Programmatic Advertising Explained for Publishers

Programmatic advertising means ad space is sold by software, impression by impression, instead of through a salesperson and an insertion order. Your page or app asks for an ad, an exchange offers that slot to many buyers at once, the highest acceptable bid wins and the ad appears, all before the screen has finished loading.

If you already run AdSense, AdMob or a managed network, you are almost certainly selling programmatically and have been from the first day. The word matters mostly because of what sits between you and the advertiser: several companies, each taking a cut, each with its own rules.

This guide follows one impression through that chain, explains the four ways inventory is sold (open auction, private auction, preferred deal and programmatic guaranteed), and looks at what published research says about where the money goes. Any dollar figure that comes from our own tables is a modelled estimate, and the worked examples are labelled as examples.

Who is in the chain

Six kinds of company turn up in almost every programmatic sale. The names change; the jobs do not.

The boundaries blur in practice. Google Ad Manager is an ad server with an exchange attached, and Display & Video 360 is its buy-side counterpart, so a single company can sit on both ends of one sale. Independent SSPs such as Magnite and PubMatic and independent DSPs such as The Trade Desk work with their own set of partners.

For an app developer, the SSP role is usually played by the ad network or mediation platform you installed. AdMob, AppLovin MAX, Unity and the rest each collect demand and hand you a single price. The mediation guide covers when stacking several is worth it. For a site, a managed network such as Mediavine or Ezoic fills the same role.

One impression, step by step

Take a visit to a page with an ad slot. The sequence runs like this:

1. The page loads and the slot asks for an ad.
2. The ad server or SSP wraps the opportunity into a bid request: the page or app, the slot size, a rough device and location, any floor price, and the consent signals for that user.
3. The exchange sends the request to its connected DSPs.
4. Each DSP checks it against its campaigns. Does this user and this page fit anything we are buying, and what is it worth?
5. DSPs that want it reply with a price and the ad itself, or with a decision not to bid.
6. The exchange picks a winner under its auction rules, tells the winner and returns the creative.
7. The ad renders. A notice goes back to the DSP so the buyer is billed.

The whole sequence has to finish while the page is still loading, so the exchange sets a maximum wait. The OpenRTB specification has a request field called tmax for exactly this: the maximum time in milliseconds the exchange allows for bids to arrive, including internet latency. A bidder that answers too late is left out.

The bid request carries a consent string where the user has given one, which is why consent setup affects what you earn. The consent messages guide covers GDPR, TCF and ATT.

RTB and the OpenRTB standard

Real-time bidding (RTB) is the auction step: a single impression is sold the instant it becomes available. OpenRTB is the specification that lets exchanges and bidders from different companies talk to each other. It is maintained by IAB Tech Lab and started with a group of supply and demand technology companies in 2010. Because of it, a DSP does not need a custom integration for every SSP.

Two details from the 2.6 version of the spec are worth knowing. Floors, which you may set, are expressed as a minimum bid per impression in CPM terms. And the request states the auction type: 1 means first price and 2 means "second price plus".

Prices throughout the system are quoted per thousand impressions, whatever the advertiser's own pricing model was. If you want that translated into plain terms, the CPM, CPC, CPA and CPI guide does the conversion.

First price versus second price

In a second-price auction the winner pays slightly more than the runner-up. In a first-price auction the winner pays what they bid.

An example with assumed bids: three buyers bid $3.00, $2.40 and $1.10 for one impression.

• Under second price (plus a minimal increment), the $3.00 bidder wins and pays about $2.41.
• Under first price, the same bidder wins and pays $3.00.

For years the industry ran second price. Programmatic had grown into a mix of auctions with different rules before a winner was picked, and in 2019 Google moved Ad Manager to a single unified first-price auction. Its rollout announcement reported a "neutral to positive impact" on publishers' total revenue in testing. In October 2021 Google said AdSense would follow, adding that publishers would likely not see a change in earnings.

What changes in first price is behaviour. Buyers do not want to overpay, so their software tends to lower bids toward the price they think is enough to win, a practice called bid shading. Floors matter more too, because a floor now sets the bottom of what the winner pays as well as who qualifies. We cover the practical side in choosing floor prices.

Open auction, private auction, preferred deal, guaranteed

"Programmatic" covers four different ways of selling, and they differ in who can bid and how firm the deal is. Google's help centre lists them on its transaction types page.

Google describes a preferred deal as a first chance for the buyer at the negotiated price, with no obligation to buy. A programmatic guaranteed deal is different: inventory is designated only for that buyer at that price, and the number of impressions is contracted.

Most of what small publishers earn comes from the open auction. It is the default, and it needs no relationships. The other three exist because large advertisers want certainty about where their ads run, and they usually involve a sales conversation and, in practice, enough volume and a clean brand environment to be worth a buyer's time. If you sell into them at all, you will probably do it through a managed network or a sales rep rather than directly.

What the open market pays

The open auction is what prices most of our benchmark figures. This table renders the mobile eCPM estimates for Tier 1 audiences by network and format.

The networks in the table do not pay the same. The differences come from which buyers each network is connected to, how it handles bidding, how much it keeps and how well its auction treats your user. Mediation and header bidding exist to put more of those buyers in front of the same impression. If you want the detail, header bidding for publishers and bidding vs waterfall go through both, and the AdMob vs AppLovin comparison shows two of the biggest side by side.

Where the money goes

Every company in the chain takes a fee. The honest answer to "how much" is that nobody can give a single number, and anyone who does is either quoting one study or guessing.

The most cited primary study is the ISBA and PwC programmatic supply chain transparency study, published in May 2020. ISBA is the UK's advertiser trade body. The study followed spend from 15 advertisers through to 12 UK publishers and found that publishers received 51% of advertiser spend on average. A further 15% of spend, about a third of the supply chain costs, could not be attributed to any identified party, which ISBA called the "unknown delta".

Read that number carefully. It describes the supply chains PwC could trace: it identified over a thousand and managed to match 290 end to end. It is a UK study of a small group of advertisers and publishers, so it says nothing specific about mobile apps or small blogs. And it is an average across very different chains, so a particular route could be better or considerably worse.

ISBA published a second study after the industry formed a taskforce. It reported that the unattributable share fell to 3% from 15%, and that the ad impression match rate rose to 58% from 12%. ISBA also says plainly that the results "should not be taken as representative of the broader programmatic ecosystem". The two studies used different scopes, so do not subtract one publisher share from the other.

A worked example with deliberately round numbers. Apply the 2020 average to $10.00 of advertiser spend: roughly $5.10 reaches the publisher, about $1.50 is unattributed and the rest, around $3.40, is the identified cost of the intermediaries. This does not describe any particular network. It shows why the CPM an advertiser pays and the eCPM you see can sit so far apart.

You can see a network's published cut in one place. AdSense states that when advertisers buy display ads through Google Ads, publishers keep about 68% of the revenue, and that you can check your own figure in Account > Settings > Account information. That 68% is for one product through one buying route. Other networks and exchanges often do not publish their share, so treat any percentage quoted for them without a source as unverified.

Transparency files that protect your income

One familiar kind of programmatic fraud is pretending to be a publisher. Someone sells counterfeit inventory under your domain name, and buyers who are fooled either waste money or learn to distrust the name.

Three IAB Tech Lab standards fight this. ads.txt is a file on your domain that publicly declares which companies are authorized to sell your inventory, and app-ads.txt does the same for apps. sellers.json is published by SSPs and exchanges so buyers can identify the entities that sell or resell inventory. A third piece, the SupplyChain object in OpenRTB, lists each hop a bid request travelled through. A careful buyer checks one against the others.

For you the work is small and the payoff is real. Keep the file current when you add or drop a partner. The guides for websites, Google Play apps and iOS apps walk through each case. A missing line can mean buyers skip your inventory, and you can see how that fits with other causes in why your eCPM is low.

What a small publisher controls

You cannot change what the DSP charges or how an exchange splits fees. You can influence the parts that sit under your name.

• The number of links in the chain. Each extra reseller is another fee and another place for the impression to go wrong. Adding a partner should earn its keep in measured revenue, not in promises.
• Floors. Set too high, they cut fill. Set too low, they leave money on the table. Test changes over weeks.
• Consent. In regions with consent rules, a missing or invalid signal limits which buyers will bid.
• Inventory quality. Fast pages, ads that stay in view and traffic buyers can trust all lift what DSPs will pay. The invalid traffic guide covers the traffic side.
• Where your demand comes from. Compare options in the Ad Manager guide or, for apps, the AdMob mediation walkthrough.

Common questions

Is AdSense programmatic?

Yes. AdSense sells your ad space in an automated auction, and Google moved that auction to first price in 2021. You do not touch the exchange or DSPs; Google does that for you.

Is programmatic the same as real-time bidding?

Not quite. RTB is one way of selling programmatically: an auction run per impression. Programmatic also includes fixed-price deals such as preferred deals and programmatic guaranteed, which are agreed in advance but delivered through the same technology.

Do I need my own SSP account?

Almost certainly not. An ad network, a mediation platform or a managed network already connects you to SSPs and exchanges. A direct SSP relationship makes sense only when you have enough traffic that the extra control repays the work, and SSPs commonly vet applicants and may have minimum volumes, so check each one.

Does programmatic mean lower-quality ads?

The technology does not decide that. The buyers and the filters do. You can block categories and advertisers in the ad network's controls, and a managed network will usually vet demand partners for you.

What to do next

Open your ads.txt or app-ads.txt file and check it against the sellers your ad networks tell you to include. It takes ten minutes, and a missing line costs more than it looks.

Then work out how much of your income comes from the open auction compared with direct or deal-based sales. For most readers it is close to all of it, so the biggest lever is competition inside that auction: more bidders, sensible floors and a clean consent flow. To see what that might be worth, run your numbers through the AdMob revenue calculator, and read the methodology page to see how our estimates are built.