Advertising

What’s the Difference Between Direct and Programmatic Ads?

Sovrn Advertising Team // February 22, 2022

Advertising is one of the most common ways for publishers to generate revenue. But when you’re just starting out, it can be challenging to make sense of all the different types of ads — and to figure out how they fit into your overall monetization strategy.

The two most common approaches to advertising are direct and programmatic. Here’s a quick tutorial on the basics of each.

What are direct ads?

Direct ads are set through an agreement between the publisher and the advertiser. Both parties negotiate the terms of the agreement, including the price, how many ads will be shown, the location where the ads will be displayed, and how long the ads will run.

These types of ads are typically guaranteed, in that an advertiser will buy a set number of ads for a specific amount of time. 

Consider this example: The publisher of nytimes.com wants to work with Nike on its latest sneaker release in time for the Olympics. Nike might offer to run a campaign for the next month and will guarantee 100 million impressions at $4.00 CPM (“cost per mille” or the cost of 1,000 impressions). 

In this campaign, the Nike ads will likely be shown in “premium” ad properties, meaning they will appear above the fold or in highly viewable areas. This allows the publisher to maximize the number of times that Nike’s ads are shown to ensure they earn as much revenue as possible from this specific campaign.

Direct ads can be incredibly profitable for publishers, but they are difficult to scale and customize. The process to set them up is manual and requires negotiating with advertisers. If a publisher has enough time, resources, and data insights, they may be well positioned to actively seek out direct ad opportunities. 

What are programmatic ads?

Programmatic ads allow advertisers and publishers to work at scale, using an automated ad exchange to auction available ad space. Bids for programmatic ads are typically based on data about the publisher’s audience.

Programmatic ads are more flexible than direct ads, as they allow advertisers to show different ads to different readers based on behavior and preference data, location, and demographic information about each individual user. This targeted approach gives advertisers the power to show the right ad to the right reader at the right time and place. Programmatic ads typically appear in less-premium locations. This could mean anything that is below the fold or less visible on the page.

Continuing with the example from above, perhaps Adidas knows that nytimes.com is working with Nike during this month, so Adidas might want to run programmatic ads on other websites across the open web. Adidas will rely on data associated with each reader to decide which product should be displayed — whether that’s the latest sneaker release, popular athletic wear, or an item the user viewed on their latest visit to the Adidas brand site.While programmatic advertising gives both publishers and advertisers the ability to scale, and it can be quite lucrative, it only works if publishers have the technical resources needed to implement sophisticated header bidding or server-to-server implementations.

When should I use direct vs. programmatic?

The most successful publishers use a combination of programmatic ads and direct ads, leveraging the strengths of each to increase their revenue opportunities.

Use direct ads for premium placements.

Publishers with a diverse reader base should look for opportunities to implement direct ads that are contextual. Often these websites have unique subdomains or sections that target different audience segments.

For example, nytimes.com might want to work with cooking-focused advertisers for cooking.nytimes.com. Brands like Hello Fresh or Home Chef would likely be interested in premium ad placements on that subdomain, as it would allow them to reach a very specific audience. 

A contextual approach is also advantageous for more focused audiences like parenting101.com, a domain that is likely visited by parents. Parenting101.com could seek out direct ad opportunities with a brand like Ikea to promote their cribs or toddler furniture.

Use programmatic ads for less prominent placements.

Publishers should use programmatic for ad placements that are non-premium and less visible. That’s because the work of audience targeting and customization is done on the advertiser side for programmatic ads.

Advertisers rely on the data associated with each reader for programmatic bidding. When they detect a reader on the page that matches specific criteria, they will show that reader an ad. 

Consider the following scenarios that demonstrate how programmatic ads play out in real life:

  • A reader visits a product page and is shown ads for that same product on other websites
  • A reader searches for products/services and is shown ads that match their specific Google search
  • A reader opts in to receive emails about new releases for video games and is shown gaming-focused ads
  • A reader is based in a specific location and sees location-specific ads
  • A reader has location-specific regulations that affect cookie tracking and sees a more generic ad 

Use direct and programmatic ads together.

Programmatic and direct ads complement each other well, so it’s smart to use them together as part of a comprehensive monetization strategy. Publishers can leverage data gained from programmatic to inform other opportunities to work directly with an advertiser. And data insights derived from direct ads can be used to optimize your site for seasonal advertising trends and different contextual layouts (i.e., a sports page, a cooking page, an outdoors page, etc.).

Looking for more understanding about programmatic and direct ads? Sovrn can help. Just email us at sales@sovrn.com and our team will be happy to answer your questions!

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