How Programmatic Advertising Works – and Where the Money Goes

Of a typical dollar spent on programmatic advertising, only 47.1% reaches consumers as "working media." Why? Every ad is won through an automated auction among an agency, a demand-side platform (DSP), an ad exchange, a supply-side platform (SSP), and data vendors. At each of these stages, someone takes a chunk of the budget before any of the money reaches the site where an ad is displayed.

The Moment an Impression Is Sold – What Actually Happens

Every time a user loads a website page, a digital auction happens instantly to decide which ad shows.

It starts with a supply-side platform (SSP) on the publisher's side, which auctions off the available ad slot. That SSP sends a "bid request"—a description of the ad unit, the page, and the user—for this only-in-the-moment opportunity.

Bid requests go through ad exchanges: like stock market exchanges, they connect buyer and sellers of ads, facilitating an auction.

Demand-side platforms (DSPs) are the ad-tech platforms used by advertisers. A DSP receives a bid request, uses behavioural data to target the right user, and automatically bids for the publisher's inventory on the advertiser's behalf. The bids are based on the value of the ad impression: the DSP spends the least it can to target the most valuable users in the right context.

The highest bid wins, and the winning DSP renders the advertiser's ad creative in the remaining fraction of a second before the page loads for the user.

Without human involvement, an auction from publisher's SSP, through the exchange to the advertiser's DSP, and to creative ad-serving is a quantum-scale moment in the digital ad ecosystem.

Who Sits in the Pipe – DSPs, SSPs, Exchanges and Data Vendors

The supply chain of programmatic today flows through a network of intermediaries, also called intermediaries. Here is who they are and what they do:

DSPs

Buyers of online ad inventory, demand-side platforms (DSPs) facilitate the bidding and buying of ad space on behalf of advertisers. DSPs integrate with SSPs and ad exchanges to access publisher inventory, match publishers' ad space to advertiser's targets, buy inventory at scale, and optimise ad purchasing via real-time bidding. Think of them as the ad buyer's personal trading desk.

SSPs

Sellers of ad inventory, supply-side platforms (SSPs) help publishers automate the sale of their ad inventory to the widest market, maximising revenue, minimising unsold inventory, and improving efficiency. An SSP connects to DSPs and ad exchanges to push the publisher's inventory out to advertisers. They function in a way much like e-commerce platforms such as Etsy or Shopify, but for digital publishers.

Ad Exchanges

The ad exchange is the marketplace where DSPs and SSPs come to exchange an impression. DSPs bid for ad space listed by publishers on the SSPs. Think of them like a stock exchange: they make sure that buyers and sellers can trade quickly, efficiently, and securely. If the DSP wins the auction, the ad is delivered through the publisher's ad server.

Data Vendors and Verification Providers

The data vendors, who can work with both DSPs and SSPs, provide myriad types of digital audience data to signal whether users match the target advertiser's profile. Verification providers factor into placement and fraud mitigation. Both have their own fees.

The Fee Waterfall – How a R1.00 Budget Is Sliced

So what comes back to the publisher from that R1.00 programmatic budget? Here is an examination of where the ad dollars go, based on real studies.

For every rand that an advertiser spends on programmatic, only 47% actually reaches "working media" where an ad that was shown to a real, targeted user. Another 26.9% becomes "transaction costs", including DSP and SSP fees. The remaining amount reaches bad ads, ad fraud and unverified sites.

But fee rates wildly vary based on the DSP and the SSP. SSP/exchange take rates can hover around 5-15%, depending on the ad exchange and the DSP's use case. But in some cases, one SSP took as much as 45% off the top. DSP fees are usually in the 15-20% range. The fee waterfall shows how dramatically the share of the budget can be cut before it reaches the publisher or site.

The key performance indicators of media-productivity, such as viewability, brand safety, and scale, are heavily dependent on programmatic ad costs—and an advertiser's budget. But a better understanding of the numerous hands through which ad dollars flow is essential for advertisers to make programs more efficient.

Variability and Risk – When the Middlemen Take Almost Everything

Why is visibility into DSP and SSP fees essential? Without it,

When 25% of ad dollars are lost to low-quality media and nearly 20% to intermediaries, it makes clear why visibility is important for brand sustainability in programmatic advertising. Consistently, analysts argue only 40-45% of ad spend truly serves the advertisers. They suggest negotiation and prioritisation.

The South African Picture – Global Pipe, Local Budget

So what about SA? The digital display market in South Africa is small but significant, at around R1.5 billion according to a study by IAB South Africa / PwC in 2024. It includes both non-programmatic and programmatic ad placements, but the bulk of programmatic goes through open exchanges between DSPs and SSPs.

Google Ads and Facebook dominate. But a significant chunk also runs through real-time bidding (RTB) programmatic through DSPs, ad exchanges, and SSPs.

The Competition Commission has documented how South African digital agencies and trading desks use these "ad tech pipes" for media buying. They have not released detailed benchmarks of DSP/SSP and broader supply-chain fees in the country—but research suggests the global practices and fee "waterfalls" apply here, too.

Even without a transparency benchmarks from a South African study, it is important to realise that there is no South African "ad tech tax" or mapping: the programmatic advertising system in the SA digital market fractures the budget through a global chain of DSP, exchange, and SSP fees, before the 'ads' hit a webpage.

What Budget-Approvers Need to Ask

For board members and budget-approvers, the biggest takeaway is that there is no "default", "standard" or automatically "optimal" fee structure in programmatic advertising. DSP platform fees, publisher commission, and agency trading desk margins can all vary from 5% to 50% depending on the programmatic supply chain in use.

But there are a few fundamental questions about transparency, transparency, and accountability that every budget-signer can and should ask:

• In our programmatic advertising, what percentage of media-spend does each DSP take for platform fees? And how does that percentage vary between DSPs in our supply chain?
• What are the typical SSP/exchange take rates for the programmatic supply paths we use? How do we know if one SSP or exchange is charging disproportionately high fees vs other alternatives?
• Are there trading desk or agency fees on top of the DSP fees? And what is the margin estimate for the agency/two though which we run our programmatic buys?

That's not to mention questions about the quality of inventory in the supply chain. There's a good reason why competent CFOs and CEOs avoid "set-and-forget" mode: DSP, SSP and "waste" fees can creep up, and performance can degrades—and in programmatic, things change even faster.