Understanding the Complicated World of Advertising Technology (AdTech) & Programmatic Advertising

The programmatic advertising industry can be hard to understand; there’s specific terminology, a whole bunch of initialisms, and dozens of AdTech platforms.

To help you make sense of it all, we’ve created a list of resources where you can find answers to your questions.

Video

Watch the video below to learn about AdTech and programmatic advertising.

The video covers the follow topics:

• A run down on the key terms.
• A brief history of digital advertising — from the very first online ad to today.
• The key platforms (i.e. software), processes and players in the programmatic advertising industry.
• The main media-buying processes.
• The main digital advertising mediums and channels.

View and download the slides from the presentation here.

The transcript from the video can be found below.

AdTech Terminology

• The Ultimate Guide to AdTech Terminology
• AdTech & MarTech Glossary

A Brief History of Digital Advertising

• The History of Digital Advertising Technology

The Main Platform, Processes and Players

• The Main Technology Platforms and Intermediaries in the Digital Advertising Ecosystem

The Main Trends, Challenges, and Opportunities

• Programmatic Advertising and AdTech in 2022: Challenges and Opportunities
• AdTech and MarTech Predictions and Trends in 2022

If you have any questions about programmatic advertising or AdTech, then feel free to get in contact with us here.

Transcript From the Video Presentation

Introduction

Hello everyone, my name is Michael and I’m Head of Marketing at Clearcode. In today’s video, I’m going to be explaining the complicated world of AdTech and programmatic advertising.

This video is designed for anyone who has recently started working in the digital advertising industry and for those who want to learn more about digital advertising works.

For those of you who haven’t heard about Clearcode before, we’re a software development company that specializes in designing and building advertising and marketing technologies, such as ad servers, DSPs, SSPs, CDPs, etc.

Agenda

So here are the main topics I’ll be covering in this video.

We’ll first start with some key terms, but there are a lot of specific terms in the AdTech and programmatic advertising industry, so I’ll only cover the key terms initially and as I’m going through the presentation, I’ll explain new terms as they appear.

Then we’ll have a look at the history of digital advertising and look at the key events that have helped shape the industry over the past 3 decades.

Next we’ll look at the key platforms, processes and players in the AdTech and programmatic advertising industry.

Next up we’ll take a look at the media-buying process.

Then lastly, we’ll then look at the main digital advertising mediums and channels.

Key AdTech and Programmatic Advertising Terms

So starting with some key terms.

The first set of terms are about advertising.

Online advertising usually refers to ads shown in web browsers. When the Internet became widely available in the mid 90s, many newspapers, magazines and other businesses started to move online, as did advertising, so that’s where we get the term “online advertising” from.

Digital advertising refers to advertising displayed via digital channels. This can refer to ads shown on websites and mobile apps, but it can also refer to advertising shown on digital displays, such as the ones in shopping malls and digital billboards.

Programmatic advertising refers to the automation of digital advertising via software and data. So when we think about how advertising was bought, sold, and even measured before the Internet, everything was a direct, human-to-human process. There wasn’t any software that could help advertisers and publishers automate the processes. When the Internet was introduced, tech companies started building software, known as advertising software or advertising technology, to automate the various processes used to buy, sell, deliver, measure, and manage digital advertising campaigns. 

Data also plays a key role in programmatic advertising as it allows advertisers to improve the performance of their campaigns and reach their target audience in a more effective way, and allows publishers to increase their ad revenues by learning more about their audiences and helping advertisers reach them.

The last set of terms that we’ll look at are AdTech and MarTech.

So when we talk about advertising technology, or AdTech for short, and AdTech platforms, we’re essentially just talking about software. These platforms are used to power and automate many different digital advertising processes, such as buying, selling, measuring and reporting. 

Marketing technology, or MarTech for short, is software that’s used to create and manage digital marketing activities.

Now the main difference between AdTech and MarTech is that AdTech is used for digital advertising, such as displaying ads on a website, in a mobile app, in a video and on a digital display. Whereas MarTech platforms are used to run and automate digital marketing activities, such as email marketing, search engine optimization, and customer relationship management.

There are some companies that offer software for both digital advertising and marketing activities, and that’s where we get the term MadTech from, which is essentially just a combination of AdTech and MarTech.

If you would like a more comprehensive and detailed list of the key terms used in the AdTech and programmatic advertising industry, then please visit our AdTech and MarTech glossary.

A Brief History of the Digital Advertising Industry

Alright, now we’ll look at a brief history of the digital advertising industry.

So the first ever online ad, which kicked started what is now a multi-billion dollar industry, appeared on October 27, 1994 on a website called HotWired, which is now wired.com, the popular tech publication. This advertiser was AT&T and it ran for about 3 months, during which time it had an average click-through rate of 44%. To put that into perspective, the current click-through rate for banner ads is between .02 and 2%, which just goes to show you that consumers will be interested in anything that’s new, even advertising.

Key Events from the Past Three Decades of Digital Advertising

Now we’ll have a look at the key events from the past 3 decades. There have been many key events over the years that have helped shape the AdTech and programmatic advertising industry and make it what it is today, but if I had to assign a theme to each of those 3 decades, it would look like this.

In the 1990s when online advertising first appeared, there was a lot of innovation and this is when we saw the first AdTech companies emerge.

The 2000s were dominated by acquisitions, especially by the large tech companies.

And more recently from 2010 onwards, the key theme has been privacy.

Let’s now take a closer look at the key events from these 3 time periods.

The 1990s in Digital Advertising: Innovation

So as I mentioned a moment ago, the key theme of the 1990s was innovation. We saw the first ad appear in 1994, web cookies, which would go on to play a key role in online advertising, were invented by 2 developers from Netscape in 1994. 

The first ever ad server was invented by a company called FocaLink Media Services in 1995.

A company called DoubleClick, which was also one of the first AdTech companies, was invented in 1996.

And in 1996, Yahoo! started running ads on its search engine.

The 2000s in Digital Advertising: Acquisitions

The 2000s in online advertising were very much focused around more innovation, but also acquisitions. As we can see here, Google really started to get involved in the online advertising industry by building its own ad platforms and acquiring other AdTech companies.

In the year 2000, Google launched its AdWords ad platform, which is now known as Google Ads.

In 2003,Google acquired Applied Semantics, creators of a contextual advertising product called AdSense.

In 2006, AdMob, a mobile ad network, was founded. Google acquired the company in 2009. 

In 2007, Google acquired DoubleClick for $3.1 billion. This is one of Google’s more significant acquisitions and was seen by many as a game changer for Google as it allowed them to beef up their ad product portfolio. DoubleClick’s products are still part of Google’s AdTech stack, but they underwent a rebranding process in 2018 that saw Google drop the DoubleClick name.

There were a couple of other big acquisitions in 2007 by Microsoft, that acquired the ad exchange ADECN, and Yahoo! that acquired the ad exchange RightMedia.

The 2010 Onwards in Digital Advertising: Privacy

The main theme in programmatic advertising over the past few years has been privacy. 

Various governments around the world have introduced new privacy laws and regulations to strengthen user privacy for their citizens and residents. 

But we’ve also seen some large tech companies take action and introduce changes to strengthen privacy for their users. 

In 2016, the European Union adopted its General Data Protection regulation. The regulation was then enforced 2 years later on May 25, 2018. The goal of the GDPR is to give EU citizens and residences more control over their personal data and to strengthen user privacy. The EU’s GDPR is often seen as the catalyst for the introduction of other 

In 2017, Apple released a feature called Intelligent Tracking Prevention (ITP), which is designed to increase privacy for Safari users by preventing cross-site tracking. The main way it does this is by blocking third-party cookies and other cross-site tracking techniques.

In 2018, Mozilla introduced a privacy feature called Enhanced Tracking Protection (ETP), which is similar to Safair’s ITP in that it aims to prevent cross-site tracking by blocking third-party cookies and other cross-site tracking techniques. 

Also in 2018, the California government introduced the California Consumer Privacy Act (CCPA). The goal of the CCPA is to make it easier for Californian citizens and residents to know the types of personal information businesses collect about them, and give them the right not to agree to the sale of their personal data to other parties.

In 2020, Google Chrome announced that it would be shutting off support for third-party cookies by 2022. But then in June 2021, Chrome announced that it would be extending its planned sunset of third-party cookies by 2 years.

Then, in July 2022, Google Chrome once again announced that it will be delaying the deprecation of third-party party cookies by another year. 

It’s currently expected that Chrome will shut off support for third-party cookies in the second half of 2024.

Then in 2020, Apple announced that it would be introducing new privacy changes to its mobile operating systems in an effort to increase user privacy for iOS, iPadOS and tvOS users.

I’ll talk more about these privacy changes, how they work and the impact they have on programmatic advertising a bit later in this video.

And if you’d like more information about the history of digital advertising, then please read chapter 03 of our AdTech Book.

The Main Platforms, Processes and Players in the Programmatic Advertising Industry

So now we’ll take a look at the main platforms, processes and players in the programmatic advertising industry.

For any given advertising transaction, there are 2 key players — an advertiser and a publisher.

An advertiser is a brand or company (e.g. advertising agency) that wants to get its product or service in front of its target audience to build brand awareness, develop brand loyalty, and increase sales.

A publisher can be defined as any company that produces content that attracts an audience. A publisher could be a newspaper, such as the New York Times, and even a video streaming service such as Hulu and Netflix. 

In between an advertiser and publisher sit multiple differ companies, which are often called intermediaries.

Let’s take a closer look at these companies now.

Let’s start with the advertiser’s side, which is also known as the demand or buy side, as advertisers are the ones wanting to buy the available ad space.

Most advertisers would use an ad server, which is also known as a third-party ad server. 

This AdTech platform is responsible for making decisions about what ads to show on a website, serving those ads, connecting with other AdTech platforms (e.g. demand-side platforms) to purchase inventory, and collecting data such as impressions, clicks, etc, for reporting.

A demand-side platform (DSP) is a technological platform that allows media buyers (advertisers and agencies) to run advertising campaigns and buy inventory from various ad exchanges and SSPs through one user interface.

DSPs are a key component of the real-time bidding (RTB) process, which allows advertisers to buy media on an impression-by-impression basis.

To help improve targeting and enhance media buys, DSPs often utilize data from data-management platforms (DMPs) and data brokers. 

On the publisher’s side, which is also known as the supply or sell side, there are also a couple of key pieces of AdTech.

The first one is a publisher’s ad server, also known as a first-party ad server. 

This technological platform allows publishers to manage the ad slots on their website and display ads that have been sold directly to advertisers (i.e. direct campaigns). In the event that no direct campaigns are available, first-party ad servers will act as a management platform whereby they decide which ad codes (i.e ones from a third-party ad server, SSP, or ad network) to serve in their ad slots.

Another piece of AdTech that most publishers would use is a supply-side platform (SSP), which is a technological platform designed to help publishers sell their inventory on multiple ad exchanges and ad networks, and in some cases directly to DSPs, in an automated, secure and efficient way.

Even though publishers don’t need to use an SSP to sell their inventory on the ad exchange, the technology used in SSPs provides many benefits that allow them to receive the most yield from their inventory and gain clearer insights into their audience.

Next up we have ad networks.

An ad network is a technology platform that serves as a broker between a group of publishers and a group of advertisers.

Ad networks were first introduced in the mid-1990s as a way to help publishers sell their available ad inventory and help advertisers scale their digital ad campaigns across many different sites without having to deal with each publisher directly.

Ad networks aggregate unsold inventory from publishers and offer advertisers a consolidated and generally less expensive pool of impressions on a cost-per mille (CPM) basis. However, many ad networks nowadays also offer advertisers access to premium inventory, which is ad space located in high-traffic areas of a website, such as at the top of the home page.

Then we have ad exchanges. 

An ad exchange is an AdTech platform that facilitates the buying and selling process of available impressions between advertisers, who place their bids via DSPs, and publishers, who sell their inventory via supply-side platforms (SSPs) or directly with the ad exchange.

Ad exchanges are often compared to stock exchanges, as the buying and selling process of media is akin to the process of buying and selling stocks via a stock exchange.

We’ll talk more about DSPs, SSPs and ad exchanges in a moment when we look at the real-time bidding (RTB) process.

The Main Intermediaries and Other Companies in the Digital Advertising Industry

So here’s an overview of the main intermediaries and other companies that operate in the programmatic advertising industry.

First up we have the walled gardens of AdTech, which include Google, Facebook (or Meta as they’re now known as), Amazon and Apple.

The reason these companies are called walled gardens is because they have closed-off ecosystems, whereby they keep their audience and data to themselves. All of these walled gardens, apart from Apple, also have self-serve advertising platforms whereby advertisers can run ad campaigns across their properties.

Google and Facebook dominate the online advertising industry. In fact, it’s estimated that for every $1 spent on digital advertising, 30 cents of that goes to Google or Facebook. Amazon is also becoming a dominant third player in the digital advertising space as they sit on a treasure trove of insightful consumer and purchasing data that advertisers can utilize to show ads on the Amazon marketplace.

Unlike Google, Facebook and Amazon, Apple doesn’t have any self-serve ad platforms, apart from its Search Ads platform that is used to display promoted ads on its App Store.

Instead, Apple’s role as a walled garden company in programmatic advertising is connected with the privacy changes they’ve introduced recently, which have a direct impact on the performance of advertising campaigns on Apple’s devices and products.

Next, we have advertising agencies.

There are many different types of advertising agencies, including many small- and medium-sized agencies, but the ones shown on this slide are the largest agency holding groups that work with the largest brands in the world. 

An advertising agency is a company that provides services to brands associated with creating, planning, and managing advertising campaigns. They are generally independent, external companies working for their clients, which can include businesses, international corporations, non-profit organizations, and governments.

Traditionally, brands hired ad agencies to produce television commercials and run print campaigns in magazines, newspapers, and on billboards, but also to take care of other forms of promotion and marketing.

Due to the growth and rise in popularity of the Internet, agencies use an array of advertising and marketing technologies to create, run, manage, and measure online campaigns.

Then we have the independent AdTech and data companies, which often compete with the walled gardens.

These companies offer a wide range of advertising-technology and data platforms for buyers and sellers of digital media. These are just some of the main independent AdTech companies on the market, but there are thousands more.

The Main Media-Buying Processes in Digital Advertising

Now we’ll look at some of the main ways digital advertising can be bought and sold.

The first one we’ll look at is manual media buying.

In the early days of online advertising, the buying and selling of ads between advertisers and publishers was a very manual process.

Advertisers would work with publishers and send them ad tags directly. Because there weren’t any technological platforms involved, there wasn’t any way to define targeting or produce reports. 

Luckily, the introduction of ad servers solved this and kickstarted the programmatic media-buying revolution.

Next up we have programmatic direct. With programmatic direct, an advertiser and publisher agree on the inventory and the CPM, then the rest of the process is handled programmatically via the use of AdTech platforms. 

Programmatic direct is very similar to the way media was bought and sold prior to the Internet and even in the early days of online advertising, but provides more scale thanks to the use of advertising technology.

Real-time bidding (RTB) is a protocol that was introduced in the late 2000s and was a big game changer for the way online media was bought and sold. 

Originally designed to help publishers sell remnant inventory to advertisers, RTB is now used to sell all types of inventory, including premium inventory.

Instead of buying thousands of impressions from the same publisher, RTB allows advertisers to purchase individual impressions across multiple publishers to reach their target audience more precisely and bid based on the information known about the website and user at that particular time.

Publishers also benefit by receiving higher CPMs for their inventory.

The key AdTech platforms used in RTB auctions are DSPs, SSPs and ad exchanges and also data platforms like DMPs.

Although RTB helped publishers sell their remnant inventory on the open market, many premium publishers found that they were losing money on their most premium inventory. 

Advertisers also became concerned that they were missing out on premium inventory and their ads weren’t even seen by visitors. 

To overcome these issues, private marketplace (PMP) was born.

Private marketplace is an invite-only variation of the RTB model where publishers offer their most premium inventory to a select number of buyers.

Advertisers participating in PMP deals can bid on the available inventory before the publisher offers it in an open RTB auction.

Header bidding (aka pre-bidding, advance bidding, and holistic yield management) is a media-buying process that enables publishers to simultaneously collect bids from a number of demand sources (e.g. DSPs) before their ad server loads other tags, such as direct deals.

The bids are collected via a piece of JavaScript code located in a website’s header section, hence the name header bidding.

Header bidding came about because of the inefficiencies of waterfalling and also because of Google’s preferences towards its own ad products. Because many publishers use Google’s ad server, Google favored bids from Google Ad Exchange (AdX).

This resulted in demand from other AdTech platforms missing out on the chance to purchase the ad space, even if they wanted to pay a higher amount for it.

With header bidding, publishers, via SSPs and ad exchanges, can collect bids from different demand partners and then pass the winning bid to their ad server so that it can compete with their other deals.

To help publishers implement header bidding into their websites, there’s an open-source framework called Prebid, which makes it easier for publishers to get started with header bidding and get access to more demand with minimal integration hassle.

Lastly, we have the publisher’s waterfall.

Waterfalling, also known as a daisy chain or waterfall tags, is a process used by a publisher to sell all remnant inventory. This process occurs when a publisher has been unable to sell its premium ad slots that are usually reserved for direct ad sales between the publisher’s internal sales team and advertisers.

Waterfalling gets its name from the waterfall-like process for selling inventory; the demand sources are initiated one at a time, one after another.

The advantage of this daisy chain is that the publisher is able to sell off its inventory; however, as the impressions go further down the waterfall, the CPM price, which is worked out as an average, decreases.

While some publishers still may use a waterfall setup, many have switched to header bidding.

The Main Digital Advertising Mediums and Channels

In this final section, we’ll look at the main digital advertising mediums and channels.

So an advertising medium is a form of verbal or non-verbal communication and essentially refers to the ad format.  Examples include text ads, video ads and audio ads. 

An advertising channel refers to the place where the ads will be displayed. Examples include display, social media and TV advertising. 

Now let’s take a look at some of the main digital advertising mediums.

First up we have text and images ads. These ads can appear on many different channels, such as on websites and in mobile apps.

Next we have native ads. Native ads are designed to blend in with the rest of the surrounding content by following the natural form of the user experience and matching the design and behavior of the web page, application, or platform.

Although native ads are meant to look like the surrounding content, there still needs to be a clear and prominent disclaimer stating that they are paid advertisements. 

Native ads are generally found on content-rich sites, such as news sites, blogs, and social networks.

There are many different types of native advertising with one of the more interesting types being branded or native editorial advertising, which involves companies paying to show their branded content on a website, like a news site or blog, and is displayed just like the other forms of editorial content on the site.

Some great examples of branded content come from Netflix’s ad campaigns promoting the shows Orange is the New Black and House of Cards:

Rich media is an interactive form of advertising and can include animated images (e.g. gifs), audio files, and videos. 

Unlike traditional text and image ads, rich-media ads often include elements that allow the user to interact with the ad.

Video advertising refers to ads displayed in the form of a video, instead of their traditional static form, such as banner ads. Video ads can be found on many different channels, such as on websites and in mobile apps.

Lastly, we have audio ads, which are found in podcasts, music-streaming services and digital radio. 

Now we’ll look at some of the main digital advertising channels.

First up we have display advertising. This channel is also known as web advertising and refers to advertisements displayed in web browsers on desktops, laptops and mobile devices (smartphones and tablets).  

Then we have mobile app (aka in-app mobile) advertising, which relates to displaying ads inside mobile apps on smartphones and tablets. 

Next, we have social media advertising. Many popular social media sites like Facebook, Twitter, Pinterest, LinkedIn and Instagram utilize native advertising, where the ads appear in and next to the news feed, making them look like organic content.

Next we have digital out-of-home (DOOH) advertising. This advertising channel is the digitized version of out-of-home (OOH) advertising, which refers to advertisements displayed on billboards, street furniture , and on taxis, buses and subway walls. 

DOOH utilizes digital screens and billboards to display advertisements in the same way as traditional out-of-home advertising, but with enhanced visual capabilities.

Lastly, we have advanced TV.

Even though traditional TV is around, new forms of TV are starting to take off.

These new forms of TV include

Advanced TV, which is a term coined by the IAB referring to any form of TV other than the traditional broadcast, cable and satellite connections. 

Over-the-top (OTT), which refers to devices or services used to stream digital content to a connected TV. Examples of OTT include streaming services such as Netflix, Hulu, Disney+, AppleTV+, and Amazon Prime.

And connected TV (CTV), which refers to devices that connect to the Internet and allow viewers to watch video content from over-the-top streaming services. Examples of CTV include smartTVs, gaming consoles, and streaming devices. The IAB Tech Lab doesn’t consider desktop computers, laptops, smartphones, and tablets as examples of CTV.