Making Sense of Real Time Bidding/RTB

Real Time Bidding, also called “Real Time Buying”, or “RTB” is an ad industry buzz phrase that’s been around for a few years now. If you haven’t figured out what it might mean to your business, you’re not alone. The concept is confusing, but it’s probably time to get your head around it.

The Basics

Programmatic advertising is the term for using media software to negotiate and buy ads. Real Time Bidding, a type of programmatic advertising, is a way for digital advertisers and digital media companies to come together on an ad-by-ad basis to negotiate a price for their ad space. It’s one case where the over-used term “win/win” actually has some meaning. Let me explain:

Prior to RTB, leftover ad space was typically sold (usually well below market price) either directly to an advertiser or through an auction of “leftover” spots. The transaction was conducted through a media-side ad tool like Google AdSense to advertisers using buyer-side tools like Google AdWords. In this example, the advertiser sets a floor for how little they’d accept for the spot on a CPM basis, and Google delivers the associated traffic for that sale.

As an advertiser, cheap ads may sound like a good deal, but (as you might expect) there are drawbacks:

  • With little more than a broad-stroke description of a site’s visitor demographics, many of these ads are likely to be displayed to people who never were, and never will be, prospects.
  • Targeting is weak at best and primarily based on general site demographics or topics.
  • The actual ad cost is hidden. You know what Google charged you for it, but what was their cost?

Real Time Bidding adds a value to both the advertiser and the media company by sharing information about the site visitor. In the RTB example, as a site visitor loads a page with available ad space on their desktop or smart phone, Ad Networks and Supply Side Platforms associated with the website pass information about the webpage and the user to an ad exchange. An auction then takes place, and the ad is awarded to the advertiser who assigns the greatest value to that user/situation. This all takes place under 100 milliseconds.

Real Time Bidding is said to be more transparent in terms of cost, as you are generally supposed to see the actual price paid for the media with the ad exchange’s markup figured separately.

The greatest value of RTB is in the ability to bid programmatically on a specific situation: for a particular customer with particular buying habits on a particular page on a particular website. This should result in a more targeted (and likely more expensive) ad purchase, but it can also cut out many ad purchases that may have been delivered to the wrong user from the outset.

RTB solutions are becoming more common today, and solutions that can make sense for advertisers of most sizes and industries are possible. Today, RTB serves display ads (static and animated), video ads, social media ads, search ads, shopping platform ads, audio ads, OTT (Over the Top TV) and more. RTB solutions continue to mature, and are being included in many more digital ad buys. If you’re not using it yet, don’t worry, you’ll be using it someday soon.