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Nov 07

How does real-time bidding (RTB) work?

Real-time bidding has changed the face of online advertising, but there’s still confusion around what it actually is. Here’s a primer, in plain English:

Everyone’s talking about real-time bidding. What is it?

Real-time bidding refers to the buying and selling of online ad impressions through real-time auctions that occur in the time it takes a webpage to load. Those auctions are often facilitated by ad exchanges or supply-side platforms. Often, RTB is compared to the stock mark where the entire inventory of ad space available to buy is similar to the stocks available. Instead of having to go through a trader to purchase ad space, as it was traditionally done, advertisers are now able to purchase ad space within 200 milliseconds, automatically.

OK. So how does it work?

Once an advertiser places their bid parameters (min and max bid, who they want to target, how they want their ad placed), they’re all packaged up and sent through a DSP or demand-side-platform to different publishers. At this point, the publishers will take a look at the advertiser’s bid parameters and decide whether or not they have a display match. If a match is present, the auction for placement of the ad begins. The prices of the advertisement could change depending on multiple factors: one factor is if there are multiple parties bidding on the same placement and another factor, is the price of the advertiser’s base bid and max bid. Once a bid is finalized, the publisher then has the option to accept the advertisement. If the ad is accepted, it is then placed, and the impression is won for that advertiser.

Why is real-time bidding good for advertisers?

Efficiency. Thanks to real-time bidding, ad buyers no longer need to work directly with publishers or ad networks to negotiate ad prices and to traffic ads. This type of ad buying started because of the amount of inventory on the market, available for advertisements, became too large for the people to manage. RTB alleviates the pressure on advertisers trying to reach their target customer as soon as possible. Another positive of RTB, not relevant to the stock market, is even if a campaign is a total fail, the business can gain insights into their marketing and their customers. This presents an opportunity to not only work through the kinks that caused a possible not-so-good campaign but get a closer look at what the audience reacts to the most. On top of this, you have begun to create a brand presence among those who saw your ads based on the RTB placement.

RTB still may be new to some in the advertising and marketing world, but it is one of the best innovations brought to ad buying. And, like any technology, RTB will only continue to innovate and make the lives of advertisers and buyers even easier—maybe programmatic advertising will rule the world.

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