Real-Time Bidding

Did you know that there’s an online marketplace that replicates the interactions of a real-life auction? Imagine a silent auction where someone sells their expensive jewelry. Everyone in the audience raises their paddle to show interest, and the bidding continues until someone finally outbids the rest. This same concept takes place online!

Advertisers who want to showcase their advertisement on a website or app enter a digital marketplace where advertisements are bought and sold in real time. This process is known as real-time bidding (RTB).

What is Real-Time Bidding (RTB)?

RTB is an automated process where publishers sell ad inventory, and advertisers place bids in real-time and on a per impression basis.

Before the mid-2000s advent of RTB, the selling and buying of advertising media were often negotiated directly between an advertiser and a publisher, or via ad networks that aggregated ad inventories from multiple publishers in advance. This manual process was tedious and ineffective for advertisers, as advertisers often paid for ad impressions that their target audience did not see.

RTB, also referred to as open auction or open marketplace, is the most common form of programmatic media buying. It’s where any advertiser can bid on ad impressions offered by publishers.

Besides open marketplaces, RTB is also used in a private marketplace (PMP), an exclusive, invitation-only digital marketplace where publishers control who bids on their inventory. In PMPs, ad inventory is available only to a select group of advertisers, increasing the likelihood of securing higher-quality ads.

Tasks that once took hours with manual media-buying now take only milliseconds with RTB, allowing advertisers to quickly respond to and optimize their campaigns. RTB is also a driving force behind the adoption of programmatic advertising, with its global spending expected to reach nearly $600 billion in 2024.

How Does Real-Time Bidding Work?

The success of the RTB process relies on the collaboration among its participants. Let’s discuss each player’s roles: the advertiser, the demand-side platform (DSP), the ad network and the ad exchange.

The advertiser is interested in promoting its offerings and wants to showcase itself to potential new customers. The DSP is the technology that advertisers use to automatically bid on ad inventory. They do so by communicating with the supply-side platform (SSP) to determine what ad space is available at the moment and how much it costs. The ad network, an intermediary between publishers and advertisers, collects ad inventory from publishers in large quantities and then sells specific impressions to advertisers. Lastly, the ad exchange is the digital marketplace where advertisers and publishers buy and sell digital advertising space in real time through automated auctions.

Ad inventory is auctioned in real time on a per-impression basis. When a user clicks on a webpage, the auction initiates immediately. The advertiser who places the highest bid gets to showcase their ad. This entire process takes milliseconds between the time a visitor lands on a webpage and the page fully loads, a seamless process many would not even know is taking place!

What are the Benefits of Real-Time Bidding?

RTB has many significant benefits, including accurate audience targeting, consolidated tracking and reporting, and price transparency. Let’s explore each of these advantages and their implications for both advertisers and publishers.

Precise audience targeting

Data from SSP and Data management platforms (DMP) enables advertisers to create better visitor profiles. This improves targeting accuracy and helps advertisers make more informed bidding decisions. It also strengthens an advertiser’s understanding of their target audience because user data is consistently evaluated once someone visits a publisher’s website, helping ensure ads are reaching the right individuals.

Better price transparency

The vast number of publishers and advertisers, coupled with the effectiveness of the auction mechanism, benefit both parties.

RTB benefits publishers by increasing the likelihood of their ad inventory being purchased at a higher price point because of the competition among advertisers. For advertisers, RTB grants access to a wide range of publishers, where they can find the best placements for their ads and effectively reach their target audience.

More consolidated tracking and reporting

RTB simplifies user tracking and reporting by consolidating these transactions across different ad exchanges and networks. DSPs and supply-side platforms (SSPs) facilitate performance tracking and reporting for advertisers and publishers, respectively. This integration allows both advertisers and publishers to improve their efforts.

What are the Challenges of Real-Time Bidding?

Just as there are many benefits to utilizing RTB within a marketing strategy, there are also several challenges associated with it. From privacy challenges to compromised brand safety, marketers will face various risks that they should be prepared to overcome to ensure they achieve desirable outcomes.

Privacy compliance and data quality

A drawback of RTB is its heavy reliance on cookies that provide marketers with customer insights for better targeting methods. With the impending removal of cookies, advertisers will need to adapt their strategies by focusing on alternative data sources and technology, such as first-party data and contextual targeting.

Another challenge of RTB is that the data it leverages is not always accurate, affecting the bidding decisions. Various factors, including fraud and measurement errors, can sometimes impact this data. Consequently, marketers could waste valuable resources on inaccurate targeting, leading to a lower return on investment.

Brand safety

Undoubtedly, if an internet user views an advertiser’s ad on a sketchy website, they will likely judge it negatively due to its association with the surrounding content. Advertisers looking into using RTB should be aware that their ads could potentially be displayed alongside content they wouldn’t normally want their company to be associated with.

Process accountability

Another drawback of RTB is ensuring the process and outcomes are clear and accurate. Advertisers are not always given accurate information about their advertising through the RTB process, including where their ads are displayed, how well they work, and how much they cost.

What is the Difference Between Real-Time Bidding and Header Bidding?

Header bidding is essentially an improved form of RTB that addresses the inefficiencies of the traditional waterfall model used by RTB. In this traditional model, publishers receive advertisers’ bids sequentially. Header bidding enables publishers to accept bids from multiple advertisers simultaneously.

How to Take Advantage of Real-Time Bidding

Advertisers use RTB through DSPs to efficiently purchase ad inventory. DSPs offer several benefits, including automation, targeting and efficiency. They streamline the ad purchasing process, allowing advertisers to target specific audiences and have more control over their ad spend.

Publishers take advantage of RTB through SSPs to efficiently sell their ad inventory. SSPs have many benefits, including revenue optimization, increased control and better inventory management, facilitating the entire process.