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Core Concepts of Programmatic Session 01
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Page 1: Core Concepts of Programmatic - OpenXwelcome.openx.com/rs/745-BUQ-779/images/The_Core... · Contents Core Concepts of Programmatic ... Programmatic page 11 Impression-Based Buying

Core Concepts of Programmatic

Session 01

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Contents Core Concepts of Programmatic

Contents

page 05 Editor’s Note — Welcome to the School of Programmatic

page 06 Preface — The School of Programmatic: Why Now?

page 07 Overview

page 08 Intro — Why Programmatic?

page 10 Section 01 — Building a Common Language: the ABCs

Programmatic

page 11 Impression-Based Buying

Real-Time Bidding (RTB)

page 12 Buyers/Sellers

Buyers

page 13 Sellers

page 14 Viewability

Campaign Performance

page 15 Real-Time Optimisation

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page 17 Section 02 — Exploring the Marketplace

page 18 How it Works

page 19 The Players —

Ad Networks

page 20 Agency Trading Desk

Ad Exchanges

page 21 Supply-side Platform (SSP)

page 22 Demand-side Platform (DSP)

Data Providers

Data Management Platform (DMP)

page 25 Section 03 — Deal Types

A Brief History of Programmatic Selling

Private Exchanges

page 26 Types of Programmatic Models

page 27 Open Exchange Buys

Automated Guaranteed

page 28 Unreserved Fix Rate

Invitation-Only Auctions

page 30 About OpenX

page 31 Contacts and General Info

page 32-34 Agenda

Contents Core Concepts of Programmatic

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Session 01 Core Concepts of Programmatic

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Editor’s Note Welcome to the School of Programmatic

Digital technologies are disrupting every aspect of modern life - from the way we communicate, to how we consume media, monitor our well-be-ing and of course, how we find and buy things.

Marketing is at the sharp end of this transforma-tion. Where we once had a tried and tested marketing mix for communicating with our customers, we now have a complex and rapidly evolving landscape. The pace of change is outstrip-ping our ability as marketing professionals to stay up to date.

One such area is programmatic advertising. Reports suggest spending on programmatic advertising has increased by 66% since 2013 and is growing 30% year on year.

The speed of this change has created a knowledge gap. Through our own research we have found just how much the industry needs to up skill; where there are knowledge black spots and how people want to learn. We’ve looked at the prob-lem from both the supply and demand side too, to make sure we truly understand where we need to focus our attention.

It is our mission to lead the way in educating the advertising and media space about programmatic advertising. I hope you will find the time to join us at OpenX’s School of Programmatic as we continue to drive advertising in the digital age

Join us and be the expert.

Sincerely,

Tim Cadogan — CEO, OpenX

Innovation in advertising and the growth of programmatic in recent years have been phenomenal.

Welcome to the School of Programmatic

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Preface The School of Programmatic: Why Now?

So why now? Programmatic is the future of advertising. There’s no better time to harness its power than the present.

The School of Programmatic: Why Now?

Programmatic advertising is increasing in influence, with such rapidity that many media professionals, even the most experienced, admit it’s hard to keep up. We know, because we’ve asked them.

In order to understand the knowledge gaps across the programmatic community, OpenX has undertaken extensive research. From trading room to board room, all of the programmatic professionals we’ve spoken with recognise the need for further education.

To help with this, OpenX is inviting all members of the programmatic world to meet together and reach the same page. It doesn’t matter how little or how much you know about digital advertising; the School of Programmatic sessions will give you the knowledge to get ahead right now. Every professional to attend will benefit, because everyone will learn to speak the same language. Acronyms will make sense and knowledge gaps will be filled. The concepts and technologies that once seemed opaque will be explained in easy-to-understand, accessible layers.

Said they want to learn more about pricing, particularly when it comes to strategy and the debate of quantity over quality

Said they want to learn more about how to set up operationally for programmatic; including systems, processes and agency operations

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Section 01 Building a Common Language: the ABCs

→ Our vision is that everyone who works with, or is affected by, programmatic advertising already recognises its value. Yet the potential of programmatic remains bewildering for many.

Join the School of Programmatic and watch the mystery surrounding its technologies, systems and processes disappear. With experts to quiz and hands-on demos, we’ll highlight the positive aspects of programmatic advertising, explain the technologies and address the challenges.

OpenX wants you to discover and embrace every opportunity that programmatic provides as the digital transformation of the advertising industry accelerates.

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Introduction Why Programmatic?

Direct buys are the traditional way to buy ad space, and for a long time, served newspapers, magazines, radio, television and the display worlds well. Typically, direct buys are relationship driven, with the publisher’s sales team working hand-in-hand with the brand to understand desired goals and au-diences, and devising the best way to reach them.

In today’s world, direct buys are an important component of brand cam-paigns where the goal is to raise wide-spread awareness for a new product or brand when:

• Significant overlap exists between the publisher’s audience and the advertiser’s target market (e.g. out-door camping sites and Colemans)

• The audience is homogenous, by which we mean, the advertiser’s message is appropriate for every reader (e.g. “this toothpaste reduc-es cavities and brightens smiles”).

Intro — Why Programmatic?

Given that brand campaigns seek to target consumers in the pre-consid-eration phase, the potentially mixed demographics of readership (men, women of all ages and income brack-ets) national media sites offer deal ho-mogeneous audiences.

To achieve scale for digital brand cam-paigns, marketers will plan their budg-ets across several large websites in order to aggregate audiences. Often, 80% of available media budgets are allocated to purchasing media directly from publishers.

But what happens if prospects respond differently to messages? If, for optimal results, the message should be driven by the user who sees it? In such cases, a blind allocation of media budget to directly purchased media won’t pro-duce the most efficient outcome.

That’s where programmatic comes in, and it is why it has grown exponential-ly since its inception in early 2000s.

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Section 01 Building a Common Language: the ABCs

01 Building a Common Language: the ABCs

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Section 01 Building a Common Language: the ABCs

Section 01 — Building a Common Language: the ABCs

The world of programmatic demands you learn a new language of advertising. While it’s impossible to talk through a glossary of terms, there are some key con-cepts everyone must know going into programmatic.

Note that we have created a glossary of terms for a handout.

1.1 — ProgrammaticThere are as many definitions of programmatic as there are vendors that sell programmatic services. Though the definitions vary, everyone agrees that at its heart, programmatic is about automation. Spe-cifically, programmatic eliminates manual interven-tion between a buyer (advertiser or agency) and a seller (publisher) of digital media, and replaces it with machines.

The benefit of programmatic is that it is highly effi-cient. For instance, buyers can cherry-pick the im-pressions for their campaigns based on any com-bination of user, time of day, page URL, geography and numerous other attributes. They no longer need to purchase every user on a page, which leads to media waste.

For publishers, programmatic means streamlined operations, as well as the ability to sell every impres-sion to the buyer who is likely to pay the most for it.

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Section 01 Building a Common Language: the ABCs

1.2 — Impression-Based BuyingIn the pre-programmatic days, inventory was sold in blocks (e.g. homepage, run of site, style pages, etc.), which meant buyers paid for users who were not their target audience, or wouldn’t convert under any cir-cumstances. The result was significant media waste.

Impression-based buying allows buyers, through their buying proxies, to purchase inventory one im-pression at a time, based on what is knowable about each impression and campaign goals. Buyers often use a combination of first- , second- and third-par-ty data to help determine if a consumer behind an impression is a likely candidate for the product or service advertised.

1.3 — Real-Time Bidding (RTB)In many (but not all) programmatic scenarios, inven-tory is sold in an auction, where numerous buyers compete for each impression. Real-time bidding awards the impression to the highest bidder. (In many instances, second price auctions apply, which means the buyer who bids the highest amount wins the impression, but is asked to pay fractionally more than the second-highest price offered).

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Section 01 Building a Common Language: the ABCs

1.4 — Buyers/SellersAt the end of the day, programmatic is all about helping advertisers and publishers find one another so that an advertiser can reach and engage a de-sired audience, and so that publishers can earn ad-vertising revenue to keep their site in business. But with programmatic, there are lots of companies in the middle.

1.5 — Buyers

DSPs, agency trading desks, ad networks, other publishers

Programmatic is complex, and buyers need a bidding engine to participate in the real-time mar-kets. Because it is extremely difficult and costly to build and maintain, most buyers partner with a programmatic tech-provider to buy their im-pressions for them. Those partners are typically demand-side platforms (DSPs) or agency trading desks (ADT). In some instances, such as OpenX, indi-vidual brands can leverage a rules-based interface to purchase inventory.

At times, an ad network may need to purchase in-ventory from an ad exchange in order to achieve the volume it needs for its own clients. The same is true for publishers, who may purchase inventory from the ad exchanges in order to fulfil campaigns that exceed its readership. This is called audience extension, since the publisher seeks from the ex-changes users who are similar to its users.

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Section 01 Building a Common Language: the ABCs

1.6 — Sellers

Ad exchanges, ad networks, supply-side platforms

Likewise, publishers need to partner with a pro-grammatic tech provider in order to sell its inventory programmatically. Typically, those providers are ad exchanges or supply-side platforms (SSPs), which aggregate inventory from many different sources into a marketplace. Additionally, many publishers have relationships with ad networks, which fulfill (i.e. sell) inventory on behalf of the publisher.

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Section 01 Building a Common Language: the ABCs

1.7 — ViewabilityThe concept of viewability is a direct response to reports that up to 70% of all digital impressions that advertisers pay for are “unviewable”, meaning they fall outside of the user’s browser. Viewability is a metric that is quickly being adopted as a means of transacting digital media. Specifically, to be con-sidered “viewable” at least 50% of a creative must appear within the user’s browser for at least one full second. Advertisers don’t pay for impressions that aren’t viewable.

1.8 — Campaign PerformanceHow do we measure campaign success? Truly, it’s an art. Most campaign optimizers access a variety of metrics to determine a campaign’s per-formance including:

Click-through rate (CTR) Compares the number of people who clicked on an ad to the number of actual impressions shown

Cost per 1000 The price per 1,000 digital impressions impressions (CPM)

Cost per action (CPA) Leveraging the cost (CPM) and the click-through rate, measures how much the advertiser paid for actions earned from an ad

Engagement Rate (ER) Typically used by branding campaigns, compares the number of consumers who engage with an ad to the number of ads shown.

Engagement Time (ET) Measures the length of time consumers actually engage with an ad.

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Section 01 Building a Common Language: the ABCs

1.9 — Real-Time OptimisationIn the pre-programmatic days, advertisers had to wait until a campaign was complete before assess-ing results and figuring out how to do better the next time around. Programmatic changed that by collecting results in real time, so that campaign managers can assess campaign performance and make changes to campaign criteria immediately. This is known as real-time optimisation.

Typically, the buyer’s DSP provider has campaign managers on staff who are expert at assessing cam-paign results as they come in, and using that insight to hone in on the users, pages, time of day, crea-tives, messages and a host of other attributes that deliver the most conversions.

Often, results are shown via heatmaps.

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Section 01 Building a Common Language: the ABCs

02 Exploring the Marketplace

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Section 02 Exploring the Marketplace

Section 02 — Exploring the Marketplace

Real-time bidding (RTB) is an online advertising tech-nology that’s taking the market by storm. The enthu-siasm stems in large part from advertisers, who get to cherry - pick impressions for their campaigns. The result is stellar ROI.

So what is RTB exactly? It centres on ad exchanges, where media buyers and publishers meet to buy and sell inventory, one impression at a time via real-time auctions. There are no set prices for inventory, pub-lishers set a price floor (and if they don’t they should), and see what the market will deliver.

It centres on ad exchanges, where media buyers and publishers meet to buy and sell inventory, one impression at a time via real-time auctions.

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Section 02 Exploring the Marketplace

2.1 — How it WorksHere’s a typical scenario. When a non-guar-anteed impression becomes available, the publisher’s ad server sends an ad request to an ad exchange. That request may or may not include the publisher’s URL (many choose not to disclose that information so as not to inter-fere with direct sales efforts).

But that ad call will certainly contain the user’s cookie, which is a key distinction of the tech-nology. Potential buyers grab that cookie and, using first-, second- and third-party online and offline data, develop a remarkably clear pic-ture of the user. Then, leveraging sophisticat-ed, lookalike models and algorithms, buyers calculate a bid based on campaign goals (e.g. brand vs. performance) as well as the user’s probability of taking a desired action.

The ad exchange collects all of the bids and selects a winner based entirely on the CPMs offered. Some exchanges pay the publisher the highest CPM offered, while others award the impression to the highest bidder, but pay the publisher the second-highest CPM offered. The winning bid is sent to the pub-lisher’s ad server, along with the URL for the winning bidder’s ad creative.

The user’s cookie is a key distinction of the technology.

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Section 02 Exploring the Marketplace

2.2 — The PlayersIf you’ve ever seen a Lumascape diagram, you’ll under-stand that the programmatic landscape can look like a bowl of spaghetti. Though confusing, it can generally be broken down into the following categories:

2.2.1 — Ad NetworksAd networks are aggregators of advertising inventory that package it together to sell at an increased margin.

RedirectRedirect

Ad RequestAd Response

AdvertiserAd Server

NetworkAd Server

PublisherAd Server

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Section 02 Exploring the Marketplace

2.2.2 — Agency Trading DesksIn-house digital media trading desks that execute campaigns on behalf of clients as a managed ser-vice, and are seen as experts in the use of data and technology.

2.2.3 — Ad ExchangesOpen ad exchanges are the bread and butter of the real-time bidding revolution. They aggregate inventory from hundreds of publishers of all sizes and sell all available impressions via highly auto-mated real-time auctions. The benefit of open ad exchanges is the scale they offer – billions of impres-sions reaching 100 million unique users per month.

Visitors enter site.Publisher sends requestto Ad Exchange.

Advertisers see visitor, site and unit deitails.

Ad Exchange picks best bid and sends ad.

Visitor sees ad unit(the process takes placein milliseconds).

Advertisers bid.

DSP AReal-time bidder

DSP BReal-time bidder

DSP CReal-time bidder

£2.00 £1.80 £1.60

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Section 02 Exploring the Marketplace

2.2.4 — Supply-side Platform (SSP)SSPs are software platforms that let publishers sell impressions automatically, and maximize the price their earn by attempting to match each impression with the buyer who values it most. SSPs allow pub-lishers to access a large pool of potential buyers including ad exchanges, ad networks and demand side platforms, and to apply sales controls, such as price floors (i.e. minimum prices).

THE TRADITIONAL SSP

NetworkDemand

RTBDemand

£1.50

£1.00

£0.25

£1.25

£1.10

£0.75

Evolving towards

NETWORK DEMAND + RTB DEMAND

£1.50

£1.25

£1.00

£0.25

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Section 02 Exploring the Marketplace

2.2.5— Demand-side Platform (DSP)A demand-side platform lets advertisers and agen-cies buy impressions automatically. A DSP assesses the attributes (user, geo, time of day, page URL, etc.) of every single ad impression, calculates the value to the campaigns, and assigns a bid based on those attributes.

2.2.6 — Data ProvidersData companies are big in the RTB game. Compa-nies such as Nielsen, and Experian enable buyers to overlay data segments of interests to the users the ad exchanges send them. In other words, let’s say an auto manufacturer wants to target auto in-tenders. Whenever an exchange sends a request for a bid, the brand (or DSP or trading desk) can see if that IP address happens to be in the Nielsen auto-intender category. If so, the brand can choose to bid on that user, even if the request stems from a site like lifestyle.co.uk.

2.2.7 — Data Management Platform (DMP)Lots of advertisers and publishers are realising the value of first and third party data, and want to use it for their own purposes. A data management plat-form is a centralised platform used by agencies, publishers and marketers to manage and merge data such as cookie IDs. They can also combine a variety of online and offline data sources with-in the platform to generate audience segments for improved targeting.

→ Infographic next page

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Section 02 Exploring the Marketplace

Ad Network

Advertiser / Agency

Publisher

Ad Exchange

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Section 01 Building a Common Language: the ABCs

03Deal Types

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Section 03 Deal Types

Section 03 — Deal Types

3.1 — A Brief History of Programmatic SellingIn the early days of programmatic trading, all inventory was sold in open exchanges, where any qualified buy-er* could purchase any inventory that was available, as long as the buyer placed the highest bid. Publishers had some sales controls at their disposal – advertiser white and blacklists, price floors – but not enough for them to feel fully comfortable to sell their best inventory in the channel. As a result, “programmatic” inventory was equat-ed with sub-premium or “remnant” in-ventory, and buyers expected to pay cut-rate prices for it.While programmatic was long asso-ciated with “remnant” inventory, both sides of the transaction couldn’t help but notice the efficiencies of automat-ed trading. That led them to ask: how can we apply the benefits of program-matic to inventory typically reserved for direct deals?

The answer: Private Exchanges

3.2 —Private Exchanges

With private exchanges, publishers offer inventory through a “walled off” section of an ad exchange, which buyers purchase via DSPs. Private exchanges work just like open ad exchanges in that the buyer isn’t ob-ligated to purchase an available im-pression; if an impression represents a desired user, the advertiser is then free to submit a bid. If the advertis-er opts to pass on an impression, the publisher seeks an alternative buyer.

Depending on campaign objectives, media planners can include or ex-clude users on the basis of geogra-phy, retargeting, third-party data seg-ments, time of day, browser/device, as well as many other attributes that de-termine outcomes.

Today, there are a number of deal types that can be executed via a pri-vate exchange.

* Ad exchanges screen buyers based on product, messages, fraud, creative types and so on.

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Section 03 Deal Types

3.3 — Types of Programmatic Models

Automated Guaranteed

Unreserved Fixed Rate

Invitation-Only Auction

Open Auction

Other Considerations

Reserved1

Unreserved

Unreserved

Unreserved

• Prioritisation in the ad server• Deal ID• Data Usage• Transparency to buyer• Price floors

Type of Inventory

Programmatic Guaranteed Programmatic Premium Programmatic Direct Programmatic Reserved

Preferred Deals Private Access First Right of Refusal

Private Marketplace Private Auction Closed Auction Private Access

Real-time Bidding (RTB) Open Exchange Open Marketplace

Other Terms Used in Market

Pricing

Fixed2

Fixed

Auction

Auction

Participation

One-One

One-One

One-Few

One-All

Source: Interactive Advertising Bureau 2013

1 — Reserved inventory is advertising space on a publisher’s site that is put aside for a specific advertiser for an agreed site.

2 — Fixed Price is any arrangement where the buy-er & seller agree on a flat price that the buyer pays rather than the highest bid in an auction environment.

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Section 03 Deal Types

3.4 — Automated GuaranteedThese deal types involve reserved inventory (set aside for a particular seller) that’s sold at a pre-negotiated fixed price, and occur between one buyer and one sell-er. Automated Guaranteed campaigns are essentially direct deals that are executed programmatically, mean-ing inventory is purchased one impression at a time.

3.5 — Unreserved Fix RateThese transactions involve unreserved inventory sold at a pre-negotiated fixed rate. These transactions oc-cur between one buyer and one seller. This buying model is chosen when advertisers are looking for a specific type of user for a campaign, such as a par-ticular demographic. This model gives the buyer first

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Section 03 Deal Types

dibs on desired impressions, and the fixed price helps publishers protect their yield.

Other names for Unreserved Fixed Rate transactions include Preferred Deals, Private Access and Right of First Refusal.

3.6 — Invitation-Only AuctionsThese transactions involve unreserved inventory sold at auction-based prices (i.e. the buyer that bids the most wins). Typically, invitation-only transactions in-volve one seller and a handful of buyers. This buying model is often chosen when advertisers want to se-lectively purchase premium inventory, and publishers want to place limits on who may access inventory.

Other names for Invitation-Only Auctions include Pri-vate Marketplaces, Private Exchanges, Private Auc-tions, Closed Auctions and Private Access.

3.7 — Open Exchange BuysIn open exchange buys, any qualified buyer can purchase any inventory, as long as it meets the pub-lisher’s price floors and brand-safety criteria. Pricing is auction based; the publisher hopes to get the highest price possible.

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About OpenX

About OpenXOpenX is a global leader in digital advertising technology. We create highly efficient, high quality programmatic advertising markets that deliver optimum value to buyers and sellers.

OpenX’s programmatic advertising platform combines an ad server, a real-time bidding ad exchange and an SSP to deliver the highest revenue across every digitally connected screen.

OpenX is headquartered in Los Angeles with offices in New York, San Francisco, Tokyo, London and Munich. The company is backed by leading investors including Accel Partners, Index Ventures, SAP Ventures, Samsung, Mangrove Investments and DAG Ventures

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Contacts OpenX

Contacts and General Info

— How Much Does It Cost?The School of Programmatic is com-pletely FREE to attend. You will also receive a complimentary subscrip-tion to the online resource which will be available later in the year.

— How To Book Your PlacePlease visit:

→ openx.com/school and choose the session you would like to attend.

You can also book by emailing your choice of sessions and full contact details to:

[email protected]

— Location and TimingThe School takes place at the Hospital Club, Covent Garden.

8.30am – School opens for breakfast/networking

9.00am – Class Begins

9.45am – Break

11.00am – Class Finishes

FREE

Hospital Club →24, Endell StreetLondon, WC2H 9HQ

High Holborn

Long Acre

Leicester Square

Covent Garden

Holborn

Coven GardenLeicester Square

New Oxford Street

Charing C

ross

Street

TottenhamCourt Road

Endell Street

Neal Street

Monument S

treet

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Agenda School of Programmatic

Agenda16th February

Session 02 — Programmatic on the Go

Audience: Publishers, App Developers, Trading Desks, Media Services, Advertisers, Agencies.

Planning for cross device campaigns: mobile, tablets and wearables

Programmatic buying considerations unique to mobile

Exploring the best mobile ad formats

Building apps into your media mix Measurements & KPI’s

Content presented by → Justin Re, Director of Mobile, OpenX → Stephanie Emmanouel, General Manager, Somo→ Jason Cooper, GM Mobile, Integral Ad Science→ Yoni Argama, VP Marketing & Business Strategy, Inneractive

11th March

Session 03 — Strategies for Success: Supply Side

Audience: Publishers

Understanding revenue, pricing and yield optimisation strategies

Getting to grips with inventory pricing: remnant vs premium

How to better manage your inventory

Using data to deliver impact while protecting your IP

Reporting on campaign performance

Audience extensions – what/how/why

What technologies do I need to use and why?

Pan-regional campaigns and performance

Content Presented by → Qasim Saifee, SVP Monetisation, OpenX→ Phuong Nguyen, Director of Advertising, eBay

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Be the Expert 32

14th April

Session 04 — Fundamentals of Money & Measurement

Audience: Publishers, App Developers, Trading Desks, Media Services, Advertisers, Agencies.

Defining core measures and metrics for supply and demand side

Defining CPA, CPM, CPI etc… How to budget in programmatic

Creating transparency in demand and supply side business models

Core reporting processes and models: what do brands care about?

Content Presented by → John Harvey, Director Partner Services, OpenX → James Bourner, Head Of Display, Jellyfish → Ben Price, Head of Commercial Operations, Future Publishing

12th May

Session 05 — Selling Models for Publishers

Audience: Publishers

Integrating programmatic within your direct sales organisation: ensuring not to cannibalise existing accounts

The inventory conundrum: remnant versus premium

Establishing effective pricing models: CPMs, eCPMs, CPC,

RPMs and how to increase revenues Defining ‘viewability’ metrics Understanding yield and revenue optimisation

Scaling programmatic for niche publishers

Programmatic Best Practice: Case Studies for Supply Side

Content Presented by → Richard Ottoy, Commercial Director UK, OpenX→ Steph Miller, Head of Media Sales, Zoopla

Agenda School of Programmatic

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Be the Expert 33

14th June

Session 06 — Strategies for Success: Demand Side

Audience: Trading Desks, Media Services, Advertisers, Agencies.

Understanding pricing and budgeting.

Managing and using data to make better targeting decisions

Reporting on campaign performance

PMP’s – how to make the most out of your existing deals

Overcoming brand safety, fraud and non-human traffic concerns

Content presented by → Ian Davidson, Senior Director Platform Demand, OpenX → Edward Thomas, Head of Audience, Skimlinks

Agenda School of Programmatic

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→ uk.openx.com/school-of-programmatic


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