Publishers looking to increase their ad revenue should know about the differences between Real-Time Bidding and Programmatic Direct.
If you are a marketer looking forward to running an online ad campaign, you might be having difficulty choosing between Real Time Bidding or RTB and programmatic direct channels. It is understandable. Evidently, the end result is, of course, the same, i.e. you get to place your ads on some website. However, the main point here is that the processes in these two cases are quite different, and both of them have their pros and cons.
Did you know that the market for Real-time bidding has reached $10.1 billion in 2021? On the other hand, one out of two dollars in the US is spent on programmatic direct biddings. This is indicative of the fact that both processes are very high in demand when it comes to ad marketing, and in this article, we will be discussing the following points to get a clearer picture of the “Why”s and the “How”s.
- What is Real-Time Bidding or RTB, and How Does it Work?
- What do We Mean by Programmatic Advertising, and How Does it Work?
- How are Real Time Bidding and Programmatic Advertising Different?
- In a Nutshell
What is Real-Time Bidding or RTB, and How Does it Work?
RTB or Real Time Bidding can be defined as a process in which the purchase and sale of digital ad inventory take place. It is almost like an instant auction and happens in a matter of seconds. RTB is usually facilitated by an ad exchange, DSP or a programmatic platform.
Essentially, when a user visits a website, at the very same time, a corresponding bid request is sent to the ad exchange. This bid request can contain myriad pieces of information, including browser history, demographic details, location etc.
An ad exchange is nothing but a digital marketplace where advertisers and publishers are able to buy and sell spaces for advertising. So as a next step, the ad exchange forwards the bid request to the list it has of buyers and advertisers who had placed a bid for the ad impression in real-time. As the name suggests, the advertiser who puts in the highest bid wins the impression, and automatically their ad is served to the same user. But we have to remember that all RTB transactions actually happen in about a moment.
What do We Mean by Programmatic Advertising, and How Does it Work?
Programmatic advertising is a process of selling and buying digital advertising spaces which are automated and are different from manual and traditional processes. This automated process helps serve the ad at the correct place and at the correct time. Programmatic advertising can helps advertisers in using defined parameters while placing their ads. This is done by using machine learning and artificial intelligence as a point of leverage.
In order to run programmatic ad campaigns, media buyers use DSP (Demand-Side Platform) and other programmatic platforms. DSP can be described as a platform for the digital campaign which enables advertisers to make online purchases of placements in real-time. This support is extended from the beginning to the end. It mainly provides the following:
- Planning tools
- Geo performance
- A programmatic channels ecosystem
- The ability to view performance at the domain level
- Audiences etc
How are Real Time Bidding and Programmatic Advertising Different?
Now that we are acquainted with the basics of the two processes of ad placements, namely RTB and Programmatic Advertising, let us now look at how exactly these two are different from each other.
The very fundamental difference between the two is the shift from the purchase of ad impressions in bulk, as it happens in the case of Direct programmatic advertising, to the auctioning of each individual ad impression to the highest bidder, as is seen in RTB.
With Direct buys, you can let your ads be seen in specified contexts by buying the impressions in bulk. You will have the ability here to add filters to your audience based on targeting rules which include browser type, geography etc. However, you will still be targeting the ads to the particular website.
However, in the case of RTB, each individual impression is evaluated and profiled in milliseconds during the process of the auction, which happens while the page is loading. The targeting can be done at a psychographic, demographic and behavioural level. However, unlike Direct, it can be done across a wider variety of sites instead of just one. As a result, it is possible to target a larger section of the audience.
One more difference between the two is the level of the surety of the fact that your ads will indeed be on the receiving end of the volume you expect.
In the case of direct buys, you buy ad inventories in bulk at a fixed CPM rate, which the publisher delivers in the future. In this way, the inventory remains “guaranteed” or “reserved” for you. Considering there will be no exceptions, you will be receiving these ad impressions as per the initial purchase agreement.
However, in the case of RTB, you will be auctioned with a number of other advertisers, all of whom will be bidding at different rates for each individual impression in real-time. Considering the situation is so dynamic, the ad inventory can be considered as “non-guaranteed” as the marketplace is essentially unpredictable.
Another point of difference is the pricing, and the primary reason for that is, in Direct Buys, the purchase is made in bulk, whereas in RTB, the biddings are made for each and every individual ad impression.
Direct buys are made in bulk at a fixed CPM rate, and of course, all the ad impressions have the same rates. This system has persisted right from the era of banner ads and is here to stay, as it seems.
However, in the case of RTB, bids are put for each individual ad impression. So effectively, each impression is priced individually. But in terms of practicality and from the perspective of reporting, the metric of cost-per-impression would be highly impractical for advertisers. So, the de-facto method of pricing becomes effective CPM or e-CPM. This is actually the dynamic value derived from all of the individual prices that have been paid for each ad impression, which gives it the name.
In a Nutshell
Although it is true that direct purchase is, in a way, inefficient in terms of pricing and modes of operation, it also needs to be remembered that the benefits it has sometimes make it viable to some advertisers. RTB takes care of these problems alright, but falls short in the case of guaranteed placements.
So practically, it is actually possible to make use of both these methods as and when applicable as complementary to each other. But for that, there is the necessity of a data-driven mindset as well as a systematic approach to scaling and optimization.
FAQ Related to Real-Time Bidding vs Programmatic Direct
RTB stands for Real Time Bidding, and it represents a process by which advertising ad inventory is sold in a matter of seconds.
The most common metric of purchase is the CPM pricing model.
For the sake of practicality, the pricing model used in RTB is e-CPM or effective CPM, which is a dynamic rate derived from the individual impression purchases made.
Shubham is a digital marketer with rich experience working in the advertisement technology industry. He has vast experience in the programmatic industry, driving business strategy and scaling functions including but not limited to growth and marketing, Operations, process optimization, and Sales.