Digital advertising is expected to hit $50 billion this year. 
Digital advertising is expected to hit $50 billion this year.  - 
Listen To The Story
Marketplace

Advertising used to look like this: People went out to lunch, drank a lot, had some great ideas and put them on television. But these days, advertising is all about mobile, all about digital and all about machines.  

Doug Fleming heads up programmatic ad sales at Hulu, the TV streaming service. Along with thousands of other advertising and marketing executives, Fleming has decamped to San Francisco this week for the Adtech conference. It’s two days of, well, everything thats means anything when it comes to advertising and technology.

Fleming is giving a talk at the conference about the way things work now. Here’s a preview:

“It is absolutely imperative that a publisher has their technology stack in order. Their content management system is talking to their database, their consumer marketing team is tied in with their advertising team, who are tied in with all facets of the inner-workings of the machine.”

Translation: Digital advertising is on a tear. It's expected to hit $50 billion this year, and a lot of that is thanks to automation. Buying, selling, targeting and placing ads is all being done by computers, and it needs to be a well-oiled machine to work properly.

Here’s what that looks like: Say you load a YouTube video on your smartphone. An ad often pops up first. But before it does, there’s a tiny pause. And during that pause, “in nine-one thousandths of a second, there’s a mini bidding war that takes place to see who’s going to win that impression,” says Kenny Day, who runs political ad sales for Yahoo! and is a veteran of the ad tech business. Day is describing what’s known as real-time bidding. It was introduced by Google back in 2009, when it bought the ad-tech company Doubleclick and invented computerized ad auctions.

But ad tech really took off when the power of buying and selling in a fraction of a second was combined with the mounds of data companies collect on consumers. That combination has fueled a spate of acquisitions in the past two years. And it’s what is behind Verizon’s $4.4 billion offer for AOL, which has a solid ad tech business.

“There are all these data companies that are dropping pixels on you. They're cookie-ing you. They know that you are female, between the ages of 30 and 54,” says Day, adding that they know where you live, your political leanings and the products you buy.

And when you log into Facebook or Google or surf on your phone, those little trackers follow you everywhere.

Everyone's sort of tagged with these IDs that we carry with us. It's called a long tail, Day says.

The data is anonymous, but computer algorithms compare your activities to millions of people doing the same things you are doing online and determine what types of ads people similar to you might like. And the more data that gets fed into the mix, the more precise the targeting and the bigger the potential payoff for advertisers.

So when that ad pops up on the video you’re about to watch, and it’s for a product that you may actually be interested in buying, there you have it: the cross-device, behaviorally targeted, real-time bidding, technology stack in action.

And who said ad tech was hard to understand?  

“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VA

As a nonprofit news organization, what matters to us is the same thing that matters to you: being a source for trustworthy, independent news that makes people smarter about business and the economy. So if Marketplace has helped you understand the economy better, make more informed financial decisions or just encouraged you to think differently, we’re asking you to give a little something back.

Become a Marketplace Investor today – in whatever amount is right for you – and keep public service journalism strong. We’re grateful for your support.

Follow Molly Wood at @mollywood