What is Real-Time Bidding (RTB)? Definition and Importance
Real-time bidding (RTB) is tactic in programmatic advertising where ad inventory is bought and sold in a real time auction, typically on a per-impression basis.
In 2021, programmatic advertising made up 89% of all digital ad spend. 1 With this type of advertising on the rise, it’s important to understand the many nuances of the digital advertising industry. Here, we’ll break down everything you need to know about real time bidding (RTB), how it works, and why it’s important for marketers and advertisers.
Real time bidding (RTB) is a form of programmatic advertising that allows for the buying and selling of digital ads in real time. When users go to a website or mobile app, a real-time auction is conducted where advertisers bid and compete for an ad space. If the advertiser has the highest bid in the auction, their ad is displayed on a publisher’s website or mobile app.
- Supply Side Platform (SSP) - Publisher Facing (with some advertiser-facing capabilities)
- Demand Side Platform (DSP) - Advertiser Facing (with some publisher-facing capabilities)
- Exchanges - Gives the ability for SSPs and DSPs to transact on a publisher’s supply (their ad inventory)
Supply side platform
Through real time bidding, publishers and advertisers are able to sell and buy ads facilitated by a supply side platform. An SSP is programmatic software for publishers to facilitate sales of their advertising impressions. By connecting publishers with multiple ad exchanges, demand-side platforms, and ad networks all at once, SSPs let publishers (aka suppliers) sell impressions to a greater pool of potential customers, and allows suppliers to set the bidding range to maximize their revenue.
Demand side platform
A demand side platform is programmatic software for advertisers that provides automated, centralized media buying from multiple sources. As its name implies, a DSP is driven by the demand side of the advertising equation: Advertisers seek inventory that will help them reach the right audiences at the right time, within a defined budget.
In programmatic advertising, an ad exchange is an online marketplace where advertisers, agencies, demand side platforms, publishers, and supply side platforms can bid on advertising inventory from various publishers using RTB. Advertisers determine the price by participating in the bidding process. Additionally, with an ad exchange, advertisers gain visibility regarding where their ads will appear.
Overall, real time bidding helps make the buying and selling of programmatic ads more efficient. Traditional advertising requires time to develop requests for proposals (RFPs) and quotes, conduct negotiations, and create insertion orders. Through real time bidding advertisers can buy and place ads quickly with more control over the process.
Real time bidding operates through a popular programmatic advertising model called cost per mille, or CPM. Certain types of programmatic ads are measured by cost per mille (CPM), which means cost per thousand impressions. CPM is the standard pricing model, where advertisers pay a price based on the number of impressions each placement receives in a monthly or quarterly basis.
Display ad costs vary, but what makes them one of the most cost-effective advertising methods is the flexibility. With some traditional advertising, brands can’t change the visuals, call to action (CTA), or message after an ad begins running. That means that if the ad isn’t effective, the cost per action may be higher. Since display advertising is dynamic, and based on pricing models like CPM, this allows advertisers to change course during a campaign and gives brands greater flexibility to optimize campaigns and maximize the efficiency of their budget.
Real time bidding is a type of programmatic advertising. There are other types of programmatic advertising such as private marketplace or programmatic direct, which offer different controls and functionality for publishers to sell their inventory.
Real time bidding allows for faster and more efficient buying for advertisers. They are able to have more control over their buying, which cuts down on wasted ad impressions by serving ads to relevant audiences and minimizing ad fraud risk—making it cost-efficient, as well.
Real time bidding facilitated through an SSP can help publishers find the right demand sources to work with, based on factors like latency, unique demand, bid rates, and ad space availability. This gives the publisher control over their inventory to specify which advertisers can buy at what pricing.