Real-Time Bidding (RTB)
What is Real-Time Bidding (RTB)?
Real-Time Bidding (RTB) is a crucial component of programmatic advertising, which involves the automatic buying and selling of digital ad space on a per-impression basis in real time. RTB functions as an instant auction where publishers present their available inventory and advertisers bid to secure these ad spots to reach their target audience. This entire process is completed in the time it takes for a webpage or app to load.
For instance, when you encounter an ad between game levels on a mobile game, an auction occurs at that moment. Advertisers interested in showing you their ad place bids for the impression, and the highest bidder’s ad is displayed to you within a fraction of a second. RTB enhances efficiency, allowing advertisers to target their audience precisely and enabling publishers to maximize their revenue from digital real estate.
RTB vs. Programmatic Advertising
While RTB is a part of the broader programmatic advertising ecosystem, the two are not synonymous. Programmatic advertising covers the entire process of buying and selling ads in real time, whereas RTB specifically refers to the millisecond auctions where the bidding occurs. Not all programmatic advertising uses RTB; other methods include private marketplaces or programmatic guaranteed deals, where advertisers and publishers negotiate directly.
How Does Real-Time Bidding Work?
In RTB, multiple advertisers bid on a single impression of a publisher’s inventory in real time. The highest bid wins, and the corresponding ad is displayed to the user. Here are the key players involved in this process:
• Advertiser: The company promoting a product or service, aiming to get their creative in front of their ideal customer.
• Demand-Side Platform (DSP): Technology enabling advertisers to bid automatically for ad space. DSPs analyse user data and other factors to decide which impressions to bid on.
• Publisher: Websites or apps with ad inventory to sell. They aim to sell each spot to the highest bidder to maximize revenue.
• Supply-Side Platform (SSP): Technology that helps publishers auction their ad space. SSPs sort bids by advertiser, format, audience, and price for the best match.
• Ad Network: Intermediaries that gather inventory from publishers and sell relevant impressions to advertisers.
• Ad Exchange: A digital marketplace where the auction takes place in real time.
When a user visits a webpage or app, the SSP sends a bid request to the ad exchange, indicating available inventory. The bid request includes user data (depending on their consent) and publisher requirements (like ad format, impressions, and price). The ad exchange opens an auction to advertisers, whose DSPs analyze the bid request and decide on their bids. The highest bidder wins, and their ad is displayed to the user instantly.
Pros and Cons of Real-Time Bidding
Pros:
• Precise Audience Targeting: RTB allows advertisers to bid on ad space intended for specific audiences, leading to better conversion rates.
• Financial Control: Publishers maximize revenue by selling to the highest bidder, and advertisers can set maximum bids to control costs.
• Real-Time Optimization: Both advertisers and publishers can adjust their strategies quickly for better results.
Cons:
• Lack of Context Control: Automated processes can lead to ad placements that seem insensitive or inappropriate.
• Lack of Content Control: Publishers may lose control over the ads appearing on their pages, potentially leading to mismatched content.
• Data Challenges: Accurate user data is harder to obtain due to privacy concerns and regulations like GDPR and CCPA.
Real-Time Bidding vs. Header Bidding
Header bidding, also known as advanced or pre-bidding, is a subset of RTB were publishers auction inventory to multiple ad exchanges simultaneously. This contrasts with traditional RTB, where each ad exchange conducts its auction sequentially. Header bidding exposes inventory to more advertisers, resulting in higher yields, improved fill rates, and increased revenue.
Real-Time Bidding vs. Programmatic Buying
Programmatic buying is a non-auction model in programmatic advertising where ad space is sold directly to advertisers for a negotiated price and fixed time. This method is more common for premium ads where advertisers seek precise control over ad placement.
RTB Platform Examples
• DSPs for Advertisers: theTradeDesk, AdRoll, mediasmart
• SSPs for Publishers: Outbrain, OpenX, Magnite, Smaato, Index Exchange
Mobile RTB
As smartphones proliferate, mobile RTB allows advertisers to bid for space on mobile sites or apps. In-app bidding, like header bidding, enables app publishers to get competitive rates for their ad space while showing relevant ads to users. The Future of RTB: Trends to Watch RTB is set to grow, with the global market potentially reaching $19.7 billion by 2030, driven by smartphone penetration. Key trends include:
• Privacy Challenges: Alternatives to cookies for user data are needed as privacy regulations evolve.
• AI and Machine Learning: These technologies can optimize campaigns, improve contextualization, and combat fraud.
• Connected TV (CTV): RTB is becoming popular for CTV, enabling precise targeting of engaged audiences.
Key Takeaways
• RTB is the process of automatic, real-time bidding for ad impressions.
• It is a part of the programmatic advertising ecosystem but distinct from it.
• RTB enables precise targeting and real-time optimization for advertisers and publishers.
• Challenges include lack of context control, content control, and data accuracy.
• Header bidding allows multiple ad exchanges to bid simultaneously, enhancing revenue for publishers.
• Mobile RTB is crucial for in-app advertising.
• The future of RTB includes overcoming privacy challenges and leveraging AI and machine learning.