This document provides a high-level overview of the key players and life cycle involved in programmatic advertising. It begins with one advertiser (Nike) and one publisher (ESPN) directly working together. However, as the number of advertisers and publishers grow, intermediaries emerge to connect them more efficiently. This includes ad networks that aggregate inventory from multiple publishers, and supply side platforms and demand side platforms that help publishers and advertisers/agencies respectively to buy and sell inventory programmatically in real-time bidding auctions via ad exchanges. The document walks through a simplified end-to-end example of how an ad impression is bought and sold from the time a user visits a publisher page to when the ad is displayed on

1. Programmatic Advertising : The complete
lifecycles for beginners
Recently I was having a discussion with my office colleagues
regarding the Ad-Tech ecosystem and I realized that most of the
newcomers, in fact even the mid-level engineers don’t have clarity on
the basic parties involved in a Programmatic Advertising ecosystem. I
find similar unawareness among my friends who works in different
domains, most of the general audience won’t understand the
complexity and different players involved in online programmatic
advertising. Upon discussion with them I understood their problem
— there are lots of material available on the internet but very few
starting from scratch and most of the resources try to explain each
play in a silo not the whole life cycle of an online ad getting displayed.

2. So, in this post, I am trying to explain from scratch different players
involved and one simple end to end life cycle of a programmatic RTB
Ad-impression. We will not take a deep dive into any of the
individual players but will just cover whatever is required
to understand the full life cycle. I will be discussing in simple
and plain language without any jargon, as we discuss in an informal
discussion.
Some terminology before we start:
Programmatic Advertising: Simply put, it is the
automated buying and selling of online advertising.
Advertiser: is someone who is trying to sell the products/services,
for example, Ford, Coca-Cola, Nike, etc. They pay to get their
advertisement displayed on different digital channels.
Publishers: is someone who displays the advertisements, any social
media site, blogs, website which has advertisement displayed —
Spotify, ESPN, FB, etc. They get paid for displaying ads on their
page/app.
Inventory: The actual space on the page where the Ads will be
displayed is called inventory. Publisher sells these spaces as an
inventory. There are some common types of inventories in a display
advertisement as shown below:

3. Impression: is the term used for Ad getting viewed. When an Ad
gets loaded on a webpage that is considered as an impression.
Clicks: When a user clicks on the Ad being showed it’s considered as
‘clicks’.
One Advertiser and One Publisher
Now let’s start. We will go step by step, starting from the most basic
scenario — one Advertiser [Sports Shoes — Nike] and one Publisher
[Sports Site — ESPN].
ESPN wants to sell its inventories and Nike wants to display its Ads at
appropriate places. Nike can go to ESPN directly and ask to display

4. their Ads. As Nike, it makes sense for you to display sports shoes Ads
to someone who is visiting sports sites (this is a very simplified
version but let’s go with this as of now). As ESPN you will be happy to
display NIKE’s Ads on your site as your users will be getting Ads as
per their taste (this is again a much-generalized version). More the
users visit ESPN sites more the NIKE (advertisers) will be willing to
buy from ESPN — Network Effect. Many times, companies like
NIKE will hire an Agency to buy the publisher’s inventories on their
behalf. These Agencies have media planners who work directly
with publishers to buy inventories. These are also referred by some
as Agency Trading Desk or just Trading Desk.
Is the above model realistic and feasible?
If there are only these two entities in the Advertising world, then
everyone is happy and we need no discussion further but it’s not so,
hence we will continue our journey. Now imagine a real-world
scenario where we have multiple websites to publish Ads and
multiple Ads to be published. In such a case, ESPN will rarely sell its
whole inventory to NIKE and Nike will publish all its Ads on ESPN
site — this will be disastrous for NIKE because Ads are just a way for
Advertiser to convince a user to buy their product. If Nike publishes
all its Ads on ESPN, in a way, NIKE is missing all the users who didn’t
visit the ESPN site. So what can NIKE do? Visit all the relevant
websites and pay to publish their Ads? Unless and until anyone is
living in the woods, they will know there are millions of websites if
not infinite. Hence, this idea is not feasible. In the same way, ESPN
can’t reach all the Advertisers and hence its inventories can go
unsold.
Ad-Networks to the Rescue

5. It seems we need an entity that connects with various publishers and,
let’s say in a layman term, collects various publisher’s inventories,
and sells them to advertisers. This will solve Advertiser’s problems to
a great extent, they don’t have to go to each publisher instead they
will contact this entity and this entity can have their Ads published on
one of the available inventories (matching the advertiser criteria).
Advertising Industry thought the same — we have this entity and it’s
called Ad-Networks. Ad-Network generally gets leftover inventories
from the publishers, and they are grouped under various categories
such as Vertical Ad-Networks, Blind Ad-Networks, and Target Ad-
Networks. As we mentioned earlier we will not go into the details of
these individual players.
Point to Note: When a new entity is added, it’s not that the
old connection is removed completely i.e. Publishers and

6. Advertisers will still have a direct connection for some
premium Ads, etc.
** In all the diagrams now onwards, the solid lines show our flow; the
dotted lines are showing different possibilities in real-time.
Which Ad-Network to select?
Many people saw this opportunity and hence, many Ad-Network
came into the market. Now, for a publisher emerges another problem
— which one of these Ad-Network to use? To solve the problem, a
new technology platform emerged whose role was to analyze the
performance of the Ad-Networks i.e. to find out which one of these
will sell a publishers’ inventories at the best price. These Ad-Tech
platforms were called Network Optimizers.
The emergence of a new Ad-Tech platform:
SSP
In the late 2000s, Real-Time Bidding was introduced in the
Programmatic Advertising world, Network Optimizers saw this as an
opportunity and they morphed into new Ad-Tech platforms which we
know today as Supply Side Platform [SSP]. As we now know,
SSPs help in Ad-Network optimization for publishers. So, it
makes more sense for an SSP to sit between an Ad-Network (not
always but in general) and a Publisher, as shown in the below figure.

7. A Publisher can mention the floor pricing for a given type of
inventories for example if it’s a header at homepage then most likely
floor pricing will be more compared to secondary page bottom
inventory. We will see later this helps in yield optimization for
the Publishers during RTB. A single SSP connects to various Ad-
Networks and Advertisers ( for time being, I am using term
Advertisers but soon we will see there are different entities with
different names and functions), this gives publisher multiple bidders
and hence prevents inventory value from falling.
What about Advertisers?
The most obvious thought now will be, SSPs are helping publishers to
sell the inventories but what about Advertisers/Media Agencies who
are buying the inventories? And the answer is ‘DSP’ — Demand
Side Platform.

8. DSPs are the counterpart of SSPs at the buying side of the ecosystem.
DSPs help advertisers/agencies to buy inventories on an
impression-by-impression basis from various entities such as
SSPs, Ad-Networks, publishers, etc. But DSP’s function is not just
simply buying the Ads, usually, an advertiser sets up its campaign in
the DSP mentioning creatives (Ads) and various targeting
criteria such as age, gender, location, the category of content on site
and many more. Each time when an impression is available for the
sell, DSP analyses the value of the impression for the
advertisers based on the information it has regarding the
impression either directly from its user profile database or from
third-party data providers known as Data Management Platform
(DMP).
DMPs are software platform that collects, stores and organizes
the user’s data. They gather data from various sources and data
gathered are often categorized into 3 types –
First-Party Data: information gathered directly from users’
interactions e.g. CRMs, Transactional systems, etc.

9. Second Party Data: These are mainly first-party data from another
company. For example, when a user visits online sports shoe site (S1)
a cookie is created and S1 can sell this data to Marathon even
organizing site (S2).
Third-Party Data: Data collected from any other source is termed
as third party data
Point to note: DMPs are not only for DSPs/Advertisers but it can
benefit SSPs/Publishers too. By understanding its user better
publisher/SSPs can sell the impression/inventories at an optimal
price.
Something seems to be missing — where do
they buy and sell?
We have covered various kinds of Ad-Tech platforms but something
seems to be missing in the ecosystem — isn’t it? Buyers and Seller
side seem to be disconnected, to be precise there is no exchange of
information between them for buying and selling. If you feel so, you
are right we are missing an important component of the market
place where the Publishers will put their
inventory/impressions for sale and Advertises will buy the
same. In the Programmatic RTB advertising ecosystem, we call
it Ad-Exchange, similar to a stock exchange.

10. Seller side sends information related to the impression to be sold
such as website, browser, ad-types, user-related info if any, etc. to the
Ad-Exchange. Ad-Exchange then broadcasts bid requests to multiple
DSPs, Ad-Networks, and Agencies. Each bidder then evaluates the
impression and provides its optimal bid price. It sends the optimal
bid price and creatives to the Ad-Exchange. Ad-Exchange
then selects the winning bid usually using a second-price
auction, recently Google and other companies have started moving
to the first-price auction.
First Price Auction: The highest bidder wins the auction and
makes the payment equal to the bid amount.
Second Price Auction: The highest bidder wins the auction but
pays the amount equal to the second-highest bid plus $0.01. Floor
pricing, as we saw earlier, comes handy for a publisher to restrict
bidding price to fall below the floor price.
Once the winner is selected — the bid price and URL are passed
back to the Seller side. Ad-Exchange can be Open or Private.
Private Ad-Exchange is used generally for premium Ads and as the
name suggests it’s limited to certain publishers and publishers can

11. restrict which advertisers can bid. Publishers prefer this as they can
get more price and Advertisers prefer this as they will know where
their Ads are getting displayed — brand image/dilution concerns.
So now we are done — right?
It may look like the ecosystem is complete but not so fast. We have,
deliberately, left one important piece of the puzzle — the Ad-
Servers. When online advertising started to grow publishers soon
realized that they need some platform to run and maintain the
online Ad campaigns. This led to the birth of Ad-Servers. Today,
in addition, to run and maintain the online Ad campaigns, Ad-Servers
are responsible for making instantaneous decisions on what
Ads to show on a website, then serving them, and collecting
and reporting the data such as impressions, clicks, etc. to
gain insights.
Ad servers can be used by publishers (known as first-party ad
servers) and advertisers (known as third-party ad servers).
Both Ad-Servers are essentially the same technology but they are
used by publishers and advertisers for different reasons.
First Party Ad-Servers: It allows publishers to manage ad slots on
their websites and display ads that have been sold directly to
advertisers via direct campaigns. In case no direct Ad-Campaign is
found then it goes SSPs, Ad-Networks, and Agencies, etc. to serve the
impression. This is also used for targeting and inventory forecasting.
Third-Party Ad-Server: Advertisers use this to track their Ad
campaign. Advertisers Ad-Tag data is loaded by Publisher AdServer
using which the clicks, impression data is recorded/tracked by the
Advertiser Ad-Server.

12. While the content on the publisher’s website is loading the Ad-space
(inventory) has the code which sends out a request to Publisher’s Ad-
Server to fill the Ad slot. So, the Ad-Servers are the first direct
connection with a Publishers in the Programmatic/RTB advertising
ecosystem (simplified one).
Putting all the Pieces Together: The complete
Life Cycle
Now, it’s time to put all the pieces together and walk through a full
cycle from the point a user visits a publisher’s webpage till the point
Ad is loaded. Please refer to the full flow diagram below [excuse the
diagram’s dullness — I just prepared it quickly] for the reference. The
actual scenario will be too complex hence I have simplified a little bit
— the solid lines show our flow; the dotted lines are showing
possibilities in real-time.

13. Let’s take an example — Muskaan: 20–30 years, cricket fan, female —
who was browsing dress on the Shein site visits ESPN site. We will
use the 200ms lifecycle to show the different events happening at
different timestamps (serial number mentioned is the number
matching to the diagram).
1. 00ms: Muskaan clicks on the ESPN site.
2. The browser sends a request to the publisher Web-server to load
HTML content.
3. The browser starts rendering the content of the page
4. 10ms: Publishers check Data Management Platform [DMP]
whether it has information stored for Muskaan or not.

14. 5. 30ms: Publishers sends whatever information it’s able to get, to its
AD-SERVER. It checks whether there is any campaign running that
has a target customer profile similar to Muskaan. If the match is
found then the ad will be served then and there.
6. 40ms: If no campaign targeting Muskaan is found then Publisher
Ad-Server then tries to programmatically serve the Ad. Publisher Ad-
Server] sends the details to-Traders, Ad-Network, and SSP[Supply
Side Platform].
7. 65ms: If the impression is not yet cleared then the server tries to
clear the impression by going to Private Exchange.
8. 75ms: If the impression is not cleared from the Private Ad
Exchange then Ad-Server sends it to the Open Ad-Exchange [OAE].
9. 80ms: OAE: sends out the bid request with information related to
Muskaan, Website, Browser, Ad-Types, etc. to the — Traders, Ad-
Networks and DSPs
10/11/12. 100ms: Each bidder goes through the information sent and
adds Marketers targeting and budget rules. Each DSP will review the
targeting criteria. Let’s say DSP2 has targeting criteria — female, 20–
30 age range, location — India, sports fan. DSP1 and DSP3 have
slightly different targeting criteria. Based on these, the DSP’s
algorithm selects the creative and the optimal bid price — for DSP2
this impression is more valuable compared to other DSPs hence it
bids more for it. This bid is then sent back to the Ad-Exchange.
125ms: Ad exchange then selects the winning bid from all the bidders
using 2nd price auction.

15. 13. 150ms: Ad-Exchange sends the winning bid and Ad URL to the
Publisher Ad-Server.
14. Publisher Ad-Server tells Muskaan’s browser which Ad to display
— it sends out the Ad-Tag containing a URL pointing to the
Advertiser Ad-Server.
15. 175ms: Muskaan’s browser sends the request to Advertiser Ad-
Server and counts the impression.
16. The advertisers Ad-Server sends the markup to the Muskaan’s
browser/site and
17. The Ad is displayed.
200ms: Advertiser/winning Bidder Ad-Server receives Ad-Tag data
on Muskaan’s initial experience with the Ad.
Please note the whole life-cycle we discussed is a generic simplified
version of Programmatic Advertising. Nowadays, almost all the
Publishers/Advertisers use a customized solution as per their needs.
But I hope this post has brought some clarity to the readers how a
Programmatic Advertising works!!
To know more about Ad Technology ie JDX Suite click here.