What is Real-Time Bidding (RTB) in Programmatic Advertising?

Reading time: 5 minutes

Online advertising has evolved from a simple one-on-one transaction between publishers and advertisers, to today’s mammoth ad network. If you are a publisher wanting to monetize ad space, the entire thing has become quite complicated.

Enter real-time bidding or RTB — the process of buying and selling ad space through the use of an automated, real-time auction. This programmatic advertising method has completely changed the Ad Ops landscape and delivers fantastic results for both advertisers and publishers.

Don’t know what RTB is? Here’s what you need to know about this foundational advertising tech and how you can maximize its use as a publisher.

What is Real-Time Bidding (RTB)?

Real-time bidding is a programmatic advertising technique that uses an automated auction system. Publishers can rapidly sell ad spaces by tapping into a vast network of advertisers willing to bid on them in real-time.

RTB is a form of impression-based bidding, where advertisers can buy ads per impression. This is in sharp contrast to how online advertising worked in the past, where impressions were often bundled together. RTB, therefore, allows advertisers to be hyper-focused on their targeting so they can maximize ad spend.

The RTB process is often a public affair where anyone can bid on an ad impression as long as they are part of the ad network facilitating the auction. 

But, there are also private RTB sessions that only allow invited agencies to bid. Publishers often use these private auctions to sell premium ad spaces on their websites.

How does RTB work?

RTB is a series of complex steps that triggers when someone loads a web page.

For the sake of explanation, let’s say the user is a 50-year old male reading a how-to article on a fishing website. 

If that web page contains any ad spaces, the website’s server needs to know which ad to display there. To do this, the server gathers demographic and psychographic data about the reader via cookies or data from a Supply Side Platform (SSP). 

In our example, the website server knows that the reader is a 50-year-old male who frequently visits fishing websites. It might then assume that he is a fishing enthusiast and would be receptive to ads about fishing gear. This piece of data, together with other information about the ad space, is then packaged into a bid request and sent to an ad exchange.

The ad exchange then holds an auction where agencies, demand side platforms (DSPs), and other exchanges with relevant ads can bid on that request. These players will have buying parameters that tell them when to join and how much to bid. Sometimes, the publisher will also have additional bidding parameters such as minimum and maximum bid values.

An advertiser with ads about fishing gear, for instance, might have the following parameter, “Bid $1.5 CPM for 40 – 60-year-old males living in Montana with interests in fishing.” In this case, the parameters line up with our bid request example, so that advertiser puts in a bid.

Once the highest bidder wins the auction, they can then show their ad on that particular impression. The ad exchange sends instructions to the publisher’s server to get the winner’s ad creative. The web page finishes loading, and the winning ad is displayed to the user.

As you can see, the RTB process involves a web of interconnected steps. But despite its complexity, the execution takes just a fraction of a second. The auction, in particular, lasts only ten milliseconds to complete from bidding to selection!

Souce: AWS

Difference between RTB and Programmatic Advertising

One question that often pops up is, “how is RTB different from programmatic advertising?” The quick answer is that the two are separate but closely related terms.

RTB is a kind of programmatic advertising that uses a real-time auction system to serve relevant ads in real-time. The latter refers to any advertising system driven by technology and, often, artificial intelligence.

RTB is by no means the only form of programmatic advertising, although it’s the most widely used. Some publishers, for example, use programmatic guaranteed deals instead. This is where advertisers buy ad space directly. As a publisher, you can maximize your profit and security by pre-selling only to advertisers who are willing to pay a premium for your inventory.

Benefits of RTB for publishers

For the most part, we’ve been talking about how real-time bidding benefits advertisers (better targeting, maximized ad spends), but what about publishers? Why would a website owner like you bother with RTB?

It turns out the benefits are plentiful, but the main gist of it is that RTB can increase your ad revenue more with less effort.

Remember that RTB uses an auction system, and the winner is the one who puts in the highest bid. That means you’ll always get more value for your ad inventory. You can now maximize the revenue of even the slowest-moving remnant ad spaces, ensuring all of your vacancies are filled at any given time.

And because RTB is a kind of programmatic advertising, everything is automated and efficient. You don’t need to seek and negotiate with advertisers yourself or dabble with ad exchanges directly. At the same time, RTB gives you more control over which ad inventory you want to sell and at what price.

Publishers can also use RTB to optimize their content strategy by observing which types of content get most advertisers at the highest prices. They can then focus more on this type of content to further increase ad inventory revenue. Publishers can also take the most profitable ad inventories and sell them directly to advertisers as premium space.

RTB can even benefit your readers by ensuring that you only serve them relevant ads. 

Making Online Advertising Work for You

Whether you plan to use RTB (or any other method) to monetize your website, working with an Ad Ops provider is essential.

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