Have you ever been to an auction? Or seen one on television? Real-time bidding in advertising is very similar. The advertising world has evolved since the arrival of the internet as more and more investors were drawn toward the novelty factor of this new-age phenomenon. What is the current state of online advertising and how does real-time bidding work?

The internet has opened up new avenues for online advertising, content, and digital marketing. It is the fastest way for an ad to travel halfway across the globe in just a matter of a few seconds. Have you ever wondered what kind of sorcery is this? How is everything running like a well-oiled machine on autopilot?

The answer is programmatic advertising and more specifically, real-time bidding. While it is true that humans continue to write copies, design ads, and ideate online ads, computers have taken over the other aspects of online advertising including real-time bidding. 

This article provides a basic overview of real-time bidding and how exactly it works. Let’s begin by understanding what real-time bidding is. 

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What is real-time bidding?

No, there are no auctioneers that do the dirty work for you in terms of buying and selling online ad spaces. Instead, we have programmatic advertising technology that primarily facilitates real-time bidding (RTB).

It displays ads in front of an audience at the most relevant time. Instead of an auctioneer, technology handles the entire ad-bidding process without any hassles. This means bids on ad spaces are made at any time, anywhere on a cost-per-thousand-impressions (CPM) basis. Now, what do we mean by CPM? Read along to find out. 

What exactly is cost per thousand impressions(CPM)?

In the digital advertising world, advertisers have to pay a certain amount when thousands of people see their ads. That is the CPM. Similar to an auction, the highest bid from the aptest and most relevant ads wins the ad placement.  

Now, let’s understand how real-time bidding works

Understanding real-time bidding (RTB) – how does it work?

Working of RTB

As mentioned earlier, real-time bidding is nothing but an automated digital auction system that enables advertisers to bid on online ad space.

Now, let’s take a look at how it works. 

1. Advertisers (buyers) are looking for ad space

You may have observed long queues outside supermarkets and medical stores during the pandemic due to the social distancing regulations. While there is no social distancing in the online advertising space, marketers are required to fall in line with the demand-side platforms (DSPs). Demand-side platforms automate the entire process of buying ad space on behalf of participants who are fervently looking to purchase cyber real estate for their ads. 

All DSPs are aware of the various buying parameters which they need to take into account during the auctions and also assess campaign performance. 

2. Lights, camera, auction!

The auction is arguably one of the most critical phases in the entire process. At this stage, publishers pile up ad exchanges with their impressions and wave the green flag to start the bidding. The supply-side platforms (SSP) do the opposite of what demand-side platforms do. SSPs are responsible to automate the sale of an ad space while increasing the prices as high as possible.

Many programmatic advertising experts refer to this process as a stock exchange. While DSPs primarily focus on seizing the opportunity to get the most popular, appealing, and efficient ad space, SPPs are on the lookout for the highest price. 

3. Ad is published

The winning advertisement is published across the publication, app, network, feed, or website once the auction is over. Everything unfolds in just a matter of milliseconds. RTB actually completes from start to end in less than 200 milliseconds. You take around 300 milliseconds to blink. In other words, one can say that everything takes place in literally less than a blink of an eye.

Benefits of real-time bidding

Now that we have a fair idea about real-time bidding and how it works, let’s zoom in on its benefits. 

Here are some of the key benefits linked with real-time bidding. 

  • Real-time bidding is time-efficient

RTB is very time efficient and saves valuable time as far as your ad campaigns are concerned. All you have to do is define your parameters and let the automated process work its magic.

  • Cost-effective

Apart from saving precious time, RTB is also cost-effective since you predefine your budget. 

  • Your ads are very relevant

Real-time bidding also ensures that your advertisement is topical to the user. You won’t waste money on customers who have little interest in your brand.

  • Brand protection

Marketers are responsible to safeguard their brand’s image. RTB helps them choose where to market their brand. They can also deploy ad verification services to restrict their advertising from displaying on illegitimate websites or pages.

Will real-time bidding lose its charm with the advent of header bidding?

Real-time bidding in online advertising

While RTB seems like a next-to-perfect technology, there are visible downsides. Numerous publishers have criticized RTB and said that they actually have less money than before after implementing RTB. Publishers say that RTB leaves them with more unsold inventory than previous ad technologies including direct buying and waterfalling, even though the most attractive impressions are sold for higher prices.

Publishers say that RTB leaves them with more unsold inventory than previous ad technologies including direct buying and waterfalling, even though the most appealing impressions are sold for higher prices. As a result, today, we see both, header bidding and RTB share a common space in the programmatic advertising space. 

What is header bidding and why was it developed?

Although both, RTB and header bidding was developed around the same time, RTB gained more steam until now. Just like RTB, header bidding is also a type of programmatic advertising. Besides, the header bidding process is also quite similar to RTB as it sends impressions to numerous advertisers at the same time, enabling every advertiser to bid at the same time. 

How are RTB and header bidding different?

Real-time bidding segregates the sale of RTB impressions and direct buys. This means that an impression is either sold via direct buying or RTB. On the flip side, header bidding offers advertisers a shot at direct buying as well. The final result? Publishers earn higher revenues. 

Final words

RTB ultimately benefits all parties involved in the advertising process since it facilitates more effective purchasing and selling across the board. We are confident that new technologies will continue to introduce groundbreaking changes to the online advertising space in the future. 

If you are still wondering how RTB and programmatic advertising works, get in touch with our online advertising ninjas. You can also read more about our programmatic and content syndication services to discover how we can help your business. 

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Feature Image Source: Digital advertising by Nick Youngson CC BY-SA 3.0 Pix4free

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