What Happens In A Programmatic Auction?
by Lloyd Greenfield
Have you ever wondered what happens in a programmatic auction? How thousands of buyers compete for a single impression in a split second? Well, this article is here to answer those questions.
We’ll go through, step by step, what happens within an open RTB auction to allow publishers to make their inventory available through programmatic auctions through to the buyer serving their ad.
Step 1: A User Lands On A Page With An Available Ad Slot
Step 2: Call To The Publisher Ad-Server
A call is made to the publisher’s first-party ad-server. This is the technology used that decides how to utilise the available impression. There are many different ways in which this impression could be fulfilled:
Fulfil a direct deal with an advertiser
Fulfil a sponsorship deal
Sold via a programmatic path
Private Marketplace (PMP)
In our example, the impression is being made available to the OpenX exchange to sell via Open RTB.
Step 3: The Publisher Ad Server Calls Upon the Ad Exchange to Initiate an Auction
The publisher’s ad server recognises there are no prior commitments for this ad slot and opens it up to programmatic auction by contacting the ad exchange.
Step 4: Anonymised Information is Passed Through to Buyers About the Available Impression
Information such as; impression size, user ID, page domain, browser language and country are passed from the publisher to the buyers via the ad exchange. This information is what DSPs will use when deciding how much to bid on the impression, if at all.
Step 5: The Advertiser’s DSP Cross References the Information on the Available Ad Slot Against Targeting Parameters to Determine a Relevant Bid
Demand Side Platforms (DSPs) are used by advertisers to bid on the available impressions across the web. They are plugged into multiple exchanges and will see billions of available impressions a day.
Available impressions do not always need to meet all targeting criteria in order for a bid to be submitted, though the more relevant the opportunity the higher the DSP is likely to bid to secure the inventory. This results in varying bids from buyers and some buyers not even submitting bids. DSPs will use the information sent in the bid request and their own data on the user to set an appropriate bid price.
Not all buyers will submit bids, this can be down to many reasons, such as that particular domain being blacklisted on their campaigns or simply no campaigns having the relevant ad size.
Step 6: The Ad Exchange Receives Bids and Determines the Winner
The highest bidder wins, but the rate they pay is determined by the auction type they have entered.
First price auctions: the highest bidder wins and pays what they have bid.
Second price auctions: the highest bidder wins but pays $0.01 more than the second highest bidder.
The auction type is usually passed in the bid request however, be aware that it is not always present.
Step 7: The Winning DSP Requests Their Creative Asset from Their Ad-Server
The impression has been won, and now the relevant asset must display in the ad slot. The ad has been created and is stored within the advertiser’s ad-server. The buyer’s DSP then requests it and prepares to pass it to the Ad Exchange.
In our example, Adform is being used for both the DSP and the ad server. An advertiser could use a different combination of DSP and ad-server, the process would remain the same.
Step 8: The ad serves on the page in the available ad slot
The creative asset is sent back through the DSP, Ad Exchange and Publisher Ad Server in order to display on the web page. Once the asset has reached the publisher ad-server, it can be delivered on the page.
Some extra calls to the ad-server and DSP are made when the ad renders on the page and if the user clicks on it. These are made to record the delivery and interaction with the ad.
This is what happens in a typical programmatic auction for an open RTB buy in Display. Be aware that there are different types of programmatic buy such as, PMPs, automated guaranteed and programmatic guaranteed. There are also emerging programmatic channels that do not sell their inventory using the auction model.
The landscape is evolving dramatically so be sure to keep up to date with the latest by reading our latest blogs and whitepapers. Please contact us if your organisation would benefit from bespoke programmatic training.