What are the benefits and challenges of using real-time bidding (RTB) in ad auctions?

1 How RTB works

RTB is based on the principle of supply and demand. Publishers offer their ad inventory, or the spaces on their websites where ads can be displayed, to ad exchanges or networks. Advertisers bid on these ad impressions, or the opportunities to show their ads to users, based on their criteria and budget. The highest bidder wins the impression and pays the second-highest bid price, which is determined by the auction mechanism. The ad is then delivered to the user's browser through an ad server, which tracks and measures the ad's performance.

2 Benefits of RTB

RTB offers several advantages for both advertisers and publishers. For advertisers, RTB enables them to reach their target audience more efficiently and effectively, by using data and analytics to tailor their bids and ads to the user's profile, behavior, location, and context. RTB also allows advertisers to optimize their ad spend and performance, by adjusting their bids and strategies in real time, based on the feedback and results of the ad auctions. For publishers, RTB helps them to maximize their revenue and fill rate, by exposing their ad inventory to a larger and more diverse pool of advertisers, and by selling their impressions at the highest possible price, based on the market demand.

3 Challenges of RTB

RTB also poses some challenges and risks for both advertisers and publishers. For advertisers, RTB can be complex and costly to implement and manage, as it requires sophisticated technology, data, and expertise to participate in the ad auctions and optimize the ad campaigns. RTB can also expose advertisers to fraud, privacy, and quality issues, as they may not have full control or transparency over where and how their ads are displayed, and whether they reach real and relevant users. For publishers, RTB can erode their brand value and loyalty, as they may lose direct relationships and negotiations with advertisers, and as they may compromise their user experience and content quality by showing too many or irrelevant ads.

4 Best practices for RTB

To make the most of RTB, advertisers and publishers need to adhere to certain best practices and guidelines. Advertisers should set clear goals and objectives for their campaigns, such as awareness, engagement, conversion, or retention. They should also use reliable data sources and platforms to inform their bidding and targeting decisions, and monitor the ad performance and outcomes to optimize their bids and ads. Additionally, they should partner with trustworthy ad exchanges or networks, and use tools to prevent fraud. Publishers should segment their ad inventory according to the audience, content, format, and placement characteristics, and set floor prices or reserve prices for the impressions. They should also balance the quantity and quality of ads on the website, maintain relationships with key advertisers and agencies, offer them premium or exclusive access to the ad inventory, protect user data and privacy, and comply with relevant laws and regulations.

5 Future trends for RTB

RTB is constantly evolving in response to the ever-changing needs and preferences of the online advertising industry and market. In the future, mobile, video, and social media are expected to become the dominant channels and formats for online advertising, necessitating more creativity, interactivity, and personalization in ads. Furthermore, there is a shift away from cookies to other identifiers and methods for tracking and targeting users, such as device IDs, universal IDs, or contextual signals. This requires collaboration and innovation among industry stakeholders. Finally, new technologies and platforms such as AI, ML, or blockchain are emerging to enhance and enable RTB. These offer more automation, intelligence, and security for ad auctions.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?