Real-Time Bidding (RTB): How Does It Work?

The real-time bidding (RTB) industry keeps expanding as programmatic ads continue to impact digital marketing. RTB facilitates sales instead of negotiating every separate interaction, leading to a smoother experience for stakeholders.

What Does RBT Mean? Definition and Usage

So, what is real time bidding in advertising? RTB stands for real-time bidding. This means purchasing and offering advertisements in real-time based on a per-impression metric. In such cases, marketing experts can target the most relevant audience.

We can say that RTB has something in common with the stock and bond markets. As the demand defines the share price in the stock market, the same thing happens with real-time bidding. The practice of RTB is typically facilitated by a SSP, which stands for a supply-side platform.

So, RTB is based on the auctions that happen in the interval it requires a website to load, which is a rather short period of time. Advertisement exchanges or SSPs usually facilitate these auctions.

How Does Real-Time Bidding Function?

How Does Real-Time Bidding Function?

Once you understand the RTB’s meaning, it is time to dive into how it works. While an advertisement impression is loading in a browser, information about the site and the viewer is passed to an ad exchange. The marketer who is ready to pay most of all for this type of data can get access to it. The entire procedure lasts no longer than milliseconds, so the bidding process is very fast.

As it’s not easy to make a choice which information to purchase, marketing specialists often turn to demand-side services. These platforms assist with choosing the right advertisement impression to buy and use for further purposes. How much an impression costs depends on how much purchasers are ready to invest in getting exclusive access to data.

Marketing experts use sites as a proxy for their commercials. For instance, to reach any audience interested in studying science and related disciplines, they would want to purchase ads on scientific websites.

How Is the Price Determined in Real-Time Bidding?

Several factors impact the price of every advertisement placement. They are:

  • Interval of the day
  • Geo-location
  • What the service is displayed on / Where the service is displayed

After analyzing these factors, real time bidding platforms can come up with the most appropriate bid range. RTB advertising delivers the most relevant deals to each user of the publishing platform.

Different Platforms for Ad Buying

So, real-time bidding is a part of the programmatic ad process. Three services for purchasing ads are known:

  1. Demand-side platforms (DSPs)
  2. Supply-side platform (SSPs)
  3. Advertisement exchanges

Let’s start with DSPs. They make it possible for a marketer to purchase advertising space and control their commercials. One of the most successful examples from this category is Google Ads.

As for SSPs, this is where content creators or site owners offer advertising space to advertising experts. For instance, Google Ad Manager involves an SSP, which was earlier called DoubleClick for Publishers.

Finally, there is an advertisement exchange. In this model, a dozen ads are offered for the highest price that interested faces can pay. DoubleClick Ad Exchange is one such exchange. Once you want to buy or sell ads, you can find this option on Google Ad Manager.

What Is the Process All About?

What Is the Process All About?

Real-time bidding starts as soon as a user has some ads to purchase or sell. But they should have something to offer in exchange. After selecting the suitable RTB platform, the next steps are:

  1. The publisher of the website submits available advertisement space dimensions to the SSP.
  2. The SSP analyzes the user’s cookies to get information about the user’s preferences, activities, geo-locations, etc. This is all done to detect the most relevant ads for buy.
  3. Then, the DSP evaluates the information about the user, placing a bid on the ad space concerning the data obtained.
  4. The entire operation takes place after a user clicks on a search result and before the web page loads.
  5. The last step involves the SSP getting bids from interested buyers. The system detects those offering the highest bids for the item.

Now, you may wonder how real time bidding advertising is different from other advertising types.

RTB vs. Programmatic Ads

Programmatic ads can be called “the king of tech-driven digital advertisement selling and purchasing.” They stand for any ad system driven by tech and, sometimes, AI.

Real-time bidding is an integral part of this “kingdom”, as bidding is often performed by AI. Therefore, RTB can be seen as a subset of programmatic ads. This part of the programmatic ad ecosystem allows to get the highest price available from the ad inventory by leveraging the right RTB platform’s digital publishers. Blog owners and software developers can then join the RTB process.

An example of RTB programmatic advertising is Google Ads that applies an in-house smart algorithm to detect organizations with the leading positions. In addition to pricing, the formula for determining such companies includes content quality and other variables.

How Is RTB Different from Ad Exchanges?

Ad exchanges are an essential cog in the real-time bidding machine. They serve as the services where marketers and content publishers can trade digital advertising inventory. Once the impression matches the target audience, the system places a bid. The one who offers the greatest amount for this bid obtains an advertisement right to their site.

What Is the Difference between RTB and DSP?

A demand-side platform is another element of real-time bidding. While RTB is the means to buy inventory, DSPs are tools to be purchased by marketers. Demand-side platforms purchase impressions according to information about a target audience (e.g., patterns of behavior), after which the bids are placed in the system.

How Can Publishers Benefit from Real-Time Bidding?

How Can Publishers Benefit from Real-Time Bidding?

Now that you see the difference between the various models, you may wonder what advantages RTB offers in particular.

  • Growth in Remnant Inventory Value

OTT and CTV content publishers may have some inventory not previously deemed monetized. Real-time bidding is their chance to utilize it. They only need access to information about various audiences. More than 40 percent of publishers reported a jump in their remnant inventory value thanks to real-time bidding.

The best part is that all of that run through the RTB process. It means that a publisher will not need to offer discounts to make a deal more attractive.

  • Getting to Know Audiences Better

It can be hard to work out which audience can bring you the most value. Marketers should first study the interests and preferences of their would-be audiences.

RTB auctions make it possible to reach target audiences within the parameters of an optimal context at the right time. Marketing experts purchase the publisher’s niche audiences with the help of cookie matching. The system applies first- and third-party info to assess audience segments and create the target group profile. This is the way to detect fields that deserve most of their attention. Thanks to the insights, it is possible to decide on the best price.

  • Optimization

As real-time bidding tech is compatible with tracking systems, publishers can evaluate campaign stats and come up with the necessary changes. It is possible to increase profitability without losing control.

  • Tech-Driven Pricing

User behavior and preferences change all the time. That’s why defining the price of every advertising placement is a challenge. Advertisers often try to run down the cost as much as they can. In contrast to the attempts to underprice placement, RTB allows obtaining the real value of the data.

When using real-time bidding, every impression can be bid on. The price is determined by a complex algorithm that considers all the bids from all possible purchasers. It results in more accurate pricing, and publishers get more value for their inventory.

  • Improved Performing Direct Sale

RTB allows for the determination of the most beneficial inventory segments to guarantee the highest revenues. It’s vital when publishers decide to sell their inventory to users through supply-side platforms. After learning the costs of inventory and the most demanded parts, publishers then can sell the stock for the most favorable prices to the right audiences.

How Can Advertisers Benefit?

If you are an advertiser, there are many advantages that RTB offers.

  • Expanded Knowledge and Better Understanding

With the help of RTB, marketers can obtain in-depth knowledge of their customers which is necessary to create new strategies or improve the existing ones.

  • Better Performance

Via a single dashboard, it is possible to review marketing campaigns, monitor and edit them. For instance, marketers can re-target audiences or adjust bids.

  • Protection of the Brand

Many illegal platforms for selling and buying ads are available today. To prevent their ideas from being stolen, advertisers should care about their brand’s security. RTB helps detect safe platforms by applying special verification services to stay away from illicit sites.

  • Less Wasteful Media Buying

Advertisers should not face risks associated with their funds wasted on irrelevant audiences. Bid forecasting, frequency capping, and other tools of real-time bidding can improve marketing campaign performance. All of this helps to examine, monitor, and assess different possibilities; in some cases even forecast them.

Conclusion

No doubt, RTB is a rather complex process that aims to assist both publishers and advertisers by taking their revenues to new heights. If you are using an advertising network and have met the basic requirements, you may think about implementing RTB to gain all of the benefits described above.