How Real Time Bidding Works:
Did you ever wonder how is it that ads are placed on sites you’re visiting in real time? Whenever you click through to a new app or site, fresh ads that seem to correspond to my purchase behaviors and interests are served on the pages you visit. How does this happen?
When a user visits a website, the site or app sends what is called a “bid request” to an ad exchange or SSP (they’ve integrated with one or multiple SSP/ad exchanges when building their site.) These SSPs/ad exchanges are connected with multiple platforms called “Demand Side Platforms (DSPs)” that host multiple advertisers looking to buy traffic for their brand or campaign. These advertisers place a predetermined amount of money they are willing to pay for ad placements in their DSP. As that traffic becomes available through sites and apps sending bid requests, the DSPs perform an auction that allows the highest bidding advertiser to win the placement on the site relative to the other advertisers interested and willing to spend money for that ad placement.
RTB allows for scalable supply and demand to exist in the internet marketing space – increasing value for quality traffic that is in high demand and lowering prices for less in demand or quality traffic.
SELLERS (Publishers) → SSP/Ad Exchanges (Inventory) → BUYERS (Demand Side Platforms)
Historically, if you wanted to reach sports fans, you’d buy ads on a sports-related site. For example, Bob is a sports fan and advertisers marketing to people like him would serve their ads on sports-related websites like ESPN.com – as the data and advertising has advanced RTB allows media buyers to target people by what they like and look at along with what types of sites they visit on their devices.
How Advertisers Benefit from RTB
Real-time bidding is extremely efficient, which is beneficial for advertisers. Ad buyers no longer work directly with publishers. Increasing potential inventory across a large array of sites and making it available to a large group of buyers allows for supply and demand to take effect and put the correct values on the most valuable media placements. Increased efficiency in execution and pricing creates a more transparent marketplace on the pricing of various inventory sources.
How Publishers benefit from RTB
Publishers’ main goal is to monetize as much of their inventory as possible at the most effective rate or eCPM/RPM. (estimated cost per thousand or rate per million ) They receive more value for their inventory through RTB integrating RTP monetization strategies. By increasing the demand for their ad traffic through integrating RTB strategies they will allow more buyers to bid on their traffic. With the assumption the traffic is responsive online and is aligned with an advertising audience category (consumer profile) that is in demand the site can have more people competing for those impressions, effectively driving up the price for that impression and increasing yield for the publisher.
There is a downside to RTB for sites that have low quantities of traffics. Audiences that are less in demand with advertisers, or audiences that don’t engage with ads revenue against that traffic, will be deemed less valuable relative to more engaged or in demand counter parts. RTB allows the traffic and not the brand of the publisher to drive the value of the traffic – a win win for all in this widely diverse media buying economy.
Digital advertising in its theory should increase transparency in costs and performance for advertiser and publishers. RTB is imperfect and faces its growth challenges that most industries do however when it’s done in a compliant and scaled use case it increases efficiency and performance for all of the players in the digital ad economy.