A Simple Look At Real Time Bidding

In the programmatic world, there is one term that trumps all: Real-Time Bidding. Real Time Bidding (RTB) is the backbone of all things programmatic, yet most digital marketers don’t fully understand what it is.

As a web page is loaded, thousands of factors are running in the background to determine how much a publisher will pay for you to see their specific ad. Maybe you hit their target demographic to a T, then they would be willing to pay 10x for you to see their content. Alternatively, you could be the exact audience they want to exclude, and bid down 10x. Enter: Real Time Bidding (RTB).

There are three key pillars of Real Time Bidding: the demand side platform (DSP), an ad exchange, and publisher. Publishers supply real estate on their site to the ad exchange which then holds an auction between DSP’s. DSP’s then bid for advertiser’s content based on different targeting factors that have been indicated from advertisers (e.g. Income, browsing behavior, past purchases etc.). When an advertiser’s targeting and the publisher’s inventory line up, the auction is in full swing. Within a millisecond, thousands of bids are made for the real estate. One bid trumps the rest wins the auction, and that advertiser’s ad is served on the publisher’s inventory.

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The winning advertiser’s ad is then loaded onto the web page almost immediately; the whole process takes just milliseconds to complete. Advertisers typically use DSPs to help them decide which ad impressions to purchase and how much to bid on them based on a variety of factors, such as the sites they appear on and the previous behavior of the users loading them.

Historically, advertisers decided which websites to buy inventory on based on predetermined factors from the content on site e.g. sports brands buying inventory on ESPN. Given the vast amount of information that you accumulate as you browse the internet, advertisers are privy to a much more broad understanding of things that are important to you online.

Because of Real Time Bidding, advertisers no longer need to work directly with publishers (private marketplace deals) or ad networks to negotiate pricing of all trafficked ads. Utilizing the ad tech that powers DSPs, advertisers can access inventory across a wide range of sites, bidding on only the impressions they see to be most valued to them. This cuts down the number of impressions wasted on the wrong users but also minimizes the need for costly and unreliable human ad buyers.