Programmatic advertising explained: DSP, SSP and ad exchanges

Programmatic advertising replaced most manual ad deals on the open web. Instead of emailing insertion orders and waiting for a campaign to go live, an advertiser sets targeting and a price in software, and every single impression is bought automatically. This guide explains who takes part, how one auction works step by step, and which standards make the system transparent.

What is programmatic advertising?

Programmatic advertising is the use of software to buy and sell digital ad space. Each time a page with ad slots loads, the slot is offered to buyers, buyers decide in real time whether the visitor matches their campaign and how much to pay, and the winning ad is delivered to the page.

Three ideas make it different from traditional media buying:

• Per-impression decisions. Every impression is evaluated separately, so an advertiser pays only for the audiences it wants.
• Automation. Bidding, targeting, delivery and reporting run inside platforms, not in spreadsheets and emails.
• Data. Decisions use signals such as country, device, operating system, browser and time of day.

Who takes part in a programmatic deal?

In practice the lines are blurred. Many SSPs run their own exchange, and some companies, Wizads among them, operate a DSP, an SSP and an ad server on one platform. If you want a direct comparison of the two sides, read DSP vs SSP: what is the difference.

How does real-time bidding work?

Real-time bidding (RTB) is the auction model behind most programmatic trading. A typical auction looks like this:

1. A visitor opens a page. The publisher's ad code or video player requests an ad for a slot.
2. The SSP builds a bid request. It describes the slot (size, format, position), the page and anonymous visitor signals such as country, device and browser.
3. Bid requests go to buyers. The SSP or exchange sends the request to connected DSPs, usually in the OpenRTB format.
4. DSPs decide. Each DSP checks the request against the targeting of its campaigns, its fraud filters and its budget, and answers with a price or no bid.
5. The auction picks a winner. The highest valid bid above the publisher's floor price wins.
6. The ad is delivered. The winning creative is sent to the page and the impression is counted.

All of this happens while the page is loading. Buyers that answer too slowly are simply left out of the auction, which is why speed matters on both sides.

First-price and second-price auctions

For years most exchanges used second-price auctions, where the winner paid one cent more than the second-highest bid. Since around 2019 the market has largely moved to first-price auctions: the winner pays what it bid. For advertisers this means bidding strategy matters more; for publishers it means more transparent prices.

Which ways of buying exist?

Not every programmatic deal is an open auction:

• Open auction. Any connected buyer can bid. Most performance traffic is bought this way.
• Private marketplace (PMP). An invitation-only auction, often with better inventory and a higher floor.
• Preferred deal. A buyer gets the first look at inventory at a fixed price before the open auction.
• Programmatic guaranteed. A fixed volume at a fixed price, delivered through programmatic pipes instead of manual trafficking.

What can be bought programmatically?

Almost any digital format: display banners, fullscreen interstitials, popunders and video formats such as preroll and autoplay. Video is usually requested through a VAST tag, which tells the player which ad file to play and which tracking events to fire.

Which standards keep programmatic transparent?

Because many companies stand between an advertiser and a publisher, the industry created standards that let buyers check who they are buying from. Most of them come from the IAB Tech Lab:

• OpenRTB — the common language of bid requests and responses. See what is OpenRTB.
• ads.txt — a public file on the publisher's domain that lists which companies may sell its inventory. See our ads.txt guide.
• sellers.json and SupplyChain (schain) — files and objects that show every company in the path of an impression. See sellers.json and schain explained.
• VAST — the standard for video ads. See VAST vs VPAID.

Buyers increasingly ignore inventory that cannot be verified with these standards, so for publishers they are not optional anymore.

What are the benefits and the risks?

For advertisers programmatic means reach across thousands of sites, precise targeting and the ability to change bids and budgets in minutes. The main risks are low-quality and fraudulent traffic and budget spent on placements that never convert. Fraud filtering, black and white lists and honest conversion tracking such as postback reduce those risks. Our guide on ad fraud and traffic quality explains what to check.

For publishers programmatic means more buyers competing for every impression, which usually raises revenue compared with selling to one network. The risks are unwanted ads and heavy scripts that slow the site down. Brand-safety controls and a careful choice of formats solve most of it.

How do you start?

• If you are an advertiser, a self-serve DSP lets you launch a campaign yourself, while a managed service sets it up for you. Start with a small test budget, measure conversions, then scale what works. Our guide on buying website traffic with a DSP walks through the steps.
• If you are a publisher, you connect your site to an SSP or ad network with a script or a VAST tag and let buyers compete for your traffic. Our website monetization guide covers formats, models and requirements.

Wizads works on both sides: advertisers buy traffic through the Wizads DSP, publishers monetize sites through the Wizads SSP, and DSPs and SSPs can connect to the platform through OpenRTB.

Frequently asked questions

Is programmatic the same as real-time bidding?

No. Real-time bidding is one way of trading inside programmatic. Programmatic also includes private marketplaces, preferred deals and programmatic guaranteed, which do not all use an open auction.

Do I need a DSP to buy programmatic traffic?

In most cases yes, because a DSP is the tool that connects to supply and bids on impressions. Smaller advertisers often use a self-serve DSP or the DSP of an ad network instead of building their own technology.

What does CPM mean in programmatic?

CPM is the price for one thousand impressions. Most programmatic auctions are priced in CPM, even when the advertiser optimizes for clicks or conversions.

Want to look up a term from this article? Our ad tech glossary explains them in one or two sentences each.