What is Real-Time Bidding (RTB)?

In both paid search, display and mobile advertising, there’s plenty of inventory to purchase impressions on. In order to acquire solid results, you should be testing the purchase of hundreds or even thousands of keyword combinations on paid search. If you’re doing display advertising or mobile advertising, the inventory may be spread amongst hundreds or thousands of sites or apps.

What is Real-Time Bidding?

It would be impossible to manually monitor and bid on the places you wish to advertise. To remedy this, paid search and ad exchanges utilize real-time bidding (RTB). With real-time bidding, the marketer sets the constraints of their advertising and budget, and the system negotiates for each placement in a real-time auction that happens almost instantaneously.

RTB can be both efficient and dangerous. If you’re not an experienced user, you may not set limitations on your ad purchases and may lose your budget by advertising on ineffective keyword combinations or on irrelevant sites. Done well, though, RTB’s efficiency and effectiveness far outweigh any manual intervention.

How Real-Time Bidding Works

1. User Visits a Website: When a user loads a webpage, the website owner (publisher) provides available ad space, known as inventory.
2. Ad Request is Sent: The publisher’s Supply Side Platform (SSP) or ad exchange sends a bid request to multiple advertisers via a Demand Side Platform (DSP).
3. Advertisers Evaluate the Impression: The DSPs use algorithms and data to analyze the user’s profile, website content, and other contextual factors to determine if they want to bid for the impression.
4. Real-Time Auction Begins: If multiple advertisers are interested, an auction takes place within milliseconds before the page fully loads. Advertisers place their bids in real time.
5. Highest Bid Wins: The advertiser with the highest bid wins the auction but only pays $0.01 above the second-highest bid (a method known as second-price auction).
6. Ad is Delivered to the User: The winning advertiser’s ad is instantly displayed on the webpage, targeting the user in real time.
7. Performance Tracking: Advertisers track impressions, clicks, and engagement data, which they use to refine their bidding strategies for future auctions.

Real-time bidding allows advertisers to optimize spending and target relevant audiences while publishers maximize revenue by selling inventory to the highest bidder.

How has Real-Time Bidding Advanced?

Big Data platforms that can extract and transform millions of records in real time—including conversion data—are helping to advance RTB beyond reducing bid costs and increasing click-through rates. By analyzing conversion data in real time, visitor personas, and even cross-device behaviors, RTB platforms can accurately predict the placement of the right ad on the right device at the right time in front of the right person.

We discussed real-time bidding capabilities in Programmatic Advertising on our recent podcast with Pete Kluge. Be sure to listen to the podcast—it was a great conversation.

Everything You Need to Know About Real-Time Bidding

Here’s a detailed overview of Real-Time Bidding in an infographic.