You most probably have seen ads when you look through news, like on the website forbes.com.
The process of showing ads is Real-Time Bidding (RTB).
RTB has revolutionized the world of digital marketing and advertising. By automating the process of buying and selling ad inventory through online auctions, RTB has made it possible for advertisers to reach their target audiences with relevant ads while enabling publishers to maximize their revenue from ad space.
We’ll talk about the various aspects of RTB, including its definition, how it works, its benefits, and the challenges it presents.
Key Takeaways
- RTB stands for Real-Time Bidding, a technology that automates the buying and selling of ad inventory through online auctions.
- The RTB process involves multiple parties, including advertisers, publishers, and platforms like DSPs (Demand-Side Platforms) and SSPs (Supply-Side Platforms).
- RTB offers significant benefits such as cost efficiency, targeted advertising, and real-time analytics, making it a preferred choice for many marketers.
- Despite its advantages, RTB also faces challenges like ad fraud, transparency issues, and technical complexities.
Understanding Real-Time Bidding (RTB) in Marketing
RTB is a way to buy and sell online ads. It happens in real-time, like an auction. Advertisers bid on ad space, and the highest bid wins. The process is fast and takes place in milliseconds. RTB is a part of programmatic advertising, which uses technology to automate buying ads.
Publishers benefit by maximizing their revenue from ad space, while advertisers can target specific audiences based on user data such as browsing history and demographics.
Before we continually talk about RTB, we would like to introduce the definition of Advertiser and Publisher as some of the readers may not be clear.
Who is an Advertiser in RTB?
An advertiser is a person, company, or organization that seeks to promote their products, services, or brand by purchasing ad space on digital platforms. Advertisers use RTB to bid for ad impressions in real-time, ensuring their ads are displayed to the most relevant audience.
Who is a Publisher in RTB?
A publisher is an entity that owns digital properties such as websites, mobile apps, or other online platforms where ad space is available for sale. Publishers provide the ad space (inventory) where advertisements are displayed. They earn revenue by selling this ad space to advertisers.
Where is RTB Commonly Used?
RTB is used in various sectors of digital advertising to optimize the buying and selling of ad space. Here are the primary areas where RTB is utilized:
Websites and Blogs
RTB is extensively used on websites and blogs to display banner ads, video ads, and other types of digital advertisements.
When a user visits a website, the available ad space is auctioned off in real-time to the highest bidder to ensure that the most relevant ads are shown to the user, enhancing the chances of engagement and conversion.
For example, news websites often have high traffic and diverse audiences, making them ideal for RTB. Advertisers can bid for ad space on these portals to reach a broad audience or target specific segments based on the content being consumed.
For example, a tech company might bid for ad space on articles related to technology to reach tech-savvy readers.
Mobile Apps
RTB is also in mobile advertising, especially within apps. When a user opens an app, the available ad space inside the app is immediately put up for auction. It is particularly common in free-to-use apps that rely on ad revenue.
For instance, in mobile games, ads are often shown between game levels or during breaks, and these ad spaces are sold through RTB to the highest bidder.
Mobile Web
Similar to desktop web advertising, RTB is used on mobile websites to display ads. Given the increasing use of mobile devices for browsing, advertisers leverage RTB to target users on the go, which allows for highly targeted advertising based on the user’s location, device type, and browsing behavior.
Video Advertising
RTB is used in video advertising on streaming platforms like YouTube. Advertisers bid for ad slots that appear before, during, or after video content. Therefore advertisers can reach viewers with highly engaging video ads tailored to their interests and viewing habits.
Esports platforms and game streaming services like Twitch also utilize RTB to sell ad space during live streams and events through real-time auctions. Advertisers can target viewers based on the games they watch, their favorite streamers, and other behavioral data, ensuring that ads are relevant and engaging
Social Media Platforms
Social media platforms like Facebook, Instagram, and Twitter also use RTB to auction ad space in users’ feeds, stories, and videos. Advertisers can target users based on their social media activity, interests, and demographics, ensuring that ads are relevant and engaging.
Online Marketplaces
E-commerce platforms like Amazon and eBay use RTB to display ads for products. Advertisers bid for ad space on product pages, search results, and other areas of the site. In this way, retailers (sellers on Amazon and eBay) can target shoppers with relevant product ads based on their browsing and purchase history.
How Does RTB Work?
When you visit a website, the page starts to load, and a real-time auction happens. Advertisers bid and compete for ad space, and the publisher shows the highest bidder’s ad.
Before the page fully loads, the website sends information about the available ad space to an ad exchange. This information includes details like the size of the ad space and data about the user, such as your interests and browsing history.
RTB is closely associated with Google Ad Exchange (the number 1 ad exchange) as it forms the backbone of how ad inventory is bought and sold on this platform.
As Google Ad Exchange is the largest digital marketplace where publishers and advertisers can buy and sell ad space in real-time. It connects publishers who have ad space to sell with advertisers who want to buy that space. The transactions occur through automated auctions, facilitated by RTB technology.
So here we take Google Ad Exchange as the ad exchange to introduce how RTB works.
1. Bid Request
When a user visits a website that is part of Google Ad Exchange, the process begins. The website sends a bid request to the ad exchange.
Such request includes information about the available ad space, such as its size, location on the page, and details about the user, like their browsing history and demographics to help advertisers decide how much they are willing to bid for the ad space.
2. Ad Exchange and DSPs
The bid request is then sent to multiple Demand-Side Platforms (DSPs). DSPs are platforms used by advertisers to manage their ad campaigns and place bids on ad space. Each DSP evaluates the bid request based on the advertiser’s targeting criteria and campaign goals. The DSPs then submit their bids to the ad exchange.
3. Auction Process
Google Ad Exchange conducts an auction in real-time, where all the submitted bids compete against each other. The highest bid wins the auction, and the corresponding ad is displayed on the website. The entire process happens in milliseconds, ensuring that the user experiences no noticeable delay in page loading.
4. Bid Response
The winning bid is sent back to the publisher’s website along with the ad creative. The ad creative is the actual advertisement that will be displayed to the user. The publisher’s website then loads the ad, and the user sees it as part of the webpage content.
Key Components in RTB
Supply-Side Platform (SSP)
The SSP is used by publishers to manage their ad inventory and make it available for sale on the ad exchange. It helps publishers optimize their revenue by ensuring that their ad space is sold to the highest bidder.
Demand-Side Platform (DSP)
The DSP is used by advertisers to place bids on ad space. It allows advertisers to set targeting parameters, such as demographics, interests, and location, to ensure that their ads are shown to the most relevant audience. DSPs also help advertisers manage their budgets and optimize their ad spend.
Ad Exchange
The ad exchange is the marketplace where the buying and selling of ad space occur. It connects SSPs and DSPs, facilitating the real-time auction process. Google Ad Exchange is one of the largest and most popular ad exchanges, providing access to a vast pool of ad inventory from publishers worldwide
Benefits of RTB
RTB offers many benefits for both advertisers and publishers. It makes the ad buying process more efficient and effective.
For Advertisers
- Targeted Ads: Advertisers can target specific audiences based on data like interests and demographics.
- Cost-Effective: Advertisers only pay for the impressions that matter, reducing wasted ad spend.
- Real-Time Adjustments: Advertisers can adjust their bids and strategies in real-time based on performance data.
For Publishers
- Increased Revenue: Publishers can sell their ad space to the highest bidder, maximizing their revenue.
- Better Fill Rates: RTB helps publishers fill more of their ad inventory, reducing unsold ad space.
- Improved User Experience: Faster page loads and relevant ads improve the overall user experience.
Types of RTB
There are two main types of RTB: open RTB and private RTB.
Open RTB
Open RTB occurs on open exchanges where multiple advertisers can bid on ad space. It offers a wide reach but less control over where ads appear.
Private RTB
Private RTB, also known as programmatic direct, occurs in private marketplaces. Only selected advertisers can bid on ad space, offering more control and customization.
Challenges in RTB
Obviously, RTB has transformed online advertising, but it comes with its own set of challenges. Understanding these challenges can help you navigate the RTB landscape more effectively.
Ad Fraud
Ad fraud is a significant issue in RTB. For instance, fraudsters can create fake websites or use bots to generate fake ad impressions. As a result, this can waste your advertising budget and reduce the effectiveness of your campaigns.
Privacy Concerns
RTB relies on collecting user data, which raises privacy concerns. Advertisers and publishers must comply with data protection regulations like GDPR and CCPA.
Brand Safety
Advertisers need to ensure their ads do not appear next to inappropriate or harmful content. Using blacklists and whitelists can help maintain brand safety.
Transparency Issues
Transparency is another challenge in RTB. Sometimes, you may not know where your ads will appear, and this lack of transparency can lead to your ads appearing on low-quality or inappropriate sites.
Technical Complexities
Lastly, RTB involves many technical components, such as DSPs and SSPs. Managing these components can be complex and requires specialized knowledge.
Comparing RTB with Traditional Advertising Methods
Manual vs. Automated Processes
Before RTB existed, advertisers had to personally reach out to webpage owners and broker a deal for their ads. Obviously, this process was time-consuming, and every webpage visitor would see the same ad, even if it wasn’t relevant to them.
RTB automated the process as it leverages advanced algorithms and real-time bidding to buy ad space efficiently, which means ads are shown to the right audience at the right time.
Cost Comparison
Compared to direct buying, RTB is a far more efficient ad-buying method for small to medium-sized advertisers.
For instance, direct buying usually requires a minimum spend that can be costly. In contrast, RTB offers advertisers a vast array of options to reach the right customer, making it both cost-effective and accessible for businesses of any size.
Effectiveness and Reach
In traditional digital advertising, marketers need to look for relevant publishers manually, get in touch with them, and ask for their requirements.
However, RTB eliminates all these processes and allows advertisers to deliver their ads to the most relevant audiences within just a couple of seconds. Consequently, that increases the effectiveness and reach of ad campaigns, ensuring that ads are shown according to the interests of the target audience.
Future of RTB
The future of RTB looks promising, with advancements in technology and data analytics driving growth.
Artificial Intelligence and Machine Learning
AI and machine learning are playing a significant role in RTB. These technologies help improve targeting, bid optimization, and fraud detection.
Mobile and In-App Advertising
With the rise of mobile usage, RTB is expanding to mobile and in-app advertising, which offers new opportunities for advertisers to reach their audience.
Data Privacy and Security
As data privacy concerns grow, the industry is focusing on improving data security and compliance. Advertisers and publishers need to stay updated with regulations and best practices.
