How RTB Works

What is Real-Time Bidding (RTB) and How Does it Work?

How Does Real-Time Bidding Advertising Work?

Lately, more business owners and ad publishers are getting excited because of real-time bidding — a promising form of ad buying. Coming along with ambitious claims like “the future form of ad placement” attached to it, RTB is a promising concept.

However, for those who don’t spend every spare minute tracking advertising news, understanding real-time bidding and its benefits is not easy.

In this post, we will answer the question of “What is real-time bidding?”, and check out the inner workings and benefits of RTB. You will also discover how technology will affect digital advertising in the future. 

What is Real-Time Bidding Advertising

In short, a real-time bidding definition is: “RTB is a subset of programmatic ad buying where the owner of an ad spot is chosen during a live bidding war between business owners.” Business owners bid on the single publisher’s platform simultaneously — whichever ad wins will be placed on the publisher’s platform.

Real-time bidding is mediated by ad exchanges. To join an auction, you need to use an exchange platform. These tools aggregate multiple smaller networks, connecting popular platform and app owners and business managers. Ad exchange instruments help manage the placement process and get conversion reports in real time.

Real-time bidding actors

Advertisers

Define the campaign’s buying parameters and set the campaign’s budget limits.
Use third-party tools to place bids and track campaigns.
To place bids, advertisers use DSPs. With these tools, they can place automated bids.

Publishers

Offer ad inventory to business owners — the amount of space on the website dedicated to advertising. Publish the ad of an advertiser who placed the top bid.

To automate and track inventory sales, publishers use SSPs (short for supply-side platforms) — these help publishers manage the website’s available ad space.

Data tracking and reporting tools improve the efficiency of real-time bidding as well. These tools provide DSPs and SSPs with in-depth data on target audiences, helping business owners and publishers match with each other precisely.

RTB vs Programmatic Advertising: The Difference

Since RTB and buying ads programmatically are often used as synonyms, it’s common to think that both refer to the same concept. As a matter of fact, this is a misconception. Programmatic ad placement involves all buying activities that occur with the help of technology and offer separate platforms for supply (publishers) and demand (business owners) providers.

Speaking of RTB, you would mean a specific subset of programmatic ad trading that allows business owners to buy ad spots by making CPM offers on a live bidding war.
To help you distinguish between RTB in marketing and programmatic advertising, we compared the two.

Real-time bidding Direct programmatic advertising
Price
Decided via an auction
Defined beforehand
Relationship between an advertiser and a publisher
No
Yes
Ad inventory volume
Decided in real-time
Predefined
Delivery
Demand-side platforms/supply-side platforms
Tools for direct programmatic advertising connected to the publisher’s advertising server

Where Is Real-Time Bidding Typically Used?

As a rule of thumb, RTB is used for selling premium spots that are so sought after that it’s harder for publishers to sort through prospective buyers. Thanks to RTB, the owners of media websites can maximize the value of every impression up to three times when putting it together with programmatic advertising. Whether you are an advertiser or a media company owner joining real-time bidding, choosing a secure platform is the starting point.

Adsterra is a top-notch ad placement tool that connects publishers and advertisers from all over the world, providing secure solutions for bid placement, campaign, and ad inventory management via OpenRTB.

The Real-Time Bidding Process

Although real-time bidding might seem complicated due to its multi-step architecture, in reality, it’s a clear and organized chain of events. Let’s examine the real-time bidding process from beginning to end. 

Step 1. Publisher platform users trigger ad requests

In order to be appealing to advertisers, a publisher’s website or app needs to have active users. During a user session, the data about people who browse the application or the website is gathered. Then these insights coupled with the ad inventory a publisher puts up for the auction are shared with advertisers, encouraging business owners to place bids. 

Step 2. Advertisers place bids

Depending on how much business value a target audience carries for company managers, they might want to get a spot on a particular media channel. Business owners continue placing bids until the highest one wins the ad spot. In RTB advertising, every bid is presented as cost per impression. 

Step 3. The ad that won the bid is redirected to the publisher 

After the ad exchange determines the highest bid, the platform notifies both the publisher and the advertiser.

Later, the ad will be posted on the website so that the platform visitors see it. The entire process happens in the flash — in about 200 milliseconds, to be precise. 

Step 4. Feedback tracking

An on-site tracker will record and analyze the users’ reactions to the ad — whether they clicked on the banner. Thus, an advertiser will be able to access feedback via a demand-side platform.

What Are RTB Auctions?

RTB comes in different shapes — there are four popular auction types advertisers can participate in. 

Auction type #1. First-price

The first-price auction refers to an ad auction as we know it — the advertiser who bids the highest has to pay the bid and win the spot. This one is risky for business owners since they need to watch out for placing a bid that’s too high or too low.

First-price auctions aren’t the most popular form of RTB — they are used for private auctions with a small crowd of bidders. 

Auction type #2. Second-price

This auction is similar to the previous considering that the person who offered the most lucrative bid wins — however, the winner doesn’t have to pay the price of the winning bid. Instead, an advertiser gets an ad spot at the cost of the second-highest bidder and a predetermined fee (for most platforms, it’s not higher than one cent).

To be considered in a second-price auction, an advertiser’s bid needs to go above the price floor set by the publisher.

Auction type #3. Guaranteed

This one is the early-bird-gets-the-worm type of auction. Essentially, a publisher sets a fixed CPM — whenever there’s a bidder ready to pay it, the auction is closed. It’s common for big brands to participate in guaranteed auctions — these are typically private. 

Auction type #4. Waterfalling

If there are no bidders that clear the price floor, the way out for publishers is to initiate multiple auctions at once ensuring that more people will place bids as well as getting higher odds of selling an impression

RTB benefits for advertisers

RTB Benefits For Advertisers

Despite the growing hype around RTB ad buying, business owners are often cautious about joining actions due to the lack of transparency, ad fraud, and other reasonable concerns.

Having said that, once you take a close look at the benefits of real-time bidding, giving these auctions a try will make more sense. 

1. Full transparency

As advertisers get impressions in real-time, they know for a fact which websites the ads are competing for. Good demand-side platforms should provide business owners with detailed feedback on the ad’s performance after the auction.

Another good news is that the government is taking real-time bidding seriously, publishing compliance rules for ad exchange platforms and media sellers that help prevent ad fraud. For example, IAB has already released Quality Assurance Guidelines RTB platforms should abide by. 

2. Access to premium ad spaces

Without the mediation of ad exchanges, reaching out to top ad inventory providers would be next to impossible. However, real-time bidding advertising platforms help business owners connect with top publishers in the field, ensuring millions of users with relevant interests will see the ad. 

3. A wide range of advertising filters

Thanks to a high number of publishers involved in an ad exchange, advertisers have higher odds of finding 100% matching audiences. Most ad exchange spaces allow business owners to set up detailed campaign settings, ensuring a brand manager does not pay for irrelevant ad placements. Thus, real-time advertising allows advertisers to narrow down target audiences, create better copy for ads, and stop paying for wasted impressions. 

4. Full control

Compared to fixed-price programmatic advertising models, real-time bidding is much more convenient as it allows paying for every single impression. This way, advertisers can ensure they pay for the placement only when it is driving new conversions. You can close the bid as soon as it loses traction and no longer efficiently appeals to prospective customers. 

5. Space for integrated marketing efforts

Most ad exchange platforms can be integrated with SEO and content management tools. You can link RTB performance reports to those for other campaigns — PPC, social media, video, etc. Using a single dashboard to track all marketing efforts offers business managers a big-picture view of their promotion strategy and helps precisely evaluate its efficiency. 

RTB benefits for publishers

RTB Benefits For Publishers

Publishers also benefit from real-time bidding a great deal since it helps reach wider advertiser audiences and increases the cost of the platform’s inventory. Here are the five most impactful RTB bidding benefits for publishers. 

1. Higher inventory revenue

Since advertisers place bids for every announcement impression, website owners get to make the most out of their inventory. RTB allows media channel and application owners to ensure they are not underestimating their audiences and the potential of every ad space on the website. 

2. Advertiser selectivity

Advertisers aren’t the only ones with the ability to tweak campaign settings. In fact, publishers can choose what type of businesses they want to promote as well, using built-in filters most tools for ad exchanges offer.

A media channel owner can set a higher price floor for a chosen category of advertisers or set up different starting points for various ad spaces on the website. 

3. Getting to know the audience

After joining ad exchanges, a publisher will soon find out which types of audiences advertisers are most eager to connect with. This awareness can encourage website owners to remodel content strategies so that the platform attracts more people who are relevant to advertisers.  

4. No ad space downtime

Real-time bidding allows publishers to find a buyer for all ad space available, maximizing the advertising revenue. Other than that, a media channel owner can publish the announcements that will not put readers off or make them uncomfortable thanks to intelligent technologies and algorithm ad exchange for real-time bidding platforms use. 

The Future of Real-Time Bidding Advertising

Privacy and user tracking concerns

The growing popularity of RTB as a part of the advertising industry boils down to the fact that publishers will look for more precise ways to collect insights on visitors and present them to advertisers. Thus, privacy is one of the major concerns of large-scale brand voice.
In February this year, Google removed contextual categories from the bid request tab as these could be used to profile users. That, along with the limited use of cookies means that advertisers have to focus on top-notch creative rather than hyper-personalized targeting settings.

Bidding automation

Although RTB is highly automated as is, we still need human supervision over the bidding process. However, in the future, ad exchange, supply, and DSPs will likely be fully automated. Advertisers will no longer have to set campaign settings — AI-based platforms will modify the bid and optimize the ad’s performance automatically.

Offering publishers advertising precise predictions

Both parties involved in real-time bidding suffer from the lack of clarity common for modern-day real-time bidding algorithms. As the developers of supply- and demand-side tools get more experience, they will accurately forecast how many clicks and conversions a publisher can provide a seller with, help advertisers prevent overpay and protect publishers from underpaying for impressions.

Distribution of one-stop-shop platforms

The range of advertising types and platforms is wide as is — in the future, yet more placements will be added. However, as of 2020, there isn’t an RTB platform that’s in charge of different ad placements and platforms (desktop, mobile real-time bidding, smartwatch, etc.).
In the future, RTB platforms will focus on being universal spaces where advertisers can buy mobile, desktop display ads in different formats — banners, videos, native, and others. The conversion of smaller ad exchange tools into one consolidated platform will improve the efficiency of finding the right placement and monitoring online ad campaigns.

Conclusion

What is RTB advertising? It is a powerful technology, unmatched in terms of transparency, speed, and convenience. In the last five years, both business owners and ad space sellers have chosen real-time bidding. As new updates and protocols like OpenRTB get implemented, holding real-time ad placement auctions will become easier, faster, and more secure.

If you own a business and want to reach out to prospective audience or run a website, consider contacting professionals to supervise real-time bidding, reach out to Adsterra. Advertisers can buy traffic in Adsterra via RTB (we provide OpenRTB, XML and JSON feeds integration). Publishers can easily sell us traffic using third-part programmatic solutions.