic brand-safe and efficient

• Run a placement review in the first few weeks, then monthly.
• Use an approved list of sites and apps, not only block lists.
• Use verification tools for viewability, invalid traffic and brand safety.
• Set a frequency cap from day one.
• Prefer supply paths that go direct to the publisher, because every extra step takes a fee.
• Test incrementality instead of taking view-through conversions at face value.

Is programmatic right for you?

It's good at finding new audiences at scale and at retargeting people who already know you. I wouldn't recommend it to anyone who won't read placement reports, because that's where our problem was hiding.

You can read how we run programmatic media buying, or send us a placement report and we'll tell you what we see.