Did you know that behind the scenes of every successful programmatic ad campaign lies a real-time bidding (RTB) system? But what is real-time bidding, and what results can it deliver?
Moreover, recent studies suggest the RTB market will hit $81.1B by 2032. Thus showcasing that its value can no longer be overlooked. It’s not just about understanding what RTB is; it’s about realizing the importance of implementing it.
Thus, allow us to explain RTB clearly and provide actionable solutions for integrating it into your operations.
Table of contents
What is the RTB System?
Real-time bidding (RTB) is an automated auction system or bidding algorithm used in programmatic advertising to buy and sell digital ad space in real-time and on a per-impression basis.
Advertisers compete in a quick auction to secure ad space when a user visits a website or app. The highest bidder wins with RTB, and their ad gets displayed on the site or app. It’s a fast and automated way for advertisers to get their messages out quickly. In contrast, for publishers to make the most of their ad space.
Unlike traditional manual methods for ad placement, programmatic advertising involves automated processes, which makes it more efficient and yields a higher return on investment (ROI). Although real-time bidding (RTB) isn’t the only form of programmatic advertising, it is currently the most widely used.
How Does RTB Work?
Real-time bidding operates through a system incorporating advertisers, publishers, supply-side platforms (SSPs), demand-side platforms (DSPs), and ad exchanges. As for what do they mean, here is a list of short explanations:
- Advertiser: the company or brand aiming to place an ad online.
- Publisher: the website owners or app developers looking to sell advertising spaces through ad inventory on their platforms.
- SSP: Publishers employ SSPs to showcase their ad space and pricing. SSPs serve as software that helps publishers sell ad space automatically to potential buyers in real-time. They empower publishers with greater control over their ad inventory by facilitating transactions with programmatic advertising platforms.
- DSP: Advertisers use Demand-Side Platforms (DSPs) to create and monitor ad campaigns. DSPs are software that allows advertisers to compete for accessible ad space automatically. DSPs interact with the supply side to determine the available inventory and pricing. They also evaluate user data and various factors to determine the impressions they should bid on.
- Ad Exchanges act as digital marketplaces (meeting points) where SSPs and DSPs connect to facilitate real-time bidding (RTB) in digital ad space.
When someone visits a website or app partnered with an SSP, the website or app sends an ad request to the SSP. Thus, the SSP quickly notifies the Ad Exchange that ad space is available on that platform by sending a bid request. This request contains information about the user (based on consent) and the publisher’s specifications, such as the ad format and price.
Following this, the Ad Exchange organizes an auction for advertisers. DSPs analyze the bid request using automated algorithms to decide whether to participate and the amount to bid. After that, the highest bidder secures the ad space, and the ad will be seamlessly displayed for the user. The process is seamless, and the user would never guess what was happening in the background!
Remember that advertisers establish their bid using the Demand-Side Platform, and publishers’ Supply-Side Platforms decide whether to accept or decline the bid.
Real-Time Bidding Example
Fitwatch is a San Francisco-based startup specializing in innovative fitness trackers that wants to promote its latest smartwatch with advanced heart rate monitoring. To do that, they launched a campaign on a Demand-Side Platform (DSP) to reach potential customers.
On the selected DSP, Fitwatch introduced their targeting parameters:
- Demographics: Users aged 25-45 residing in major US cities (New York, Los Angeles, Chicago).
- Interests: Track their fitness through apps or wearables and engage with fitness content online.
- Websites: Sports equipment retailers, fitness blogs, and health news platforms.
On the other hand, SportFanaticsUS is a US sports news publisher that sells ad space, partnering with Sevio Ad Manager, a supply-side platform (SSP).
Now that you know both parties involved, the user comes in. Following his workout, Carl, a personal trainer from Los Angeles, turns to SportFanaticsUS to keep up-to-date with industry trends. As he accesses the website, the SSP initiates an ad request to the Ad Exchange, transmitting user data and available ad space details.
Upon receiving the request, Fitwatch’s Demand-Side Platform (DSP) springs into action. It meticulously evaluates the user data, ensuring alignment with targeted demographics and interests, and verifies the website’s relevance to the desired category (sports news). With everything in sync, Fitwatch’s DSP bids on the impression, engaging in real-time competition with other advertisers based on the RTB auction system.
In this instance, FitWatch secures the ad spot with the highest bid. When the page loads, Carl encounters the advertisement for Fitwatch smartwatches, and that’s it.
Real-Time Bidding vs. Header Bidding vs. Waterfall Bidding
Often, in programmatic advertising, you will also encounter the terms Header Bidding and Waterfall Bidding regarding RTB. When you hear about them, know that they are not very different or competing technologies to RTB because, at their core, both header bidding and waterfall bidding are subsets of RTB.
SIDENOTE. Note that header bidding and waterfall auction aren’t the sole subsets of RTB, and RTB isn’t the only subset of programmatic advertising. This simplification aims to facilitate better understanding.
When the RTB emerged, auctions followed a waterfall model, with bids placed sequentially—the second advertiser couldn’t bid until the first one finished, and so on. With waterfall bidding, a publisher sets a price floor (e.g., $2.50).
In the first exchange, the highest bid is $2, below the floor, so the inventory moves to the following exchange. The highest bid matches the floor at $2.75, and the space is sold to that bidder. The drawback is that there might be higher bids in subsequent exchanges, causing publishers to miss out on significant revenue.
This gap led to header bidding (and other subsets). Unlike the sequential approach, header bidding simultaneously offers inventory to multiple exchanges, ensuring that publishers receive the highest revenue and advertisers secure the placements they’re willing to pay for.
Both Header Bidding and Waterfall Bidding are subsets of RTB. These 2 subsets differ in some ways:
| Feature | Header Bidding | Waterfall Auction |
|---|---|---|
| Bidding Process | Simultaneous auction | Sequential, one bidder at a time |
| Speed | Faster | Slower (bidders wait their turn) |
| Transparency | High (see all bids) | Low (limited insight into bids) |
| Control | High (choose bidders, see all bids) | Low (limited control over bidding order) |
| Revenue Potential | Higher (increased competition) | Lower (limited bidders, network priorities) |
| Targeting | Fine-grained control | Limited options (network order dictates targeting) |
| Latency | Lower (simultaneous bidding) | Higher (bids wait in line) |
| Implementation | Complex (requires technical expertise) | Simple (easy setup) |
| Ideal for | Premium ad space, maximizing revenue | Remnant ad space, quick sales |
| Risk | Technical complications, setup time | Lower revenue, limited control |
Why is Real-Time Bidding Important?
Real-time bidding is essential primarily because it significantly enhances the efficiency of buying and selling programmatic ads. Traditional advertising methods involve lengthy processes, which involve requests for proposals (RFPs), negotiating quotes, and creating insertion orders. In contrast, real-time bidding enables advertisers to purchase swiftly and place ads and publishers to sell their ad space with greater control over the entire process.
However, the benefits of RTB go beyond just speed, at least for publishers. With an RTB system and a strong SSP, publishers may be able to monetize their platforms effectively in today’s competitive digital environment.
Yet, Sevio Ad Manager has many solutions for any situation, even the most specific ones of every website or app owner. That’s because Sevio is a solution that blends advanced technology (including the RTB system) with easy-to-understand analytics to empower publishers worldwide to optimize ad delivery and boost revenue without the headache of managing complex systems.
So, as RTB is crucial and continues to be valuable in today’s programmatic industry, solutions like that can make a difference and must be considered.
What is the Difference Between RTB and Programmatic Advertising?
Differentiating between RTB vs. Programmatic Advertising can be confusing, as they are related but not interchangeable terms.
That is why you must remember that, in essence, RTB is a subset of programmatic advertising. While they are interconnected, they are not synonymous. Simply put, you can only have RTB with programmatic advertising.
RTB refers explicitly to a real-time bidding system, living up to its name. Generally, in less than 120 milliseconds, this process allows publishers to monetize available ad space on their websites/apps. It involves selling this space to buyers through an auction system, making the transaction quick and dynamic.
On the other hand, programmatic advertising has a broader scope. It involves marketing campaigns organized around an offer facilitated by a Supply-Side Platform (SSP) and a demand managed by a Demand-Side Platform (DSP).
The role of programmatic advertising is to streamline transactions between these two entities, enhancing the efficiency of the overall advertising process.
Real-Time Bidding Pros
For Advertisers
Real-time bidding enables faster and more efficient purchasing. It gives advertisers greater control over their ad buys, reducing wasted impressions by targeting relevant audiences and mitigating ad fraud risks, resulting in cost efficiency.
For Publishers
Real-time bidding, facilitated through an SSP, assists publishers in identifying suitable demand sources with which to collaborate. Factors such as latency, unique demand, bid rates, and ad space availability are considered.
Thus, it empowers publishers to manage their inventory effectively, specifying which advertisers can purchase ad space and at what price.
Real-Time Bidding Cons
For Advertisers
Even with RTB, brand safety remains a concern, as even the most sophisticated algorithms can’t guarantee ad placement next to squeaky-clean content. Moreover, expertise is essential to navigating the complexities of RTB, including campaign optimization and mitigating ad fraud, which can be a daunting task for smaller players.
Additionally, limited control over ad placement and the existence of walled gardens can restrict campaign reach and hinder specific goals.
For Publishers
Even with RTB, lower CPMs compared to direct deals are a potential trade-off, and relying solely on an SSP can lead to losing control over advertiser relationships and valuable insights. Moreover, the technical complexity of SSP implementation and ongoing maintenance requires expertise, and navigating data privacy regulations adds another layer of burden.
Even so, remember that SSPs are actively working to address these concerns. For example, Sevio Ad Manager is doing that through advanced brand safety tools, fraud detection, user-friendly interfaces, and support for data privacy compliance, making the cons almost inexistent.
Get the Most Out of RTB
Real-time bidding isn’t just about visibility but generating genuine connections. If you’re an advertiser, it’s a system that lets your message touch your ideal audience, torching engagement and fueling brand growth. If you’re a publisher, instantly give your audience something that suits them while you earn. That’s the power of RTB when guided by the right expertise!
If you’re a publisher and need the right expertise, let’s talk and see how your brand reaches your target audience at the right time with minimal effort.
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