In traditional world of advertising before digital advertising had picked up, the way transactions happened was there would be 2 people meeting in person and doing a deal to run ads in their newspaper or magazines. Same approach started happening in digital advertising as well.
It was in the world of search engines that programmatic was born and then adopted to the display advertising world. In search engine it was started in a way that when searches were made the ads were shown as a result and it was based on keywords. It was first started by goto.com which was then renamed as overture and then acquired by Yahoo. They didnt particularly have an search engine but used to have the website URLs been displayed on the top for keywords that the advertisers used to bid on.
It was google that adopted this methodology and built their own search engine with web crawlers which used to crawl across the internet to make a listing of the websites with keywords. Advertisers then also bid against the keyword which were placed as sponsored search.
But it wasnt the case in display advertising, ads were still being bought based on relationships and not in real time, this was changed when Rightmedia exchange created the first ad exchange display advertising. What this meant was that the publishers who were not able to see all their inventory directly to advertisers could come and place their inventory in the ad exchange demanding a minimum CPM (cost per thousand) and advertisers could come and bid on the inventory that various publishers were listing in the exchange.
In short programmatic was born in the world of display. Programmatic buying and selling means basically that you dont need to call up each publisher and make a deal with them but instead an advertiser could go and buy the inventory that they are looking for in real time and could stop or make changes without having to inform the publishers or asking them to change anything on their end. There is also no minimum commitments that the advertiser needs to make.
It was through programmatic that oRTB (real time bidding) started which started changing how advertising was bought in digital world. I will write more about this in my next articles.