The complex journey of digital ads

Digital advertising 101: How an ad loads on a page and why programmatic might not be as efficient as advertised

Complaining about and reporting on the issues with ad tech is all the rage these days, and for good reason. There are certainly a lot of challenges including UX, transparency, ad fraud, verification, and brand safety. What we have here is rapid innovation, which has evolved into one of the most complex technology systems on the planet (right up there with high frequency trading).

Anytime you have innovation at this pace, you will find unexpected side effects developing. I played baseball (outfield) and football (kicker) in college. A shorter, more compact swing delivered more hits. Fewer steps back and over would improve my odds of kicking the sweet spot on the football. The same can be said about ad tech.

When your LUMAscape evolves like this, you’re bound for problems:

Even with all of its challenges, it’s actually quite amazing when you dig into the technology and process of how ad tech works in 2017 (this post is inspired by behindthebanner). And yet, there are still a lot of folks in the advertising space that aren’t fluent in programmatic.

Understanding how an ad is served is the first step to uncovering solutions to the problems that plague the ad tech ecosystem. Here’s a quick refresher:

  1. User visits a web page

When a user visits a web page, a request is generated for an ad impression that appears on that site. The request is compiled based on what the site knows about the user, including data such as age, gender, location, and browsing history. This information about the user is collected by a Data Management Platform (DMP), which gathers and analyzes large amounts of cookie data. This enables publishers to target users with ad impressions geared toward their demographic, with the goal of providing relevant ads.

2. Impression request is sent to website’s ad server searching for any direct deals

The impression request is then sent to the publisher’s ad server where the publisher checks to see if the user’s impression matches any of its directly sold ad inventory.

3. No direct deals? Time to check the ad exchanges

If the impression has yet to be fulfilled, then it is sent to one of many ad exchanges where servers trying to bid on the impression can communicate with other servers to supplement the data they have collected about the user.

4. Real-time Bidding (RTB)

An auction known as RTB ensues, in which 3rd parties bid for the opportunity to present their content to the impression. The impression is then valued and a bid is placed.

5. We’ve got a winner!

The winning bid is chosen based on who the highest bidder is, with the price being set at the 2nd highest bid price (typically).

6. Ad is served to user

The ad creative could potentially have its own dynamic process based on certain known data on the user (e.g. for geolocation, the ad may include messaging specific to that location). This entire ad placement process typically takes 100–200 milliseconds. Millions of these processes are happening at once online. I think that’s pretty cool.

Programmatic on the decline?

Over two-thirds of all digital display advertising is now purchased programmatically. Most research shows heavy adoption with no signs of slowing down. It must be more efficient and more accurate, right?

Yes and no. Audience targeting creates tremendous efficiencies, but the underlying marketing data is still notoriously inaccurate. Marketing data (outside of Facebook’s walled garden) is typically only around 20% accurate. Non-human traffic is another huge blow to programmatic buying. Some research shows that programmatic is much less efficient as opposed to buying from premium publishers directly:

“This takes the efficiency ratio from about 8:1 to about 27:1. Put another way, the odds of getting an absolutely, positively “human viewable” impression is somewhere between 8 and 27 times more unlikely when buying programmatically.”

Look for there to be a slight trend back in the direction of direct buys among quality publishers and private marketplaces in the near future. Many advertisers are looking for ways to audit their digital ad spend, investing less in what companies say they can provide (we know this is a problem in ad tech), and more in what they know will give them ROI and less wastage. The next 3–5 years will be critical for the ad tech ecosystem. Solutions must be built to repair these issues and root out the bad players. Only time will tell.