What happens when you click?

July 2019

What exactly happens when an ad is being displayed to you? Let’s have a closer look at the fascinating world of programmatic advertising.

Written by: Dominique Kunz July 15, 2019

Online advertising has become part of our daily life. Barely any websites or apps can go without it these days. At the same time, internet users have grown increasingly wary of the constant fight for their attention both because of its perceived privacy intrusion and the nuisance of pop ups, auto play videos, etc. But what exactly happens when an ad is being displayed to you? Let’s have a closer look at the fascinating world of programmatic advertising.

Cookies

They seem to be everywhere, and yet, we barely understand what they do. Simply put, a cookie is a packet of data that a website sends to your computer which then stores it in a file located inside your web browser. Depending on the type of the cookie, it will be deleted when you close your browser the next time (session cookies) or it will live on until it reaches its expiration date (persistent cookie). The cookie is something like a marker on your browser, that will tell other websites something about your browsing history and hence, your interests. As you can already imagine, cookies are a foundational pillar of the online advertising industry.

Programmatic advertising

Many of the ads you see while browsing the internet got there through programmatic advertising. Programmatic advertising refers to the use of software to automatically purchase ad space on a website. Before programmatic advertising, digital ads were ordered and inserted manually through a process of negotiations between ad buyers and salespeople. A pretty expensive and unreliable process.

Today, there are different types of programmatic advertising: real-time auctions and programmatic direct advertising. We are going to shed some light on the former.

For an auction to take place, there obviously needs to be a two-sided marketplace. In this case, a brand and a potential customer.

The “attention auction”

On the demand side, a brand places an advertising order on a so-called demand side platform, defining the people it wants to target and the budget it is willing to spend on that targeting. The demand side platform then finds the right place and the right price to place that company’s ads. On the supply side, there is a user browsing the internet, accumulating cookies and other information. When the user visits a website which shows programmatic advertising (which means almost any website), a request is being sent to their computer to share as much information as possible: it will send details of the browser’s ID, the IP address (which can give away the user’s approximate whereabouts), and as much information from cookies as it can, which can include details of the browsing history and much else. This information gets bundled and presented to various demand side platforms which in turn check their offers for something that matches the data they receive. When a potential match is found, the demand side platform places a bid for displaying an ad to this user. The highest bidder wins the fight for the user’s attention and will be allowed to display their ad. Keep in mind, all this happens in the few seconds between clicking on a link and loading a website.

The revenue generated from this auction is being distributed between the publisher and the different platforms (demand side, supply side, ad exchange, etc.) involved in the auctioning process. The user however does not see any of this revenue, although next to the ad space on the publisher’s website, it is also their attention and their data being auctioned off.

The future of digital advertising

As more and more of our devices get connected to the Internet (think smart TVs and smart homes), programmatic advertising is expected to spread across these channels. As the sector keeps growing, there is an increasing notion that consumers should be able to participate in the value creation. Advertising giants like Publicis’ Maurice Levy publicly stated that they see the industry going in a direction where consumers will be remunerated for the value their data provides. Rather than piecing together data from a variety of sources – which may vary in reliability – users may provide advertisers with access to their personal data portfolio and receive remuneration based on the value of their data and their conversion history. Such a system can provide increased transparency for the consumer while decreasing privacy violation risks for companies. Furthermore, companies can spend their marketing budget to increase the purchasing power of their potential customers, rather than the lining the pockets of an ad exchange.

The VETRI wallet allows users to import data from their device and certain social media networks and share it anonymously with market researchers for remuneration. In the near future, VETRI will allow advertisers to remunerate potential customers for the access to their anonymized data for targeting. Consumers pick and choose the companies which are allowed to target them based on their data. This process increases transparency, relevancy of advertising and creates a level playing field for everyone to benefit from the growing importance of our digital footprint.

Get in touch.
VETRI Foundation
Bahnhofstrasse 3
8001 Zürich, Switzerland