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Real-Time Bidding (RTB) 101

By Lourie Contaoe,
User Acquisition Manager
April 2nd 2018

What does RTB stand for?

RTB stands for Real-Time Bidding. It is a media buying process that appeared around 2009.

What’s the difference between real-time bidding and programmatic?

To this day, some people, even in the industry, still confuse programmatic and real-time bidding. Although connected, they are not the same.

Programmatic is the automation of the media buying process. It can happen through RTB (also called open auctions) and private marketplace (PMP), which both work in real-time, and programmatic direct. We can go about it with the logic that RTB is definitely programmatic, but programmatic is not necessarily real-time bidding.

But let’s focus on the first one: real-time bidding. When a user tries to access a website, an auction between advertisers will be generated to sell the ad placement. The process usually happens between 0.2 and 0.5 seconds. As a frame of reference, think that the blink of an eye lasts 0.4 seconds.

How does RTB work?

As we have seen, real-time bidding is a programmatic media buying process used by advertisers to run their campaigns, and by publishers to sell their ad inventory. Here is how it works:

  1. A user tries to access a web page. Information, such as gender, age, interests and online behavior, is available.
  2. The browser sends a request to the server during the loading time.
  3. The ad server checks if there are pre-booked ad impressions, through deals such as programmatic direct. If not, a call is made to an ad exchange to offer the ad space to potential advertisers.
  4. The ad exchange then sends the ad request to all potential bidders (DSPs).
  5. An online real-time auction then occurs. DSPs will enter the auction or not depending on if the preset campaign parameters fit the information available on the user accessing the page. This is how they ensure their ad is relevant to the viewer.
  6. In a first price auction, the highest bidder would win the ad impression and the auction would be cleared at the highest bid price. Discover what happens in a second-price auction.
  7. The winning ad is served on the website.

Advantages of real-time bidding

While there are numerous advantages to RTB for both advertisers and publishers, let’s focus on the main ones.

On the buying-side, RTB ensures a more precise targeting than bulk buying due to the amount of information available on the user at the moment of connection. This ensures the ad served will be more relevant to the consumer and thus, that the budget is optimized. Also, as RTB allows for real-time reporting, advertisers can gain great insight on their campaigns’ performance and optimize their strategy accordingly.

On the publisher’s side, RTB allows, of course, a better monetization of inventory, as buyers will maximize the value of the impression. Also, it helps them gain in-depth insight on their audience and see what segments respond better to what time of advertising. This insight can help them build a more tailored inventory to access high-performing demand.

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