RTB Advertising – How Real Time Bidding Works

A centerpiece of programmatic is RTB or real-time bidding. RTB advertising is often confused with programmatic and vice versa. The truth is that RTB is one part of programmatic, albeit a really important one. Here is how to think about it; All RTB is programmatic but not all programmatic is RTB.

RTB is used as a mechanism for buying impressions, remember those impressions are comprised of the audience we are targeting or bidding for in this case.

If you are familiar with search marketing, then you are aware of the principles used, mainly bidding. In search, you bid on keywords that you think will bring the right users to click on your ad, get to the landing page and take the action you need them to take. In RTB advertising we use that same principle of bidding, except it’s not on keywords but on impressions and what is behind every impression? A user, and audience, a target. (unless we are talking about bots, but that’s another conversation)

Here is an example from one of the courses we offer in Programmatic Academy:rtb advertising

Let’s go through the process:

1. The user lands on a site, let’s say, for example, weather.com
2. Weather.com’s SSP pushes out a message into the exchanges saying: “here’s a user that meets your profiling requirements” the DSP’s bidder evaluates the user (impression) to see if it is a good fit for the campaign.
3. The DSP then “bids” on this user and since there are likely multiple DSP’s bidding for similar users you bid against each other for this user. The highest bidder wins and pays what’s called “second price auction
4. The DSP who wins gets to show the user their creative (banner, video, or other messages).

Next time you see a banner, just know that somewhere you were determined by an algorithm that your profile matched what an advertiser was looking for.

Fun fact: RTB is known for programmatic buying now. But did you know that goto.com was the first site to sell ads on a bidding basis they were later renamed Overture and bought by Yahoo?

There were a lot of terms thrown around in this post and for people who aren’t familiar with them it could be very confusing. If you want to learn more about programmatic, I invite you to sign up for our courses where we cover RTB but a lot of other topics in programmatic, ranging from basics to advanced.

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