What is RTB?

Posted by | June 16, 2015 | RTB | No Comments

In the world of display marketing, RTB is a popular method for buying advertisements on websites.  RTB stands for Real Time Bidding, and it is a way of purchasing ads, or online inventory, on a per-impression basis.  Transactions are via auctions that occur during the time it takes for webpages to load.

Introduced in 2009, the technology enables advertisers to buy only the inventory they want and target users based on specific criteria.  RTB is widely viewed as a method that increases efficiency and cost-effectiveness for both advertisers and publishers.

How does it work?

A publisher will hold advertising space on a website.  The process starts when a user visits a webpage on such a site, automatically triggering a “bid request”.  As the ad impression loads, information regarding the webpage and the user are passed from the publisher to an ad exchange, which facilitates an auction.  Advertisers then bid for the impression.

An ad exchange is a digital marketplace where there is a large pool of ad impressions available for purchase.  Once the bid request has been triggered, marketers analyse the available information.  They may use automated methods such as “programmatic” to determine the suitability of inventory, and how much to bid.  The highest bid wins, and the winning bidder’s ad is loaded in the webpage almost instantly.  The entire process takes mere milliseconds to complete.

RTB involves three parties: an advertiser or media buyer, a publisher and an ad exchange.  The advertiser often uses a DSP, or Demand Side Platform.  This is a software tool that sets the buying parameters of campaigns and monitors performance.  A DSP is designed to enable the purchase of ad inventory as cheaply and efficiently as possible.  It can be used to automate the RTB buying process, which can be important due to the short timescale of the real-time auctions.

Similarly, the publisher may use a SSP, or Supply Side Platform, to sell their inventory in an automated manner.  A SSP is essentially the publisher equivalent of a DSP, and it is designed to maximise prices that inventory is sold for, generally by setting a reserve.

An ad exchange is what links the advertiser and the publisher.  It centralises inventory, enabling advertisers to buy across a range of sites, instead of needing to negotiate directly with various publishers.

Benefits of Real Time Bidding?

To summarise the benefits for advertisers in one word, it’s “efficiency”.  Regarding campaign performance, it allows increased control and better results.  Real Time Bidding provides enhanced targeting capabilities and the elimination of wasted impressions.  There’s no longer any need to embark on direct negotiations with publishers or advertising networks.  Through RTB, a wide range of inventory can be accessed centrally via ad exchanges, and only the inventory most valuable to advertisers needs to be purchased.  This avoids wasted impressions and drives down costs.

RTB works for publishers as well.  Initially, some were a little wary because of the fear that advertisers wouldn’t pay as much for inventory.  But as technology within SSPs and ad exchanges allows the setting of price floors, or reserve amounts on inventory, publishers have become more confident selling this way.  In fact, because the inventory becomes available to a market that maximises the value of each impression, RTB actually delivers higher revenues.

With traditional direct buys, impressions are purchased in bulk and they ultimately target the users of a specific website.  While this can work well for certain requirements, such as increased creative freedom, it can also be limiting.  In contrast, RTB allows the advertiser to reach its target audience across a variety of websites.  This approach creates added value to individual impressions, and as such is beneficial to both the advertiser and the publisher.

It is clear that RTB has come a long way since its introduction in 2009.  Considered a game-changer in the world of online marketing, its flexibility, efficiency and cost-effectiveness have secured its place as the current backbone of digital advertising.

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