Learn the answer to the question, what is real-time bidding, and discover how the process has evolved the art of advertising.
The challenges and benefits of real-time bidding and how it has evolved the art of advertising
Advertising, in its simplest incarnations, involves one person having a place to show an advertisement (supply) and another person wanting to advertise in that place (demand). Traditionally, these two people would meet, haggle over a price, and the ad would run for a predetermined amount of time.
Today, that process happens almost automatically, the two people use software as a go-between, and the haggling occurs faster than an eye blink through a process called real-time bidding (RTB). But what is real-time bidding, and how does it help sellers and buyers of ad space?
To explain, let’s break down the process of digital advertising and RTB in marketing.
Expand your knowledge of the programmatic ecosystem even further with our comprehensive resource, What Is Programmatic Advertising?
What is Real-Time Bidding?
Real-time bidding (RTB) is a digital auction that instantaneously allows sellers and buyers of advertising space to coordinate their wants and needs via algorithm. The result is ads placed in ad spaces that match pre-programmed criteria and cost parameters as well as possible, given the participants. Think of one of those fast-talking auctioneers and the people holding up signs, but instead, it’s computers shouting at each other, and it happens in microseconds. That’s RTB.
How Does RTB in Marketing Work?
First, it’s worth explaining a little about how digital advertising works.
Supply and Demand
People who publish apps, websites, or streaming TV content have built-in places where they would like to show ads. We call that “ad inventory.” They might also have very specific criteria for what kind of ads they want to show and how much they want to get paid for showing them.
Meanwhile, on the other side of the equation, advertisers have ads they want to be seen. And, just like publishers with ad inventory, they might have very specific criteria for where they want their ads shown and how much they’re willing to pay for that. One of the highest performing new sources of supply is connected television (CTV). According to Nielsen, the CTV audience was roughly 142 million people in 2021, and that number is growing. If you don’t currently have CTV in your marketing mix, download our free guide to learn why you should.
Let’s use a hypothetical CTV example. The publisher of a streaming TV show aimed at a teenage audience might want to show ads that are family-friendly and for products that appeal to teenagers. As it happens, the makers of a line of teenage skin care products have a suite of family-friendly ads and are looking to show those on a streaming TV show appealing to teenagers.
In the old days, the publisher of the TV show and the advertiser of the skin care products might get on the phone and hammer out the details of this deal over a long conversation. But in today’s digital world, few people have that kind of time. Today, it’s faster to buy and sell ads at scale through ad networks, ad exchanges, SSPs, and DSPs.
A supply-side platform (SSP) is a software platform created specifically to help publishers sell ad inventory. On an SSP, publishers can list their inventory along with any criteria they might have for the types of ads they’re looking to run.
In our hypothetical example, this is where the publisher of the teenage-friendly TV show would enter their preferences and how much they want for selling their inventory. The SSP will then search for available ads to fill the publisher’s inventory.
If an SSP is for publishers, then a demand-side platform (DSP) is for advertisers. A DSP allows advertisers to similarly set their own preferences, criteria, target audiences, campaign dates, and price they would like to pay. The DSP will then seek out inventory for the advertiser.
An ad network acts as a go-between for SSPs and DSPs to broker ad sales, typically in bulk. They match the criteria set by an SSP with those set by a DSP, then negotiate the price. Ad networks typically represent a large volume of publishers and advertisers, allowing them to place ads in a variety of spaces depending on an advertiser’s needs.
An ad exchange is where buyers and sellers of ad inventory come together without the ad network middle-man. The ad exchange computes the criteria from both sides, makes a possible match, conducts an auction, assigns the ad to the ad space, and delivers it — all in a fraction of a second. That process is real-time bidding. An apt analogy for the functional difference between ad networks and ad exchanges is buying stock through a stock broker versus buying it yourself through an investment app.
What Are the Benefits of Real-Time Bidding?
For publishers, real-time bidding opens up the process of filling ad inventory to a wider possible match of advertisers, allowing them to more easily fill up ad inventory with more relevant ads. It also provides greater visibility into who is seeing their ads and greater flexibility over what types of ads are run.
Ultimately, real-time bidding makes publishers more money for their ad space, which is the number one goal for practically anyone with ad space to sell. With real-time bidding, advertisers can directly see how ads are performing in their space, allowing them to charge a premium.
For advertisers, real-time bidding allows for the ability to fine-tune ad placement, showing ads to specific groups of people in specific places, and to do so faster than traditional advertising. It is also simply a faster and more efficient way of placing ads at scale.
Real-time bidding also allows advertisers to adjust ad targeting on the fly, with real-time data on who is responding to which ads. In the past, an advertiser would have to wait for a campaign to conclude before they could get meaningful information on its performance. This cost them money and time. Real-time bidding makes it possible to analyze performance nearly instantly so that advertisers can swap out ads that aren’t performing and optimize their ad spend.
What are the Challenges of Real-Time Bidding?
The quality of the data fed into the algorithms will determine the quality of the match. If you are a publisher and have bad demographic data, for example, you won’t get the best possible ads for your users, which could lower your return on investment (ROI). If you are an advertiser with bad data, your ads may go into spaces you don’t want, or you may miss out on opportunities to sell to your target audience.
Brand safety works both ways. As a publisher, you don’t want ads appearing on your content for products that could make your content look bad. As an advertiser, you don’t want an ad for your products appearing on content that doesn’t represent your values. Factors like adult content or hate speech need to be taken into account when working with digital advertising, and strict filters and monitoring must be put into place to ensure that bad matches don’t occur.
Ad exchanges are compared to “black boxes” because the algorithms that govern them are often hidden from public view. A reputable service will allow you to view the entire customer journey, make optimizations in real time, and get reliable reports on your advertising activity.
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