What is Real-Time Bidding (RTB)? Everything You Need To Know

Publift
March 2, 2022
September 6, 2022
What is Real-Time Bidding (RTB)? Everything You Need To Know

Real-time bidding (RTB) is part of the programmatic advertising process and involves selling ad impressions via an instantaneous and automated auction.

The process covers a complex ecosystem of interconnected ad tech platforms that interact with one another to sell ad impressions in the split second it takes a visitor’s web browser to load the page.

Publishers can use a supply-side platform (SSP) to offer their ad inventory to an ad exchange on a per-impression. Advertisers will connect to the same exchange using a demand-side platform (DSP) and compete to buy the ad space.

Bidstream data about the user—such as location and browsing activity—helps  inform bidders about the suitability of the visitor and informs bidding behavior. 

RTB allows both publisher's sites and advertisers to control the bidding process by setting parameters such as the highest bid or maximum bids.

The process can be a game changer for publishers looking to streamline the sale of their inventory.

Let’s learn a bit more about the RTB process and why it might be the perfect fit for those preparing to launch advertising campaigns.

Table of contents:

Are RTB and Programmatic Advertising the Same Thing?

What Are The Different RTB Options?

Ad Exchanges and Ad Networks

Advantages of Real-Time Bidding for Publishers

Advantages of Real-Time Bidding for Advertisers

Conclusion

Are RTB and Programmatic Advertising the Same Thing?

Real-time bidding (RTB) and programmatic advertising are not interchangeable terms, with the former being a single category under the umbrella of programmatic advertising.

Programmatic advertising is an automated process that helps publishers and advertisers automate their deals for ad units. Moreover, RTB is just one of four deal types, which also include private marketplace (PMP), preferred, and programmatic guaranteed deals.

Let’s look at each in a little more detail.

1. RTB

Real-time bidding (RTB), which is sometimes referred to as either open auction or open marketplace, is the most widespread form of programmatic media buying and allows for a single ad impression to be sold.

Anyone can bid on available ad units via an open auction, with the highest bids winning the inventory.

2. Private Marketplace (PMP)

PMP deals are essentially invite-only RTB auctions, in which the publisher determines which advertisers will make the guestlist.

The attraction for publishers is that they can sell off premium ad space to buyers with deep pockets. Advertisers, meanwhile, know exactly where their ads are being served, giving them more insight into return on ad spend (ROAS).

3. Preferred

Publishers use this format to give their preferred advertisers the right of first refusal to buy ad inventory, without any obligation to buy.

Much like the PMP process, preferred deals allow publishers to sell off premium ad space at higher prices.

4. Programmatic Guaranteed

This approach mimics the traditional style of ad sales, in which the advertiser and publisher will negotiate directly over the sale of inventory and doesn’t involve bidding.

Again, this approach allows publishers to extract a premium for their most desirable ad units, while advertisers can ensure more refined performance data.

What Are The Different RTB Options?

There are a number of variations to real-time bidding (RTB) that include header bidding, first-price auction, and second-price auction.

Here’s a closer look at each.

1. Header Bidding

Header bidding is an evolution of real-time bidding (RTB) and emerged to address the waterfall bidding model inefficiencies by offering ad space simultaneously to multiple ad networks and ad exchanges. 

2. First-Price Auctions

In a first-price auction, advertisers can place a fixed bid on an ad impression, the highest bid wins the auction, and then the winner pays the amount they bid.

Bid shading has emerged to help prevent media buyers from overpaying for impressions in these auction types.

3. Second-Price Auctions

Second-price auctions tend to be most popular among advertisers, as the winning bid only pays $0.01 more than their closest rival to seal the deal.

Ad Exchanges and Ad Networks

Ad exchanges and ad networks are part of the programmatic media buying process. They enable advertisers, agencies, and publishers to buy and sell ad inventory. While an ad network collects inventory and sell it to advertisers, an ad exchange is where publishers and advertisers come together to buy and sell digital advertising inventory. An ad exchange offers greater trading flexibility.

Ad networks target agencies and advertisers and can offer a variety of pricing models, including fixed cost per 1,000 impressions (CPM), cost per action (CPA), cost per click (CPC) and auction-based.

Ad exchanges have a broader range of users—including DSPs and SSPs—and the pricing depends on the bidding range with changes implemented in real-time. 

Advertisers and publishers will generally base their choice of ad platforms on their industry, brand, awareness of the product or service they offer, their needs, objectives of the ad campaigns, as well as marketing budget.

Advantages of Real-Time Bidding for Publishers

The six main advantages of real-time bidding (RTB) for publishers are:

  • They can control which content and format will be displayed on their web pages or mobile apps. They can even ban ads with sensitive content.
  • They can sell their unsold inventory at a higher price.
  • Publishers can adjust prices according to demand and bids.
  • They know who the advertisers are, and can tailor their offerings accordingly.
  • Private marketplaces allow publishers to sell premium inventory to specific companies.
  • Publishers can ensure the ads shown are relevant to their audience.

Some of the disadvantages

Real-time bidding (RTB) does come with a couple of disadvantages for publishers:

  • Since RTB relies on users' data gathered through cookies, it is sometimes challenging for a publisher to comply with all data regulations. For example, if a publisher's site is shown to an EU audience, then it must comply with the General Data Protection Regulation (GDPR).
  • Unlike guaranteed deals, the price of ad impressions solely depends upon bidding.

Advantages of Real-Time Bidding for Advertisers

The main advantage of real-time bidding (RTB) for advertisers lies in the greater control they have over their campaigns.

  • They can control where their ads will display. They can choose where they want to present their services or products. 
  • They can narrow the target audience by demographics, languages, location, or other options.
  • They can correct marketing strategies as they go, depending on RTB campaign results.
  • They can use tools such as bid forecasting to enhance their marketing campaigns. 
  • Advertisers can keep ad campaigns within budget, through leveraging the maximum bids option and avoiding buying impressions in bulk.

Some of the disadvantages

There are also some disadvantages for advertisers when using real-time bidding (RTB).

  • Since software makes the ultimate decision based on data, the lack of human involvement and the automated process emphasizes the importance of quality software and finding the best real-time bidding platforms.
  • There are some situations when your ad can end up on the wrong website, where its content is totally at odds with what’s on the web page.

Conclusion

Digital marketing has been evolving and changing constantly for the better part of the past 30 years.

Both publishers and advertisers stand to benefit when integrating real-time bidding (RTB) solutions into their marketing strategies.

Publishers are able to automatically court multiple advertisers, with the highest bidder seeing their ad instantly displayed. Using RTB means that companies have greater access then ever before to user data at a website level, allowing demand partners to create more effective ad campaigns.

Publift helps digital publishers get the most out of the ads on their websites. Publift has helped its clients realize an average 55% uplift in ad revenue since 2015, through the use of cutting-edge programmatic advertising technology paired with impartial and ethical guidance.

Contact us today to learn more about how Publift can help boost your ad revenue and grow your business!

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