Real-time bidding has forever changed the world of online advertising, but there's still a lot of confusion about what it is. Here's our explanation, made simple:

Real-time bidding (RTB) is an online advertising method where ad inventory is bought and sold via instantaneous programmatic auction on a per-impression basis. 

Compared to direct buy, RTB is a far more efficient ad buying method for small to medium sized advertisers. Direct buy often has minimum spend requirement that can be expensive. With RTB, advertisers have access to an enormous pool of options to target the right customer. This topic is complex, but advertisers can begin to take advantage of this method with just a baseline understanding. 

Real-time bidding (RTB) is an online advertising method where advertisers and publishers (website owners) buy and sell programmatic ad inventory in real-time via digital auctions. 

RTB refers to buying and selling ad inventory in a real-time auction format; it has many moving parts that make it possible. Let's review a few important terms: 

Publishers: Website owners that have available ad space inventory to be filled. 

Supply-Side Platforms (SSP): Programmatic platforms that allow publishers to sell their ad space to advertisers. 

Advertisers: The marketers who buy ad space to reach and notify potential customers about products and services.

Demand-Side Platforms (DSP): Programmatic ad buying platforms where advertisers buy ad space and navigate ad exchanges in real-time. 

Ad Exchange: The digital marketplace where publishers field open ad spaces via SSPs and advertisers buy ad space via DSPs. 

The real-time bidding process happens almost instantaneously. This process unfolds within milliseconds after a user clicks on a website link:

• The publishers' SSP sends a bid request to the ad exchange to fill empty ad space.

• The ad exchange opens an auction to different DSPs allowing them to place bids to have their ads served in this open inventory space. 

• Bids get placed automatically once the DSPs analyze the bid request. The highest bid wins, and the SSP displays this ad to the user.

The process relies on behavioral data (tracked with cookies) to determine which ads to show to which users. A cost-per-thousand impressions basis (CPM) determines the bid price. 

According to Senior Campaign Analyst, Olga Voevodina, it’s difficult to oversee RTB because it happens so quickly and in such high volume. So, advertisers mostly rely on DSPs to control the process.

Most DSPs have options to manage bidding settings (i.e. setting bid price maximums and minimums). Olga suggests that advertisers monitor inventory for clients to avoid serving ads on irrelevant sites.

Regardless, before any real-time bidding can begin, publishers must choose a supply-side platform (SSP) to sell ad inventory, while advertisers must choose a demand-side platform (DSP) to bid and field their ads. 

Real-time bidding is a complex way for advertisers and publishers to connect, sell, and fill ad spaces. However, why should marketers care (and invest) in RTB?

RTB beats out antiquated advertising methods and promotes relevance. 

Before RTB existed, advertisers would have to personally reach out to webpage owners and broker a deal for their ads displayed on web pages. The process was time-consuming, and every webpage visitor would see the same ad, even if it wasn't relevant to them. 

With RTB, users should only see relevant ads. SSPs and DSPs look at individual users' cookie data to determine if they should place a bid. The advertiser with the most relevant ad will be more incentivized to place a high bid and win, thus displaying a relevant ad to the user. 

RTB saves time and money. When implementing RTB, the advertiser sets up their DSP, outlines their target audience, and inputs a budget. Then, the DSP will navigate the ad exchange for them to maximize ad spending and use predictive analytics to optimize as it goes. 

Olga expanded on this by telling us that digital advertising is a constantly evolving industry with a lot of moving parts. Staying on top of new ad methods, like RTB, allows advertisers to efficiently achieve desired ad campaign results. By knowing the difference between the many ad execution options advertisers can avoid overpaying for the same impression.

There are many platforms for marketers to run RTB ads. Here are a few RTB platforms: 

Google Ads has thousands of websites to field ads on within its display network. The software is intuitive and provides multiple insights and predictive analytics.

The Trade Desk is an excellent choice because its 250+ high-level partners provide ad inventory. TTD is known for its fantastic customer service and data features.

SmartyAds is an independent ad exchange platform for both publishers and advertisers. The platform makes the process easy by breaking down each step in detail. 

Amazon Ads is great for marketers who want to sell products on and off Amazon. They have an effective DSP to target relevant customers with high intent to buy. 

Let's pull this all together with an example of RTB in action. 

One night, our intern, Jake, searched Airbnb, VRBO, and Google for a vacation rental. The next day, when browsing the web, he clicked on a link for Verywell Mind. When the page loaded, a display ad for Airbnb appeared in the margin. 

How did this RTB ad get served to Jake? When he clicked on the web link, the SSP for Verywell Mind analyzed his cookie data. It noticed his vacation rental search history and connected with the ad exchange to find DSPs willing to place a bid. Airbnb placed the winning bid and fielded their ad. 

This inter-platform ad exchange communication occurred within milliseconds to serve a relevant ad to a customer who will most likely click on it. In this case, Jake clicked the ad. 

Still a little confused about RTB? Here are some of our answers to common questions. 

RTB vs. Programmatic Buying? 

Programmatic buying refers to the entire realm of technology-driven digital advertising methods instead of the old-fashioned manual buying process.

RTB is the most common way to buy digital ads but not the only one. For example, some inventory can be bought without RTB through programmatic guaranteed or direct contracts with the publisher.

What's the Difference Between RTB and Ad Exchange?

The ad exchange is the digital marketplace that connects advertisers and publishers to buy and sell ad space in real-time. RTB is used to place the ads via the ad exchange.

RTB vs. DSP vs. SSP?

A demand-side platform (DSP) is automated software advertisers use to bid on ad impressions. A supply-side platform (SSP) is also automated software. However, its purpose is to sell ad space inventory. 

Because these platforms are programmatic, they can automatically communicate quickly via the ad exchange and field ads in real-time, thus allowing real-time bidding to occur. 

At Pathlabs, we constantly explore new DSPs and their functionality to execute RTB. Our goal is to understand what’s included in the final price we pay for the impressions on behalf of our client and make sure we reach the desired audience cost-efficiently.

Curious about the advantages of working with a digital media agency partner? Reach out to Pathlabs to learn how we can become an extension of your team.