Direct Media Buying vs Programmatic
When it comes to buying ads, advertisers are often left wondering whether to take the direct media buying or programmatic approach. But what’s the difference?
Direct media buying means manually finding publishers to advertise with, negotiating rates and IO details with that specific publisher, then managing and optimizing your campaigns through a 3rd party ad server. Programmatic media buying is more automated and allows advertisers to bid on ad inventory.
This article is an in-depth guide to direct media buying and programmatic media buying. It explains why each method is still being used today, how they both work, and the merits and demerits of using either of the two methods to buy advertising space.
The information in here is derived from the documented experiences of advertisers and publishers, and the thorough analysis of various direct buying and programmatic buying platforms available today. All the information is up to date, unbiased, and simplified for easier comprehension.
Direct Ad Buying
Direct ad buying is the more traditional option. Since it’s been around since the infancy of the internet (its inception can be traced to around 1994), one can’t help but compare it to the proverbial “gold” that old things are often aligned with.
There’s no question that it’s a valuable method for advertisers to buy ads, especially since the returns associated with direct buying—particularly when it comes to the quality of the audience—are vastly superior to those obtained with programmatic buying.
To understand why direct ad buying is still a viable way to buy ads today, a deeper look into its workings is necessary. But first, let’s define it.
What is direct ad buying?
There are more than a few appropriate definitions of direct ad buying. It’s only fair that we shine a spotlight on each of them:
- Direct ad buying is a process through which an advertiser finds a publisher, negotiates the price, buys the necessary inventory, and finally, publishes an advertisement on the website of their choosing.
- Direct buying can also be referred to as the manual buying of ad space from publishers or ad networks, which involves price negotiation and order confirmations, both of which are reliant on human interaction.
- Direct buying is also a manual process of selecting ad space on a website or a preferred publication. It involves the negotiation and determination of ad placement, pricing, launch date, and the running period of the ad campaign.
From the first definition, we can establish that direct ad buying takes a lot of legwork. You have to shop around for publishers and ad networks, which can be tedious if you’re located remotely or don’t know where to start.
The second definition confirms that direct ad buying is impossible without an ample amount of human interaction. Similar to many customer-salesperson interactions, you will need to make calls, set up appointments, fill up forms, and send emails before you can close a deal with a publisher.
This means that you need to possess decent communication skills as well as negotiation skills to facilitate the best deals when you choose to buy ad space in this manner.
The third definition highlights the key selling point of direct ad buying: that you get to choose exactly where your ads are placed. That’s a big deal for businesses and digital marketing agencies. It makes it possible to pick the most relevant audience for your business, which means you’ll enjoy better returns.
Direct ad buying does come with a few drawbacks, but the two most significant ones are these:
- The price of ad space always varies – You won’t get the same quotations from two different publishers, which means you have to negotiate from scratch every time you switch ad space providers.
- The process is quite slow – Unlike the more automated programmatic ad buying, direct buying requires you to touch base with more than one human representative. The process of negotiation can take days or weeks depending on the scale of your offer, so this is not exactly the swiftest ad buying process.
- Custom ad placement is pricey – The biggest advantage of using this method to procure ads is incidentally one of the reasons it might not be right for your business. While you’re allowed the luxury of precise targeting plus a premium inventory, it doesn’t come cheap, and your pockets have to be deep if you choose direct buying of ad spaces.
To understand why these drawbacks are almost inevitable when you choose direct ad buying, let’s take a look at how the process works.
How does direct ad buying work?
The process of direct buying kicks off with the declaration of advertising needs to the publisher. This means everything that the advertiser hopes to achieve with their ads—the kind of audience they’re looking for, plus nitty-gritty details like how long the ad should run or where it should appear on the website.
Following this is the negotiation stage. Here, the advertiser and the publisher discuss price with the aim of settling on the most convenient price for each party. Once this is done, all that is left is for the publisher to confirm the advertiser’s ad placements once their advertisements are live. All this takes place in person or over the phone.
Direct ad buying has no monthly minimums. That means you can buy as few ad spaces as you need, which is not a feature of programmatic buying. Furthermore, the ability to negotiate lower rates and/or added value makes it uniquely suitable for B2B advertisers.
Buying ad space directly from the publisher also has another advantage: you will receive first preference for press opportunities, which means more exposure for your business.
Direct buying also means that you need to hire media buyers to handle your ad campaigns. This requires a significant investment of time and resources, even though the reward is high quality ad spaces and premium exposure to relevant audiences.
To circumvent this issue, proponents of direct media buying often resort to software media buying solutions as a way of optimizing the process to save more time and resources. One of the most used software are third-party ad servers.
What’s a third-party ad server?
A third-party server is a web server that contains publisher and advertiser data. It is capable of launching ads directly on the targeted websites. The purpose of these servers is to eliminate middlemen, but it does so much more than that. In fact, many advertisers consider third-party ad servers to be the cornerstone of direct buying of media.
That’s because such platforms have multiple uses. Advertisers can set up new campaigns or optimize existing ad campaigns right from within the software. They can also access analytics and data to understand the performance of their advertisements.
Ad servers have a very basic underlying principle. They help to match advertisers and publishers using tags that are defined by the advertiser. The ad server selects the best matches (both the publisher and the website with the required audience) depending on the criteria set by the advertiser.
That’s usually the case unless a high-priority publisher requires their inventory to be filled, which then means advertisers get routed to this publisher if they match their criteria.
Why should you use a third-party server for direct media buying?
Ad servers provide a more suitable environment for advertisers looking to buy ad space directly. They can be far more beneficial compared to the traditional way of direct media buying.
Some of the benefits you can enjoy with a third-party ad server include:
- Detailed analytics on each campaign, which make it easier to monitor ad performance and make timely adjustments to poorly performing sources.
- Multiple supply sources to choose from within a single platform.
- Access to gigabytes of data from publishers, which you can leverage to optimize your ad campaigns.
- Over 100 targeting attributes that you can use to narrow your audience and fine tune your targeting accuracy.
- Considerably less time is needed to launch a campaign. The direct media buying process typically takes weeks or months before an ad is launched. In comparison, using an ad server can get your ads launched within an hour of pressing the button.
Programmatic Ad Buying
Whereas direct media buying is considered the manual method of buying ads, programmatic ad buying is synonymous with automated media buying. It greatly relies on technology that was invented in 2009: real-time bidding (RTB).
RTB technology makes it possible for advertisers to bid on ad inventory from publishers in real time. It doesn’t require a direct interaction between the two parties, and the ad buying process is mostly automated. Therefore, programmatic ad buying dramatically improves the time efficiency of launching an ad campaign since there are no lengthy negotiations involved.
Before we go further, let’s take a look at its definition.
What is programmatic ad buying?
The process through which advertisers bid on inventory slots in a real-time auction is what we refer to as programmatic ad buying. Bids are placed simultaneously by advertisers, and the advertiser with the highest bid wins the ad inventory.
The entire process is highly automated and requires little intervention from the media buyers and sellers involved. Eliminating human interaction and negotiation dramatically speeds up the process of buying ads. In fact, it typically takes less than 100 milliseconds from start to finish.
This format of buying ads lets publishers and advertisers settle on the cost per impression (CPM) even before the sale is initiated. Unlike direct buying where buying ad inventory requires price negotiations,, you’ll know exactly how much you need to secure a particular ad slot when you use programmatic ad buying. This feature is known as a guaranteed impression.
Key elements of a programmatic advertising stack
- Ad Server
This server hosts ad creatives in formats such as native and video, and keeps all the data associated with them. The purpose of the ad server is to facilitate the delivery of ads to digital platforms, whether that means mobile apps or websites. This is something it achieves using HTTP.
- Ad Networks
The programmatic ad ecosystem is not complete without ad networks. Ad networks are companies that play an intermediary role by reselling traffic sources from publishers to advertisers looking to get exposure for their ads.
- Ad Exchanges
An ad exchange is simply a marketplace that connects demand-side platforms (DSPs) to supply-side platforms (SSPs). The purpose of an ad exchange in a programmatic advertising stack is to enable advertisers to purchase ad inventory from multiple publishers through an RTB auction or other ad purchasing methods.
- Ad Verification Providers
Verification providers are crucial components of the programmatic ad buying ecosystem. Their role is also intermediary, but more focused on assessing the quality of traffic and targeting. Verification providers exist as third-party vendors that work independently to verify every part of the process, from the selected targeting criteria to the placement of ads on publisher websites and apps.
- Data Management Platform (DMP)
The DMP is crucial to the analytic component of the programmatic advertising stack. This tool gathers all third-party user data and combines it into readable, actionable insights. The DMP is used by advertisers, who connect it to their DSP to collect data on the performance of their ad campaigns. This makes it possible for them to make data-driven decisions when fine-tuning their programmatic ad campaigns.
- Demand-Side Platform (DSP)
The DSP is basically the advertiser’s dashboard/hub. If you’re an advertiser, this is what you will use to purchase targeted traffic (often in unlimited quantities) from publishers. The programmatic ad buying method allows you to connect your DSP to multiple ad exchanges to give you several advertising inventories to choose from.
- Supply-Side Platform (SSP)
If you’re a publisher, the SSP is your main dashboard. It is from this platform that publishers manage and sell ad inventory (spaces) using programmatic buying methods like RTB. The SSP also gathers data on the audiences targeted by the publisher, which allows them to improve how ads are delivered to specific audiences.
Each one of these elements plays an important role in the programmatic media buying ecosystem. However, you don’t need to know every little detail about every component.
You can get by with rudimentary knowledge on most of these elements, but to understand how the programmatic ad buying process really works, then you must be familiar with the intricate workings of the platforms used by advertisers (DSPs) and publishers (SSPs).
Understanding demand-side platforms (DSPs) and supply side platforms (SSPs)
Programmatic ad buying doesn’t involve a lot of human interaction. The chances are that you’ll not have any direct communication with human representatives throughout the entire process.
In lieu of sales reps and customer service agents, programmatic ad buying utilizes adtech software to connect advertisers and publishers. On the advertising end, the tool used is what we refer to as the demand-side platform (DSP), while on the publishing end, it is known as the supply-side platform (SSP).
We’ve already defined the SSP as the publisher’s tool from which they sell and manage ad inventory. SSPs are the inverse of DSPs, and aside from managing inventory, they allow the optimization of ad spaces and audiences, and automate the monetization process.
All the publisher needs to do is set a price floor (minimum bid amount) for their inventory and wait to be matched to advertisers within their bidding range.
The advertiser, on the other hand, uses the DSP to bid on ad inventories listed by publishers. Your bid is largely determined by your advertising needs and budget, which are reflected by the criteria you use to select ad space for your ad campaigns.
The whole process of setting up an advertising campaign and bidding on ads from multiple publishers occurs in real-time. Rather than spend hours or days negotiating for prices, you simply state your CPM threshold and the DSP connects you to publishers within your bidding range. That means you’ll never pay more than you can afford for ad space.
What makes programmatic ad buying suitable for casual advertisers?
Earlier in this article, we mentioned that one of the key advantages of using the direct buy method is the ability to customize ad placement. You can choose the exact audience to advertise to, which may improve your ad’s performance, but also drive up advertising costs.
The direct ad buying method can also be tedious because you have to evaluate each audience before buying inventory on the website you’re interested in. If you’re not a seasoned advertiser, this can be an overwhelming task.
With a DSP, on the other hand, everything, including the analysis of ad placements, is done for you automatically. The DSP uses your targeting preferences to find the best audience for your ads. On the plus side, this means less work for you. However, it also means that you won’t know exactly where your ads are going to be displayed.
There’s also the big issue of user friendliness. DSPs typically have very simple dashboards, especially compared to the complicated interface that most direct buy ad servers have. All your targeting options, analytics, and campaign overview are displayed here, making it a lot easier for an occasional advertiser to navigate and adjust settings.
The analytics and media planning section leverages the data collected by the DMP to help you plan your future campaigns. Even without possessing technical programmatic knowledge, you can use this knowledge to create ads that maximize your ROI.
DSPs can be further divided into two: self-serve DSPs and white label DSPs. They may sound like the same exact thing, but they each cater to two distinct categories of advertisers and come with their own set of strengths and flaws.
The difference between self-serve and white label DSPs
In a nutshell, a WL DSP gives you a wider variety of choices on the global ad marketplace, and is therefore considered the more powerful option. However, it’s not exactly designed for small advertisers, who are better off using the marginally more cost effective self-serve option.
Before we go any further, what’s the difference between white label and self-serve DSPs?
We can say that a self-serve DSP is the classic iteration of automatic media buying whereby ad inventory is bought via a real-time bidding auction. As its name suggests, the self-serve option requires you to handle every aspect of your campaign, whether it’s trading ads or optimizing your campaigns.
We consider the self-serve DSP to be the easiest entry into programmatic ad trading. It’s as simple as signing up, depositing funds, uploading your creatives, tweaking your settings, and once you’re satisfied, pressing the “launch campaign” button.
A white label DSP is not exactly more complicated, but it does require a few extra steps. Instead of just signing up to a ready made DSP, you can actually buy a blank platform and tailor it to your brand. There is significantly more freedom involved when you use a WL DSP, and it’s not just because you can customize it however you want.
A WL DSP solution allows you to connect to multiple SSPs directly and without the hand-holding that comes with using a self-serve DSP. You have the freedom to integrate as many SSPs as you want, but this freedom does not come cheap.
The price to pay is both literal and figurative. In addition to your typical ad spend, you’ll need to shell out a technology fee for every SSP you connect with. That may seem like a significant expense if your monthly ad budget is only a few thousand dollars, but businesses that spend tens of thousands of dollars for advertising every month stand to benefit a lot more with a white label DSP.
It aggregates all traffic sources under one platform
A self-serve DSP doesn’t allow you to control your traffic sources. That’s not necessarily a bad thing. With a trusted DSP, you won’t have to worry about traffic because it automatically picks the best supply-side vendors for your ads. That means you don’t have to tinker with SSP integrations, and that ad management is easy and straightforward.
It, however, limits your ability to access different traffic sources. Some advertisers use several self-serve DSPs simultaneously to get more traffic sources, but it’s a fool’s errand because most advertising platforms stick to a predefined inventory, and you will inevitably have repeating traffic sources. Eventually, you might find yourself bidding on the same impressions via different DSPs.
The only way to avoid this situation is to stick with a single demand-side platform that retains multiple traffic sources which come from custom SSP integrations and ad exchanges. This gives you full control over what impressions you bid on, and unlimited access to diverse traffic sources for your ads.
It can reduce your monthly ad spend by up to 30%
Bid prices on a self-serve DSP are often marked up to facilitate commissions for the platform owners. That means 20% - 50% of what you pay for impressions is used for the platform’s maintenance, and only 50% - 80% gets to the publishers’ pockets.
As mentioned earlier, this price markup won’t affect you much if you’re a small advertiser with a budget that doesn’t exceed a few thousand dollars. However, large scale advertisers with tens of thousands of dollars in advertising funds will have to part ways with thousands of dollars in marked up prices when they use a self-serve DSP.
That’s why it makes more sense to use a white label DSP in this scenario. Although it has a $2,000 monthly platform fee, prices aren’t inflated to cover the platform’s setup and maintenance (because you own the platform). This can result in a 10% - 30% decrease in your monthly spend as you spend far less per bid compared to what you’d spend with a self-serve platform.
There is room for customization
When you use a self-serve DSP, you’re nothing more than a customer of a third-party SaaS (software as a service) platform. You apply for the account, get advertiser’s access, and trade your ads from within the platform, but that’s as much as you can do. Rebranding is impossible because you’re using the platform as a guest, not an owner.
Things are very different with a WL DSP because you are the rightful owner of the technology you purchase. That means you have full access to the platform and can change its key elements to match your brand. That includes the logo, the URL, the color scheme, and everything in between.
If branding is important to your business, a self-serve DSP is not the best choice. A white label DSP gives you unlimited redesign opportunities and allows you to integrate your brand into your advertising platform.
It offers enhanced audience targeting
DSPs in general offer you 100 % transparency when it comes to data. That’s more than we can say about ad networks, which typically hide most of your advertising data.
However, even though you can get a great deal of information about the performance of your ad campaigns whether you’re using a self-serve or white label DSP, the former platform often conceals some details like the real name of the traffic sources you’re using.
WL DSPs, on the other hand, don’t conceal any data received from publishers. They even display bidstream data that contains up to 50 parameters including browser type, mobile carrier, and internet connection. You don’t normally get these attributes on a self-serve DSP.
The white-label DSP gives you unlimited access to every attribute about the users that see your ads, even when you don’t win the impression. That means that you can collect large batches of data for free and use them to further optimize your ad campaigns.
It allows you to create and assign accounts to other advertisers
A self-serve DSP only grants you user’s access to the platform, which limits your actions to advertising for your own business or buying inventory for other companies if you’re an intermediary media buyer. This doesn’t pose much problems to an individual advertiser, but if you’re interested in creating your own advertising agency, then a self-serve DSP’s access is far too limited.
With a white-label DSP that belongs to your business, you’re not limited to just buying media. You can also create new advertiser accounts and assign them to other users. In essence, you can provide self-serve DSP services to clients that are not interested in the full service.
How does programmatic ad buying work?
Now that we’ve got a good grasp on the inner elements of a programmatic ad stack, we can easily break down the process of buying ads using the programmatic method. Here’s a thorough step-by-step representation of the process.
- First, the advertiser creates the ad campaign then launches it with a specific audience in mind. Once the publisher gets this information, they send a request to occupy specific inventory slots with the advertiser’s ad.
- The two platforms (DSP and SSP) exchange data, and it is from here that the advertiser gets publisher data like audience age, geographic location, search history, device type, and more. Then, they render the ads, and finally have them delivered back to the SSP.
- The real-time bidding auction kicks off. It involves all ads that match the publisher’s specific inventory. Advertisers place their bids, which are then assessed by the DSP. The winning bid is the one with the highest CPM.
- Once the winning bid is chosen, the advertiser wins the inventory slot, and the ad is published on a website specified by the publisher.
The whole process, from bidding right up to ad delivery, takes about a second (100 milliseconds). Programmatic advertising is all about speed, and that’s why it’s growing in popularity even with direct ad buying still being a viable option today.
Real-time bidding allows advertisers to only spend what they can afford, and that’s a major reason why it’s an attractive prospect for many small businesses. Nevertheless, RTB is not the only way to buy ads programmatically. There are other methods which, despite being less popular, are still commonly used.
Programmatic ad buying methods
There are three lesser-known programmatic ad buying methods. They are:
- Private Marketplace – Private marketplace programmatic, or PMP, is similar to RTB in a lot of ways. It is based on real-time auctions, and advertisers bid on impressions in similar fashion. Only the highest bids win impressions. The only difference is that the marketplace only offers exclusive inventory on popular websites, and that you need an invite to take part in the auction.
- Fixed-Price – Fixed-price programmatic doesn’t use real-time bidding. Instead, the inventory has a fixed price and can only be bought after negotiations between the advertiser and publisher. Unlike direct media buying, however, negotiations take place through an API.
- Preferred Deals – This method lets advertisers place their programmatic ads in inventories with a fixed price. There’s no bidding or auctions involved.
Direct Media Buying vs Programmatic Media Buying: The Differences
At first glance, it is evident that direct ad buying and programmatic ad buying have some significant differences. To help you further understand how the two ad buying methods differ from each other, we’ve created a table summary that details their unique features.
This won’t be a straight comparison between programmatic and direct buying methods, but rather a detailed analysis of direct vs ad server buying vs white label vs self-serve buying.
From the table, we can conclude the following:
- Direct buying can be more consuming, but it also offers better ad inventory and a more flexible pricing model.
- Programmatic buying is speedier and offers real-time insights, which can be leveraged continuously to improve your ad campaign.
- Companies that purchase ad inventories in bulk are better off using the direct buying method.
- Direct buying gives you the chance to manually evaluate an audience before ad delivery, which allows you to determine the effect of your ad campaign before launching.
- Programmatic buying requires very little human intervention, and is therefore suitable for small businesses with limited personnel.
- Direct buying is generally more costly and time consuming.
Of course, many companies choose to leverage both direct and programmatic ad buying when running ad campaigns. Using both technologies in tandem can prove beneficial to companies that have the resources to dabble in both means.
Unfortunately, using both methods can be a costly affair, and therefore not a good strategy for small companies and startups with limited budgets.
In the next section, we discuss the pros and cons of both methods.
Direct Media Buying vs Programmatic Media Buying: Pros and Cons
Direct Buying: Advantages
- High-quality inventory
Proponents of direct ad buying tout its quality inventory as the biggest benefit of using the method. It’s true that buying ad space directly can grant you premium ad inventory, especially since you get to pick where your ads are displayed. It’s easier to manage your brand image when you have full control over where your ads appear.
- Manual website evaluation
Buying ads directly is advantageous to businesses that have a very specific audience. That’s because you can manually evaluate a website’s audience before you purchase the ad space. This way, it’s easy to know whether your ads will reach your target audience even before you negotiate prices.
- Flexible pricing model
The consensus is that direct buying is more expensive, but there’s no reason to believe that it is out of your reach as an advertiser. Publishers always negotiate prices, so there is room to drive down the cost of advertising to match your current budget.
Direct Buying: Disadvantages
- Manual reporting and optimization
The biggest drawback to direct buying is the lack of automation. Analytic reports are compiled manually and relayed to the advertiser at a remarkably slower pace compared to programmatic buying. The same problem affects the optimization of ads, which is also fully manual due to the lack of automating technologies.
- Time-consuming process
With most of the process being manual, direct buying can be extremely time-consuming. Remember, even the price is negotiated in person, and this is a process that can take hours, days, or weeks depending on the scale of the transaction.
Programmatic Buying: Advantages
Eliminating the human factor makes the process of buying ads far more efficient. Advertisers can focus on making good creatives and leave the rest to the automated mechanisms of the programmatic media buying platform.
- Advanced automated reporting
Every aspect of programmatic buying is automated, including the collection of analytics. Data on the performance of your ads is collected in real-time, so you can continuously and immediately optimize your ad campaigns based on how they’re performing.
- Automated optimization
The beauty of adtech like DSPs is that they can do all the work for you. That includes the optimization of your ads. If you prefer to do it manually, you can, but optimization can also be handled by the platform’s automated processes. It’s quicker and more accurate.
- Flexible pricing
Impressions are bought in auctions, and you win an auction when your bid is the highest. That means you’ll never have to pay more than you can afford to secure ad space.
Programmatic Buying: Disadvantages
- Ad fraud
DSPs and SSPs can only identify bot traffic afterwards, so this method has a high potential for ad fraud.
- Hidden bid mark-up
Even though self-serve DSPs are easier to use and free to start using, there are numerous hidden fees that result in bid markups. That means bids are higher than usual to cover the cost of the platform’s maintenance.