What Is Real Time Bidding And How Does It Work?

Internet advertising isn’t really simple like the way we think and each advertisement depending on the channel chosen (content based, direct ad, video etc.) has to go through several filters before reaching the user. Real time bidding is simply the latest channel through which ad spaces are bought and sold on the internet. The sale is made on per-impression basis via an automated auction system just like the real share market. The buying and selling is done when advertisers use a bidding model that allows advertisers to buy a bucket of 1000 impressions which are sold at a flat rate. While this seems to be a fully capable method of buying ad space on the internet, the impressions are a bit less effective during certain times of the day.

Real time bidding is a dynamic way of how an advertiser can choose the best time for his advertisement to pop up to a targeted user group. The user group is divided according to a certain online behavior or trend that the various users on the internet follow. The deal usually takes place milliseconds before an internet user loads up a particular website.

How Does Real Time Bidding Work?
There are basically 3 major forces at work during a RTB operation, namely the demand side platform, the publisher and the ad exchange. It is between these forces that the RTB operation occurs and concludes with an internet user or a group of internet users get to see a particular advertisement while loading a particular website. These three elements are briefly explained as follows.

1. The Demand Side Platform
Also abbreviated as DSP, the demand side platform is a buying tool that automates the buying of online ad spaces on behalf of the advertisers. The demand side platform is used by the advertisers by setting various parameters that are based on the behavior of a specific set of internet users which have been targeted.

2. The Publisher
The publisher is basically the entity that provides the inventory during the bidding process. During the older days RTB was based on the remaining inventory which was left unsold, but due to the increasing demand and the skyrocketing revenues generated through RTB, it operates through the use of premium inventory. Tools like SSPs or supply side platforms are also used by several publishers to manage their sales and inventory better.

3. The Ad Exchange
In a similar manner like a stock exchange, the ad exchange works like a global market where ad spaces across various websites are bought and sold. It is an essential RTB tool that connects the various publishers to the advertisers across the world. The auction takes place moments before a page loads and the purchase of inventory is done in real time. It is through the various auctions that the price for a particular inventory is decided.

RTB Happens In the Basic 3 Steps
The ad exchange holds an auction which is funded through the publisher’s inventory that they provide to the ad exchange. The DSPs then place a bid on each impression on behalf of the advertisers. Each bid’s value is based on the value of the impression, the advertisers then set certain parameters in the DSP according to the behavior of the target audience and budget which allows it to function automatically.

The whole bidding operation makes sure that each ad space is sold at its maximum price which is decided by the market demand for a particular ad space. This not only eliminates the problem with impressions being useless at particular time of the day but also makes internet advertising a fare market that operates according to the demand and supply in the market. It provides an increased control of advertisers on their marketing campaigns and enhanced targeting of the customers. RTB also makes advertising more cost effective and increases its reach. We must never forget the several thousand dollars RTB has saved us by elimination of wasted impressions.

Author Bio:
Luke Peters is a content contributor for several websites like MediaGroupPerformance.com and others related to niches like marketing, finance and the field of law. He likes to read various books and other literature related to these niches and tries to keep up with the latest news in the market.