The RTB or Real Time Bidding industry is on the rise as programmatic advertising continues to gain steam. Research companies are forecasting more than a 20% growth for this market in the United States between now and 2020. This translates to billions of dollars, not even to mention other markets like Europe and Asia which have growing interests in a programmatic approach to advertising as well.
Another report from Juniper Research has estimated that algorithms used in bidding within RTB networks could be generating more than $40 billion annually in 2021 compared to a mere $3.5 billion in 2017.
As people in countries like the United States’ disposable income and internet-connected device usage increase, the focus on digital advertising and adoption of Realtime Bidding becomes more prevalent than ever.
With unprecedented growth rates and more companies adopting the usage of these programmatic advertising techniques, it’s safe to say that you need to understand RTB whether you’re an advertiser, publisher or simply a marketer working with both parties.
Here we’ll consider all the aspects and make sure you’ll leave as an expert in the field!
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Real Time Bidding explained – how does it work?
Before we get into the finer details, I’d like to explain what RTB is and how it works. This will give you a better understanding of the processes and platforms talked about in the rest of this article.
If this is your first time discovering programmatic advertising be sure to take a moment to read our Programmatic Advertising For Dummies article here to get some background information on this tech-driven advertising industry.
Real Time Bidding is an auction setting where ad impressions are sold and bought, and transactions take place in a blink of an eye. Once an advertiser’s bid wins the auction, their digital ad is instantaneously shown on the website or property of the publisher. Supporting platforms such as Ad Exchanges and Supply Side Platforms are also used within the process. RTB auctions put the focus on impression-based bidding whereas static auctions tend to group impressions only allowing advertisers to bid on them in package deals.
How does Real Time Bidding work: When a user visits a website, a corresponding bid request is being sent to an Ad Exchange.
This bid request then contains different types information such as demographical data, location information, browser history, etc. The Ad exchange then passes the bid requests along to its list of advertisers/buyers who bid in real time for the ad impression as it gets presented to the website user. The advertiser that bids the highest amount wins the impression and gets its ad served in front of the site user.
This same process gets repeated time and time for every ad unit of the website property page. This procedure takes place within 100 milliseconds, including receiving the bid request and serving the ad. Talk about creating an efficient advertising ecosystem!
Take a look at this infographic from Whoishostingthis.com to get an oversight of the RTB process.
Real Time Bidding vs. Programmatic Advertising
It is easy to get all the terms within the digital advertising industry mixed up. If you have been wondering about RTB versus Programmatic advertising and if these terminologies mean the same thing, look no further. In fact, let me start by saying these two are not the same.
You can think of Programmatic advertising as being the king of the technology-driven digital ad selling and buying the world while RTB is one critical part or facet thereof.
RTB plays a significant role within the programmatic kingdom, and rather can be classified as a type of Programmatic advertising, not Programmatic advertising itself. Some publishers can even sell their inventory without the use of RTB through methods such as programmatic guaranteed or direct.
In the next section, the comparison with Ad Exchanges will give you a better oversight.
RTB Advertising vs. Ad Exchanges
Similarly to the previous explanation, Real Time Bidding ads, and Ad Exchanges are not the same. Ad Exchanges play a significant role within Programmatic advertising and is a vital cog in the RTB machine as shown in the image below from the IAB (Interactive Advertising Bureau). As mentioned earlier, this image will help in providing oversight into the Programmatic advertising ecosystem.
As demonstrated, the process of ad inventory being bought and sold on a per impression basis, Ad Exchanges act as the platform where publishers and advertisers come together to trade digital ad inventory
This marketplace (Ad Exchange), uses DSPs (Demand side platforms) to assess the ad inventory available to the advertisers. If the impression is found to match the advertiser’s target audience, a bid is placed via the DSP, and if won the ad gets delivered to the publisher website.
Real-Time Bidding vs. DSPs (Demand Side Platforms)
As described in the IAB image above, a DSP is also a component of RTB which as most facets in Programmatic advertising plays an intricate role. If Demand Side Platforms are unknown to you, read our guide on “What is a Demand Side Platform (DSP)” here.
Here’s a short comparison from Knowonlineadvertising.com.
Demand side platforms are programs through which digital ad inventory gets bought by advertisers while RTB is the mechanism that is used to purchase that inventory.
Demand side platforms benefit the advertiser by helping them gain access to various RTB exchanges through a single access panel for ease of use and efficiency of ad campaign management.
DSPs buy impressions based on audience information such as behavioral data, whereas the bidding technology then places the bid as per the audience that was chosen.
Benefits for publishers
It’s all well and good to understand where Programmatic advertising, Ad exchanges, and Demand Side Platforms fit into the equation, but what about the publisher? Does RTB benefit the publisher in any way? Econsultancy.com identified six benefits for the publisher which include:
Technology-driven accurate pricing: Publishers receive more value for their inventory with RTB as each impression can be bid on by advertisers and precisely the highest bid amount can deliver the impression. A publisher frequently needs to use an SSP (Supply Side Platform) to make use of Real Time Bidding.
Remnant inventory value increase: As a publisher, you want to monetize as much of your inventory as possible. With RTB, inventory that was previously deemed non-monetized or not worthy can be utilized by advertisers who bid based on the audience data. Econsultancy reported that over 40% of publishers saw an increase in the value of their remnant inventory when taking part in RTB auctions.
Control via SSPs: As mentioned, a publisher needs to work through a Supply Side Platform to take part in RTB auctions. However, this means that the publisher has added control over their inventory such as specifying which advertisers can buy their ad inventory and set the pricing.
Understanding their audience better: As a publisher, it’s often hard to know which segment of your audience deserves the most attention, at least from a monetary perspective. Using this technology publishers can determine which types of audiences interests advertisers the most and fetches the best prices. This can give a publisher valuable insight and help them expand their websites into their most profitable segments, ultimately increasing their inventory value and increasing demand from advertisers.
For premium publishers make use of private marketplaces: With private markets, only a set group of advertisers are allowed to bid on a publisher’s ad inventory. With RTB and private marketplaces, publishers can sell their advertising stock with even more transparency and control.
Better performing direct sales: If a publisher wants to sell his inventory directly to advertisers working through SSPs, then Real Time Bidding can give them valuable insight into their most profitable inventory segments. A publisher can determine what parts are sought after the most, prices inventory is sold at and uses this information to sell their inventory directly to interested parties successfully.
Benefits for advertisers
From the perspective of buyers/advertisers Econsultancy.com describes it as a form of PPC or pay per click marketing. Most companies or advertisers that have ever tried to market a product or service online will be familiar with that term. Advertising via Facebook or Google AdWords is good examples of PPC.
With this short introduction in mind here are four benefits of RTB for buying display advertising:
Less wasteful media buying: With this technology ad inventory is bought on an impression basis through a range of variables which makes targeting very focused. An advertiser does not have to buy ad inventory in bulk and risk wasting money on untargeted or irrelevant website visitors. Advanced techniques and tools such as frequency capping and bid forecasting can further increase the efficiency of each campaign by allowing advertisers to test, control, evaluate and even predict certain campaign variables.
Better performing campaigns: Advertisers can view and manage their campaigns in real time through one dashboard and adjust bids and targeting as needed thus staying on top of results and improving performance.
In-depth knowledge: While running campaigns with RTB, advertisers can transform and improve their marketing strategies. They can learn more and grow to understand their consumers, creative and strategic approach with the impression data presented to them through their campaigns.
Brand protection: For an advertiser, protecting their brand is very important. With Real Time Bidding advertisers can specify where to promote their products or services and use ad verification services to prevent their ads from showing on illicit websites or pages.
The next level of development with OpenRTB 3.0
IAB’s Technology Lab has recently released the OpenRTB 3.0 solution, a next-generation version of the original Real Time Bidding from 2010 to the public for its initial commenting period. The focus of this release is increasing security and trust by providing better transparency to buyers and integrating recent improvements within the industry such as the Ads.txt initiative.
As with most developments from IAB, there is a commenting period in which the Technology Lab looks at the feedback given by the public and industry experts to improve on their initial offering. For OpenRTB 3.0 there will be two commenting phases which includes feedback on the technology framework and specifications. This period will total approximately 90 days until 15 December 2017 whereafter the final OpenRTB 3.0 model will officially be released early 2018.
Some of the updates to the framework proposed are:
- A cryptographically signed bid request process which will help buyers to see the flow of inventory and give them confirmation of the actual supply chain.
- A new advertising model to give publishers better control of graphical elements and user experience for their websites. This model will highlight any changes made to creatives of ads.
- A new standard Ad Management API specification to streamline the process of creative approval for buyers to help ease future developments and other integrations.
The use of Real Time Bidding is on the rise as more advertisers shift to a programmatic advertising approach and with the development of new versions such as OpenRTB 3.0. It’s a truly exciting era for publishers and advertisers alike with the world of digital advertising continuously growing and more ad formats joining the programmatic arena.
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