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We’re almost half way through 2015 and many people still don't recognize the difference between "programmatic advertising" and “RTB advertising." One might think that only novices make this mistake, but it’s a much bigger issue. I routinely observe people who should know better (people who have been working in ad tech for a long time) use these two terms interchangeably. This oversimplification does a disservice to our industry and ultimately the customers we all serve.
Let’s define precisely what each term means, and how they differ. First things first, programmatic, what is it? Simply put, programmatic is technology-enabled workflow automation. In digital advertising, programmatic technology is essentially one computer talking to another computer to execute the campaign trafficking operations, minimizing the risk of human error. In a programmatic scenario, a person defines the campaign parameters and the ad tags are automatically transmitted to the destination ad server. A second human isn't necessarily required, streamlining the entire operation.
In contrast, ads that are purchased directly (or without the benefit of programmatic technology) are subject to a manual process that has remained virtually unchanged for the past 20 years. One person emails another person an ad tag that needs to be placed within a campaign sitting on an ad server (among a multitude of other things). In other words, it’s person-to-person rather than computer-to-computer. Big difference.
Some channels like search advertising have been programmatic since inception, so the programmatic vernacular wasn’t necessary to specify differences in workflow or process. It's only in display, which began with manual purchasing, where there has been a need to make such a distinction. It’s important to note that along with search, other digital marketing channels, including social and email, have been always programmatic. But they have nothing to do with RTB advertising.
Real-time bidding (RTB), on the other hand, is a technology protocol or mechanism for automatically bidding, buying and selling display impressions via an auction format. It is inherently programmatic. The problem is that people now think that programmatic and RTB are synonymous, which is incorrect. Programmatic is simply a characteristic of the RTB protocol.
To understand the logic, think about fire. We know that fire is hot. Hot is a characteristic of fire. But not everything that is hot is on fire. It's the same with RTB and programmatic. RTB is programmatic, but not everything that is programmatic is RTB [1].
RTB was the "programmatic" of 2010 because it was a disruptive force in the display ad industry, enabling the first big wave of programmatic buying. As a result, many people have come to think of RTB as the only way to buy display ads programmatically, conflating the terms. But things have changed.
In display, there is now “programmatic direct”, which has nothing to do with RTB. And, per my earlier point, when we look beyond the display channel we also have search, social, and email; all of which are primarily executed in a programmatic fashion, but are not RTB [2].
So, in the future, when you use the term RTB, understand that you are referring to the RTB protocol or technology, which covers the open auction market and private marketplaces. Programmatic is a much larger concept. It encompasses RTB and “programmatic direct” within display, but also other core channels in digital marketing overall.
[1] To give an example, there is an IAB-led protocol, which is related to RTB, known as OpenDirect. Real-time bidding, as the name implies, involves an auction process, which makes guaranteeing or reserving inventory practically impossible. The OpenDirect protocol was created to bring the same level of standards to the direct (or guaranteed) side of the market. Both are undoubtedly programmatic protocols, but only one of them is actually RTB.
[2] Native is similar to display in that the workflow varies wildly based on how it’s evolved and the various definitions of “native” advertising.