What Is Real-Time Bidding in Advertising?

“One thousand dollars going once, one thousand dollars going twice, sold to the best bidder!” When reading this sentence, you probably imagine an impeccably dressed auctioneer and a contented winner getting a famous piece of art or a one-of-a-kind artifact. But what if I tell you that the lot can be the combination of enhanced ad campaigns and an optimized revenue stream? Would you take part in such an auction? Well, thanks to programmatic technology, you have this opportunity. So, what is real-time bidding in advertising, and how can you benefit from it?

The answers to these and many other questions await you below, so keep reading. 

Real-Time Bidding (RTB): Intro

We won't break new ground by telling you that companies promoting their services or products resort to various digital advertising tools. So, real-time bidding technology is one of these tools. And to better understand its working principles, let's have a look at manual media buying first.

Usually, when a company buys ad space on some platform, it has to make arrangements with a website owner and pay for all the traffic over a certain period. This strategy is not efficient enough, since the ads in question target all website visitors regardless of their age, gender, location, and preferences. As a result, a media buyer wastes time and money and hardly reaches potential customers.

Real-time bidding, on the other hand, offers the hands-off media buying and selling empowered by sophisticated targeting algorithms and an optimized revenue strategy. It means the ad automatically pops up on multiple platforms, reaching the audience most interested in the promoted product. Considering this, it's easy to guess why the global RTB market size is predicted to grow up to $27 billion by 2024.

RTB vs. Programmatic Advertising

Real-time bidding and programmatic advertising are the notions that go hand in hand, so no wonder, users tend to mix them up. Still, the difference is essential.

Thus, programmatic advertising embraces all kinds of automated media buying. It includes open auctions (a.k.a. RTB), private auctions (invitation-based), preferred deals (buying ad inventory at a fixed price), and programmatic guaranteed deals (non-auction-based).

So, as you see, real-time bidding is just a use case of programmatic advertising technology. It is a real-time auction held in less than a second. Advertisers set audience parameters, quote the price, and bid on publishers' ad inventory. Later, AI algorithms process this data and choose the highest bidder to display its ad to potential customers on various digital platforms.

Key Participants

Now, when you know the basics of RTB technology, it's high time to analyze the functions of its three pillars — supply-side platforms (SSPs), demand-side platforms (DSPs), and ad exchanges. So, let's get started!

SSPs

To automatically sell the ad space across multiple ad exchanges at a reasonable price, publishers (website/app owners) leverage supply-side platforms. Also, a supply-side platform helps them analyze ad impressions and, therefore, offer the most catchy ad spots to advertisers.

Examples of such platforms involve Google Ad Manager, Pubmatic, and OpenX.

DSPs

When advertisers (marketing agencies and companies) want to buy the most relevant ad impressions in no time, they employ demand-side platforms. A demand-side platform is a powerful ad tech solution that allows marketing specialists to reach the right audience, minimize costs, and raise brand awareness.

You've probably heard of Facebook Ads Manager, DoubleClick Bid Manager, or Rocket Fuel. So, these are popular demand-side platforms.

Ad Exchanges

An ad exchange is an innovative platform that functions as an intermediary between advertisers and publishers. It processes the bid requests obtained from the SSP and sends them to its DSP partners. If DSPs are interested in such ad inventory, they place bids. In its turn, the ad exchange chooses the best bidder and sends the bid response together with the ad content back to the SSP. 

The most well-known ad exchanges include Microsoft Ad Exchange, the Rubicon Project, and Double Click Ad Exchange.

How Does RTB Work?

Real-time bidding combines a number of complicated processes and high speed. So, to understand how the technology works, let's take a look at its every step.

Step #1

It all starts when a user creates an internet account and enters personal data. Later, search engine algorithms process and analyze this data and the user's requests and preferences (cookies) to make a unified customer profile.

Step #2

The site owner (publisher) provides information on available ad inventory to the SSP. The user clicks on this website, and while it's loading, the platform determines the most relevant parameters and placement of a potential ad (based on the user’s cookies) and sends this data to the ad exchange.

Step #3

At the same time, advertisers set parameters of the targeted audience and ad space requirements and send them to the DSP. The ad exchange also sends bid requests from the SSP to different DSP partners. Later, the DSP processes all the information and puts in a bid, if the ad spot is relevant.

Step #4

The ad exchange analyzes the bids obtained from multiple DSPs, chooses the winner (the most relevant and highest bid request), and sends a bid response together with the ad content back to the SSP.

Step #5

Once the website is loaded, the user sees this very ad automatically displayed by the SSP.

Is RTB Worth Trying?

According to Statista forecasts, US advertisers will spend more than $140 billion on programmatic advertising by 2023. This figure shows that the trend for RTB technology is also likely to grow. So, what makes market players switch to this option? The answer consists in multiple benefits unlocked by real-time bidding.

Go Omnichannel

When employing RTB technology, advertisers get the opportunity to launch ad campaigns across various user channels simultaneously. Thus, a potential customer gets the same information not only on a particular website but also in several apps and services. What's more, this information can be presented in different ad formats (banner, video, audio, native, etc.), which reduces the spam-like effect.

Enjoy Granular Targeting

Leveraging complex AI algorithms and data-driven insights of programmatic solutions enable marketing agencies to enhance their targeting strategy. By offering potential buyers what they really need at the moment, it becomes possible to create a positive customer experience and boost the customer retention rate. 

Website owners can also take advantage of AI-powered tools. Thus, by analyzing ad inventory traffic, publishers can offer advertisers the most catchy ad placements.

Optimize Your Budget

Those advertisers who opt for real-time bidding technology pay mostly for relevant ad space, which increases the chances of targeting potential leads. Also, since RTB is a CPM-based tool (i.e., the price is set for a thousand ad impressions), the bid may range between $1 and infinity. Taken altogether, it helps marketers avoid wasteful spending and make better use of their budgets. 

At the same time, when choosing the highest bidders only, ad publishers increase their revenue streams.

Thoughts to Go

The online advertising industry offers numerous ways of promoting your product or service, and real-time bidding is just an option. Still, it's the option that is worth trying, since it opens up golden opportunities for anyone who wants to get the most out of every ad campaign. So, don't hesitate to upgrade your marketing experience!

Please, contact our specialists to learn how to reap all the benefits of cutting-edge RTB technology. Qulix Systems is an expert in the adtech development field, ready to offer you upscale business solutions.