||It has been suggested that this article be merged into ad exchange. (Discuss) Proposed since October 2015.|
Real-time bidding (RTB), created by Jason Knapp, is a means by which advertising inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction, similar to financial markets. With real-time bidding, advertising buyers bid on an impression and, if the bid is won, the buyer’s ad is instantly displayed on the publisher’s site. Real-time bidding lets advertisers manage and optimize ads from multiple ad-networks by granting the user access to a multitude of different networks, allowing them to create and launch advertising campaigns, prioritize networks and allocate percentages of unsold inventory, known as backfill.
Real-time bidding is distinguishable from static auctions by how it is a per-impression way of bidding whereas static auctions are groups of up to several thousand impressions at once. Overall, when compared to static auctions, RTB is more effective for both advertisers and publishers in terms of advertising inventory sold. This is because real-time bidding gives advertisers the ability to bid on one impression at a time, and select which impressions for which individuals they will pay for. Meaning, advertisers only buy impressions on screens when they really want to. This is equally as effective for publishers, who get top dollar for one impression.
How it works
A typical transaction begins with a user visiting a website. This triggers a bid request that can include various pieces of data such as the user’s demographic information, browsing history, location, and the page being loaded. The request goes from the publisher to an ad exchange, which submits it and the accompanying data to multiple advertisers who automatically submit bids in real time to place their ads. Advertisers bid on each ad impression as it is served. The impression goes to the highest bidder and their ad is served on the page. This process is repeated for every ad slot on the page. Real time bidding transactions typically happen within[clarification needed] 100 milliseconds from the moment the ad exchange received the request.
The bidding happens autonomously and advertisers set maximum bids and budgets for an advertising campaign. The criteria for bidding on particular types of consumers can be very complex, taking into account everything from very detailed behavioural profiles to conversion data. Probabilistic models can be used to determine the probability for a click or a conversion given the user history data (aka user journey). This probability can be used to determine the amount to bid for the respective advertising slot.
Last year[year missing], according to Business Insider Intelligence, ad revenue topped $15 billion. Real-time bidding, and in particular, mobile and video real-time bidding, lead the way for that growth. Business Insider Intelligence estimates say RTB revenue will pass $26 billion by the end of 2020, which far surpasses the $8.7 billion from this year.
Buying advertising in Real Time - an Example
0.04 Sec – User ABC clicks on a URL and the publisher’s content begins to load in browser
0.08 Sec – Publisher asks its ad server if and ad is available. If no ad, server asks Ad Exchange
0.10 Sec – Ad Exchange federates ad request to multiple demand side platforms(DSPs), the technology for buying media
0.12 Sec – Ad Exchange sends each DSP User ABCs anonymous profile website category and page ad safety information
0.125 Sec – Each DSP overlays advertiser targeting and budget rules, and applies third-party data
0.13 Sec – Each DSP algorithm evaluates and computes optimal bid for advertiser
0.14 Sec – Each DSP responds to Ad Exchange
0.18 Sec – Ad Exchange runs a second-price auction and selects winning bid from DSP responses
0.19 Sec – Ad Exchange sends price and ad from winning bid to publisher’s ad server
0.23 Sec – Publisher’s ad server tells browser which ad to display
0.31 Sec – Advertiser’s ad server sends winning ad to browser
0.36 Sec – Browser displays web page including winning ad, and signals to winning DSP the ad was viewed
Demand-side platforms (DSPs) give buyers direct RTB access to multiple sources of inventory. They typically streamline ad operations with applications that simplify workflow and reporting. DSPs are directed at advertisers. The technology that powers an ad exchange can also provide the foundation for a DSP, allowing for synergy between advertising campaigns.
The primary distinction between an ad network and a DSP is that DSPs have the technology to determine the value of an individual impression in real time (less than 100 milliseconds) based on what is known about a user’s history.
Large publishers often manage multiple advertising networks and use supply-side platforms (SSPs) to manage advertising yield. Supply side platforms utilize data generated from impression-level bidding to help tailor advertising campaigns. Applications to manage ad operations are also often bundled into SSPs. SSP technology is adapted from ad exchange technology.
Challenges with mobile implementation
An individual's browser history is more difficult to determine on mobile devices. This is due to technical limitations that continue to make the type of targeting and tracking available on the desktop essentially impossible on smartphones and tablets. The lack of a universal cookie alternative for mobile web browsing also limits the growth and feasibility of programmatic ad buying. Mobile real time bidding also lacks universal standards.
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