Being served an ad online is the textbook case of an unremarkable experience. You load up a website or an app on your phone, and an ad appears alongside, in front of, or under the thing that you wanted to see. It’s a small distraction as you browse around online, and for the most part it goes unnoticed. If you—like millions of others—have installed an ad blocker on your phone or web browser, you may never see these advertisements at all. It’s difficult to recall clearly the last five or six ads that you might have run into online. It’s probably even more difficult to recall the last time that you actually clicked on one.
Yet this boring, mundane occurrence online belies the intricate machinery running under the hood of each and every one of these ads. The modern online advertising ecosystem is a mind-bending, globe-spanning infrastructure designed to deliver billions of advertisements at split-second speeds every minute of every day. What you see at the end point—a banner advertisement that you may instantly forget, or a preroll video that you click to skip as quickly as you can—is only the tiniest piece of an incredibly complex system that is otherwise invisible as you move through the internet.
The players in the marketplace for attention are the same as they always have been: those who have attention they are willing to sell, and those who are willing to buy. In online advertising parlance, those who sell attention are the “publishers.” Attention can be captured in many different ways. A YouTube star who has millions of viewers tuning in to see her latest video and a social media platform where users are logging on to chat and comment on each other’s photos are examples of publishers with a surplus of attention—other people’s attention—to sell. Publishers sell “inventory”: the opportunity for the buyer to display its message to someone who is paying attention to the publisher. The buyers vary: they include large companies buying advertising to promote their products and marketing agencies working on their behalf, as well as what are known as agency trading desks—specialized companies focused on navigating the programmatic advertising ecosystem.
The infrastructure of programmatic advertising is architected so that, theoretically, publishers are able to sell their inventory of attention to the highest bidder among a pool of buyers. This is generally done through an arrangement known as real-time bidding (RTB). RTB is initiated by the tiniest of actions—clicking on a link or loading a piece of content—which sets off a rapid, orderly cascade of events, Rube Goldberg–style. As soon as an opportunity for delivering an advertisement appears, an ad server leaps into action, announcing to the marketplace the opportunity to bid for inventory.
One of the most incredible aspects of the RTB system is that the entire process takes place in real time. The advertisements you see online are not predetermined. At the moment you click the link and load up the page, a signal from the ad server triggers an instantaneous auction to determine which ad will be delivered. The highest bidder gets to load its ad on the website and into your eyeballs.
This process happens at the speed of light. The inventory must be bid upon and the actual advertisement delivered in the split-second moment between when you click to load something online and the time that the website or content on an app is finally loaded. The entire process of putting out a request for bids, making the bids, evaluating the bids, and delivering the advertisement takes place in under a hundred milliseconds—about a quarter of the time it takes you to blink.1 This happens millions and millions of times across the internet every second, without ceasing and largely without hiccups.
This combination of rapid bidding and massive scale means that humans cannot be directly responsible for initiating the auction, bidding, and evaluating the bids. There simply is not enough time. Programmatic advertising is facilitated entirely through software platforms that automate this process. These are known as demand-side platforms (DSPs) or supply-side platforms (SSPs). DSPs service the buyers, providing tools to specify certain parameters around their bidding and specify the audiences they would like to target. SSPs provide a suite of tools that are a mirror image of this for publishers, enabling sellers to specify auction rules, set price floors, and control the kinds of advertisers able to gain access to their inventory.
Once configured manually, programmatic advertising relies on the interactions between algorithms to make the discrete choices to bid on available blobs of advertising inventory. These competing algorithms working on behalf of ad buyers then interact with algorithms working on behalf of the publisher, which choose the winner of the auction and deliver the selected advertisement.
As with the Nasdaq and the New York Stock Exchange, the buying and selling of advertising inventory does not take place all in one location. There exists a dense, networked set of ad exchanges that facilitate the meeting of supply and demand in this marketplace. At the time of this writing, companies like AppNexus, OpenX, and Smaato are leading players in this space, alongside exchanges operated by larger long-standing players like Verizon Media (formerly Oath) and Microsoft. The largest platforms—Google and Facebook—offer their advertising inventory on their own specialized tools, which operate much like a DSP for buyers.
Perhaps most remarkably, all of this takes place seamlessly. We are bombarded by ads online but give little thought to the complex, behind-the-scenes machinery of bidding and delivery that makes them possible. This invisibility belies the huge importance of this infrastructure and the implications of the failure of this system for the web and for society as a whole.What Happens
