As programmatic advertising grows in popularity, real-time bidding in advertising is gaining traction. In truth, the bulk of ad tech platforms currently enables RTB. As a result, it’s critical for digital marketers to grasp what it is and how they can utilize it to boost their marketing efforts.
Let’s start with the first-generation exchange model to better grasp RTB. Advertisers place bids to buy impressions in this model. They bid in buckets of 1000 impressions on a static, auction-based system. You pay a fixed or flat average fee for impressions in a specific bucket when you use static bidding. This is the polar opposite of RTB.
Impressions in RTB
Unlike static bidding, RTB allows the ad buyer to value each impression opportunity differently in real-time. Within your media plan, you have the option to reject or accept each ad impression.
Businesses can now buy in bulk through ad exchanges and inventory thanks to Real-Time Bidding in advertising. Inventory purchases are becoming increasingly automated, resulting in a global RTB market that is developing at an exponential rate. Today’s advertising relies heavily on real-time bidding (RTB). Programmatic digital display advertising, which includes RTB, accounted for 84.5 percent of the total digital display ad market in 2020.
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DSPS VERSUS Real-Time Bidding in advertising (DEMAND SIDE PLATFORMS)
A DSP, as shown in the IAB graphic above, is a component of RTB, which, like most aspects of programmatic advertising, plays a complex role. If you’re not familiar with Demand Side Platforms, check out our guide on “What is a Demand Side Platform (DSP)?”
Demand-side platforms are programs that allow advertisers to purchase digital ad inventory, whereas RTB is the technology that allows them to do so.
Advertisers profit from demand-side platforms because they allow them to access many RTB exchanges through a single interface, making ad campaign management easier and more efficient.
DSPs buy impressions based on audience data, like behavioral data, whereas the bidding technology does not. The price is then set based on the audience that the bidding algorithm selected.
ONTO THE NEXT LEVEL OF DEVELOPMENT WITH OPENRTB 3.0
The IAB’s Technology Lab has published the OpenRTB 3.0 solution to the public for its initial commenting session, which is a next-generation version of the original Real-Time Bidding from 2010. The goal of this version is to improve security and trust by giving purchasers more information and incorporating industry-wide changes like the Ads.txt project.
There is a commenting period, as with other IAB initiatives, during which the Technology Lab considers public and industry opinions in order to improve on its initial offering. There will be two commenting periods for OpenRTB 3.0, one for the technical foundation and the other for the specifications. This phase will last about 90 days, ending on December 15, 2017, following which the final OpenRTB 3.0 model will be issued in early 2018.
Real-Time Bidding in advertising in the Future
The future of advertising is machine learning algorithms. According to Juniper Research, ML-based algorithms will continue to help RTB networks enhance ad-bid efficiency. Real-Time Bidding in advertising spending is expected to produce $42 billion in 2021, up to $38.5 billion from 2016. RTB’s popularity has skyrocketed in recent years.
According to PR Newswire, the rapid rise in smartphone use, as well as RTB’s increased focus on ROI and performance, is pushing RTB adoption among media buyers. The global RTB market is expected to be valued at $27.2 billion by 2024. RTB has solidified its position in the digital display advertising industry, demonstrating the dynamic and exciting future that the digital advertising landscape has for marketers around the world.
PROGRAMMATIC ADVERTISING VS. REAL-TIME BIDDING IN ADVERTISING
It’s easy to become lost in the jargon of the digital advertising industry. Let me begin by stating that these two are not the same.
You might think of programmatic advertising as the king of technology-driven digital ad selling and purchasing, with RTB as a key component or feature of it.
RTB is an important part of the programmatic world, however, it is better characterized as a form of programmatic advertising rather than programmatic advertising itself. Some publishers can sell their inventory without using RTB by using programmatic guaranteed or direct approaches.
The comparison with Ad Exchanges in the following part will help you gain a better understanding.
AD EXCHANGES VS PROGRAMMATIC ADVERTISING VS. REAL-TIME BIDDING IN ADVERTISING
Real-time bidding ads and ad exchanges are not the same things, as previously stated. As seen in the graphic below from the IAB, ad exchanges play a large role in programmatic advertising and are an important cog in the RTB engine (Interactive Advertising Bureau). This image, as previously said, will aid in the oversight of the programmatic advertising ecosystem.
Ad Exchanges operate as a platform where publishers and advertisers come together to trade digital ad inventory, as evidenced by the process of buying and selling ad inventory on a per-impression basis.
This marketplace (Ad Exchange) evaluates the ad inventory available to marketers using DSPs (Demand Side Platforms). If the impression matches the advertiser’s target audience, the DSP places a bid, and if the bid is successful, the ad is delivered to the publisher’s website.
The Workings of Real-Time Bidding (RTB)
Real-time bidding can be defined as an online bidding process in which advertising agents, media purchasing agencies, and marketers trade display advertising inventory in real-time using ad exchanges.
The website of a publisher sends an ad request to the vendor every time a web user sees the site. The vendor sets an auction price for that visitor after receiving the request, allowing different marketers to look at the visitor’s profile and the predetermined floor price.
They bid for that impression based on this information. The winning bid is chosen by the vendor, and the winning advertiser’s ad is shown to the visitor. The entire procedure is automated and takes less than a tenth of a second (100 milliseconds).
As a result, publishers auction ad spaces on their websites, advertisers bid for those spaces, and the winning bidder’s ad is chosen and show to website visitors. In this process, there are three primary players:
- The supply-side parties (publishers) — those who supply inventory to the market
- The marketplace (ad exchange or ad network) — This is where the inventory is kept.
- The demand-side platform (DSP) is a platform that acts on behalf of advertisers and allows them to bid for inventory in the marketplace.
As a result, it assists marketers in determining which spots and impressions to bid for and how much to bid.
RTBs come in various forms.
Real-time bids can be divide into two categories:
- Real Time Bidding (Direct RTB)
- RTB (indirect RTB)
Real-time bidding in advertising on a direct basis
Without the need for a demand-side platform, direct RTB allows buyers and publishers to communicate directly. The publisher is in charge of the procedure in this situation. Buyers, not publishers, benefit the most from direct RTB in terms of money.
Lower expenses and greater transparency will benefit the consumer. Given that they control the process, the publisher determines the lowest price at which their impressions can be sell to alleviate worries that they may be overpricing them. The type of adverts that display on the publisher’s website is subsequently determine by them.
RTB indirect
Publishers who employ an indirect RTB setup sell their inventory to advertisers through a third party. Ad exchanges, ad networks, DSPs, and SSPs are examples of third-party companies. No component of the process is within the control of the publisher. When publishers are unable to sell impressions directly to advertisers, they often resort to indirect RTB. While indirect RTB used to dominate the global market, more publishers are opting for direct RTB in recent years because they want direct communication with ad buyers.
Ad Exchanges and real-time bidding marketing
Ad exchanges are comparable to stock exchanges in that they function in a similar way. In the same way, as stock exchanges facilitate, complete, and manage the buying and selling of bonds, stocks, and other securities, they facilitate, complete, and manage the selling and buying of publisher impressions to advertisers. Because the inventory is liquid, publishers and media buyers can exchange it in real-time on the platform.
Instead of buying 1000 impressions in a bucket for a set fee, media buyers can buy individual impressions, allowing businesses to better target ads to potential customers, even in large audiences. Just bidding on it.
Why is Real-Time Bidding (RTB) for Digital Ads a Game-Changer?
The industry standard for display ads is a mechanism that publishers have primarily used to sell off excess inventory.
- Individual impression revenue is higher.
- Remarketing and ad targeting have both improved.
- Inventory waste was reduce.
RTB has changed the advertising market in other ways as well, for both advertisers and publishers. Let’s have a look at those methods in more detail below.
For publishers, RTB
Floor price optimization
RTB makes use of real-time analytics to allow publishers to alter the CPM floor prices of their inventory in order to maximize revenue. They do it by looking at what most marketers are willing to spend for different types of audiences.
For example, a vacation website may have set its CPM floor price at $1.60 but realized that most advertisers are willing to pay $1.50. The publisher adjusts their CPM floor pricing based on this information, attracting more advertisers and generating additional money that they would not have earned if they had not modified their price.
More merchandise is sold at a higher profit margin.
RTB avails publishers’ inventory to more advertisers increasing the number of would-be buyers of website impressions. As a result, they sell more inventory and often at higher prices, increasing their revenue.
Advertisers can use RTB.
Optimization of a campaign
Advertisers may use real-time analytics to apply a variety of advertising approaches to their campaigns and evaluate their efficacy. This allows them to select the strategies with the highest return on investment. Advertisers can see which ads and demographics are generating the best engagement, reach, and click-through rates while the campaigns are running simultaneously, allowing them to make necessary optimization modifications on the fly.
Boost the efficacy of your advertisements
RTP enables marketers to completely delete some ads depending on campaign performance analyses while still reaching their target demographic. Because RTB is programmatic, its algorithms automatically apply modifications, allowing marketers to quickly adjust their strategies for better ad effectiveness.
Detecting counterfeit inventory
In the advertising industry, display ad fraud is a major concern. According to available data, 36% of display ad clicks are either invalid or fraudulent. As a result, fraud costs advertising billions of dollars. RTB analytics combined with fraud-mitigation tools can assist advertisers to discover possibly fraudulent inventory and removing it from consideration for bidding.
RTB on the Go
People are always multitasking, on the move, streaming media, watching television, utilizing applications, and surfing the web in today’s mobile entertainment and content environment. This has provided a once-in-a-lifetime opportunity for real-time bidding in mobile advertising.
Only advertisers with the correct targeting tools and skills can display advertising in the most focused way, resulting in greater sales, with bids fulfilled in milliseconds. Advertisers are using RTB to be present at the exact moment when a potential customer is ready to make a purchase on mobile, where instant reigns supreme.
