Traditional advertising involved negotiation between publishers and advertisers where both the parties used to sit together and present their offers on the table. If the parties came to an agreement, insertion orders were signed and publishers then ad creatives were placed on websites.
This technique was incompetent in many ways—publishers were not getting good fill rates, hence a large part of their inventory was going unsold. Similarly, advertisers were not able to generate a good ROI on their display marketing budgets. The impressions were not targeted and the majority of those impressions were delivered to visitors who did not match their target profile.
There was no way for the publishers to get a fair value for the inventory, on the basis of the relevance of their visitors.
Solution? Real-time Bidding.
What Exactly is Real-time Bidding?
Real-time bidding, also called RTB, is a process of valuing and bidding for an ad impression in real-time. It is an online media marketplace involving the seller (publisher) and buyer (advertiser).
Take the stock market as an analogy to understand real-time bidding. In the stock market when a share becomes available, buyers have to compete for it and the highest bidder gets the share.
Likewise, in an online media exchange, advertisers have to bid on available impressions in order to put their ads on the publisher’s website. The highest bidder gets the ad space and process renews for the next impression. There are two subsets to real-time bidding. Here they are:
Mobile Real-time Bidding: Mobile RTB is selling mobile ad inventory in real-time. However, it has its own challenges. Firstly, mobile ad inventory refers to both web-based inventory and app-based inventory. The two follow a different set of protocols to run an RTB auction. Secondly, for app-based inventory, cookie tracking is not possible which makes targeting a challenge. Although, due to a rise in mobile users, the mobile advertising market is flourishing.
Video Real-time Bidding: OpenRTB proposed by IAB now supports the VAST (video ad serving template) type of placement. Video marketing is an impactful medium with 90% users saying they find video ads helpful in making decisions. Hence, with video RTB, the idea is to show video ads as soon as a user (impression) appears on the site. Premium publishers (like Forbes) are already implementing video RTB to maximize their inventory profits.
Some popular RTB ad exchange/platforms are OpenX, DoubleClick AdExchange, Rubicon Project, Sitescout, PubMatic, AppNexus exchange, and Right Media exchange.
The Involved Parties
Continuing with the stock market example, real-time bidding mainly involves three parties:
- Sellers (supply-side): The publishers with digital inventory to sell and/or the platforms that have purchased the publisher’s inventory for reselling purposes like ad networks and supply-side platforms.
- Buyers (demand-side): The advertisers looking to purchase inventory and/or the platforms helping advertisers get inventory for their ad campaigns like demand-side platforms.
- Exchange: Real-time mediator matching publishers and advertisers like Google Ad Exchange.
Publishers take the help of supply-side platforms to find best-suited advertisers and to push their inventories further into the market to earn a better profit. SSPs help publishers increase their ad revenue by incorporating techniques like yield management.
Similarly, advertisers use demand-side platforms to participate in various real-time auctions. DSPs simplify the ad operations with applications to manage the workflow and for reporting purposes.
The real-time bidding process starts as soon as a user clicks on a link to a website. Ad request is generated containing details of the available impression. These details are around page environment (ad location, size), the website (URL, contextual category), and users’ behavioral and demographic data (browsing history, time zone, location).
In the next part of the process, a bid request is sent from media exchanges to various advertisers. Afterward, the advertisers’ system values the impression. If there is positive feedback and the impression is highly valued, the system places a bid on the auction.
In the last stage of this process, the bids from multiple advertisers are evaluated and the highest bidder gets the impression being able to place his creative on the publisher’s website.
Here’s an example to understand real-time bidding: Consider a user who spends a lot of time on fashion websites, checking newest collections and shopping for apparel. While surfing, the user arrives on a website that uses RTB ads.
Meanwhile, a fashion company and a luxury cosmetics company have both signaled interest in users with similar interests. The RTB system recognizes the compatibility between the users’ interests and the requests of the advertisers, and they bid on the impression. Advertiser that places the highest bid wins gets to display the ad to the website visitor.
The entire process takes a split second. The advertiser usually sets up their ad campaign prior while the system handles their bids and send timely bid responses.
What Are the Advantages?
When compared with the more traditional forms of display advertising, real-time bidding offers loads of benefits. Some of those are mentioned below:
Improved inventory pricing: Publishers get to set a floor price for their inventory which they can change at any point. This benefits publishers to optimize the price of their specific ad units as per the demand. This allows publishers to extract the exact value for their inventory in real-time.
- Handling remnant ad units: Remnant or unsold inventories is a concern for most publishers. Real-time bidding helps publishers get a fair price for remnant ad units by making them available at various auctions.
- Ad unit modifications: Publishers maintain control over their inventory. They can change the floor price, ad unit placements, and targeting options anytime at ad unit level. All of this helps with ad testing to get a better price by placing ads on sites.
- Better user experience: With real-time bidding, publishers can closely examine the response of users toward the ad placements. Using this data, publishers work on improving their user experience. Also, web cookies dropped by sites can further help to know more about these users. Moreover, this data can be shared with advertisers to run targeted campaigns.
- Quick solutions: Everything about real-time bidding is so fast-paced that both publishers and advertisers get to see results instantly. This idea can be leveraged into improved the ad delivery process. For instance, publishers can monitor their most-viewed ad units and increase their floor price. Similarly, they can get details of low performing ad units and accordingly improve their quality.
Challenges with Real-time Bidding
Even with all the benefits offered by real-time bidding, it still has some challenges that make it not as effective as it was designed to be. Here are some of those:
- Data leakage: GDPR, CCPA, and other similar laws convey that for a few geographical locations, the security of their users is the most important thing. Hence, this creates a challenge for publishers to decide whether to share user’s data (for targeting purpose) or not. Another challenge is these laws differ in a way that it’s getting difficult for publishers to understand whether they can store user data or not. If can, should they use it for targeting purposes or not?
- No guaranteed deal: Unlike programmatic guaranteed, real-time bidding solely depends on demand-and-supply rule. If there is demand for inventory, publishers will get a good price for it. And if the demand is less, there will be a decrease in ad earnings. Such complexity threatens the overall profit for publishers.
- Brand safety: Publishers want to have control over advertisers placing ads on their sites in order to maintain the quality and safety of their site. Similarly, advertisers want to make sure their creatives are getting appropriate allocations on sites rather than going unnoticed. These concerns from publishers and advertisers can be resolved by including a third-party platform (like Trust Metrics) allowing blocklists for certain types of content and ads.
How to Make the Most Out of RTB?
In order for RTB to be able to expand, there are a few elements that both publishers and advertisers need to take into consideration:
Make the right partnership
In order to see growth in RTB, both the seller and the buyer need to meet the minimum technical requirements for data safety, so that user security does not become a problem. Moreover, both parties should be subject to regular auditing of the data that is collected versus the amount of money spent on advertising.
Publishers must control the flow of data
User data is initially generated by websites and stored by publishers. Hence, it becomes the publishers’ responsibility to monitor its flow. Being transparent is one way to avoid any fraud with the data. If a publisher openly shares a part of their data (like cookie information) with advertisers via SSP and makes sure the advertisers are not involved in data fraud. Then there will be no confusion around data safety.
Avoid ad fraud
Bad actors always seem to find workarounds for ad fraud prevention techniques. However, these frauds can be avoided simply by complying with the ad safety measures.
Consider private auctions for premium inventory
Yes, RTB can effectively get you a fair price for your inventory. However, you as a publisher should know which part of your inventory is your gold mine. Carefully segment your inventory and take the premium part to the private marketplace for better profits.
Monitor page loading speed
Too many ads are seen to increase the page load time of websites. Also, running too many auctions at a time (RTB, header bidding, and exchange bidding) can result in users waiting longer to access the site. Hence, while running auctions, optimize your site for faster ad serving. However, ad tech is now well-equipped to help publishers with page loading optimization, one of such methods is lazy-loading. With lazy-loading, publishers can show ads to users when they are ready to see them. Hence, these ads don’t load with the rest of the content allowing both content and ads optimal time to download on users’ browsers.
The Future of RTB
Despite its advantages and disadvantages, RTB is so huge that programmatic buying and RTB are often used as synonyms; which is not correct, RTB is a type of programmatic buying.
Current statistics show that RTB will capture 32.9% of the ad tech by 2024. RTB spend will grow from USD 6.6 billion to USD 27 billion.
Market penetration and data intensity have to be the two major reasons that helped RTB to become this successful. Here’s how. Market penetration refers to the fact that both publishers and marketers are making use of real-time bidding. Growth is fueled by RTB capturing the market share for indirect sales.
The second driver behind the growth in RTB spending is the data intensity of the campaign which was generated by the enhancement in the quality and the use of data. The newly developed algorithms use the data as a key input in determining the real value of the impressions, improving the key performance indicators.