This is the first of a three part blog series that does a high level overview of digital display programmatic buying industry and how programmatic direct buying has risen to a become a major player.

According to Nielsen, online display advertising was the fastest growing advertising media in 2013, with a growth rate of 32 percent and a total spend of $11 billion. Within display advertising, programmatic and real time bidding grew at the breakneck speed of 72.7 percent in 2013 and will continue to see double digit growth through 2011. However, a lionshare of the media buying market share still belongs to traditional media and buying practices. Online display is outspent by television, newspaper, magazine and radio media buys. Within online display, nearly 70 percent of ad sells are bought through direct means, mostly through RFPs, human negotiation and manual insertion orders. Nevertheless, a new digital display buying mechanism called programmatic direct has challenged the traditional status quo means of directly buying a publisher’s premium guaranteed inventory and has recently gained momentum in the digital buying industry.

Programmatic buying is defined best by Allie Kline, CMO of AOL Networks, as a form of media buying that uses “data, tech and software for getting more for every dollar spent.” The data, tech and software help reduce the inefficiencies and large overhead costs that comes with manually buying direct ads. Programmatic buying saw its genesis in the early search advertising buying days. Instead of having advertisers constantly check their desired keyword bids on their search ads, programmatic tools helped automate the process. Soon thereafter, similar programmatic technologies were infused into digital display ad exchanges. These ad exchanges evolved real time bidding (RTB) capabilities which, when coupled with audience data, allowed multiple advertisers to bid for display ad inventory targeted to a specific user on a publisher’s site immediately before the ads were sold. These real time auctions empowered marketers to gain targeted impressions without the need of human intervention.

However, these RTB ad exchanges forced publishers to give up a lot of control and transparency over their ad inventory. They also meant giving up the valuable one-on-one relationships forged through traditional direct buying methods. On top of that, the ad exchanges have allowed advertisers to pay publishers less for their inventory. As a result, a majority of publishers use RTB ad exchange systems to sell their cheap remnant inventory. In turn, media buyers who invest in RTB ad exchanges are, for the most part, barred from publishers’ top-tier inventory and only have access to the lower quality remnant inventory that isn’t guaranteed based on their bid.

In order to access the “premium” inventory that publishers withhold from RTB networks, advertisers and agencies have to negotiate the majority of the placements through the time consuming manual display buying method. However, the large amount of time and expensive overhead involved in manually placing orders spawned a new programmatic solution in the display media landscape, programmatic direct.

To learn more about what programmatic direct is and how it fits into the display media buying industry, go to Part 2 of my blog series.