Overview of RTB and how it has impacted programmatic advertising

RTB (real-time bidding) is advertising purchase and sale technology that works as a real-time auction. The advertiser whose bid wins gets to show their ad. RTB does not set any specific prices, on the contrary, it is the advertiser who offers the price, and the auction participant placing the highest bid wins the auction.

RTB participants

There are five parties to the process:

1. Publisher;
2. SSP;
3. Ad Exchange;
4. DSP;
5. Advertiser.

Publisher

The publisher is the media (website or mobile app owner). They sell ad slots, i.e. provides the opportunity to show ads for a price. For publishers, this is one of the ways to monetize their inventories.

SSP

SSP is a supply-side platform working with publishers. It helps to sell all their inventories at the best prices. The platform helps to monetize the inventory, manage ad campaigns, get analytics, etc.

Ad Exchange

This is an advertising trade exchange that helps to sell and buy ad slots. In a way, it is the intermediary between an SSP and DSP. Ad exchange receives information on the available slots from the supply side and forwards it to the demand side.

DSP

DSP is a demand-side platform that works with advertisers. It stores media ads (advertising creatives) that advertisers would like to show online on publishers’ media. This technology helps marketers and advertising agencies to spend their budgets efficiently, receive campaign reports, and avoid ad fraud.

Advertiser

This is the party that pays for the ads and buys showings. It can be a company that wants to advertise or an intermediary – an ad agency, etc.

How does RTB work?

Despite the complexity of the process and the number of participants, the whole process takes a few instances – from 300 to 500 milliseconds.

Here’s what happens exactly:

1. Users visit a website or mobile app connected to an SSP;
2. The media sends a request to the SSP on the availability of ad slots;
3. The SSP analyzes the request taking into account targeting data and sends it to the ad exchange;
4. The ad exchange forwards the request to demand-side platforms;
5. The ad exchange launches a real-time auction for the DSPs;
6. The DSPs place their bids;
7. The auction winner shows their ad.

We need to mention that the auction is based on the “second-price principle”. It means that if there are, for example, three advertisers whose bids are 1, 1.5, and 2 dollars respectively, the winner is the advertiser who offered 2 dollars. However, they are going to pay 1.5 dollars – the second price after their bet.

Publishers, on their side, set the price floor – the minimum bid per ad showing. If no advertisers are willing to pay more than that, the slot remains unsold.

RTB advertising formats

The auction allows bidding on any popular programmatic advertising format:

• Multimedia ads – banners, interstitial ad units, lightboxes, In-Stream videos, etc.);
• Standard text and graphic ads are created automatically for each particular platform;
• Native ads;
• Video ads.

What is Open RTB?

It is an open protocol created under the management of IAB (Interactive Advertising Bureau) as a way to stimulate the growth of trading volumes on the RTB market by setting industry standards for communication between publishers and advertisers. Open RTB is not limited to real-time bidding protocol standardization and covers other aspects of information taxonomy, autonomous mode configuration, etc.

How does RTB influence programmatic advertising?

Advertisers using DSPs to manage their ad campaigns can see the differences between the RTB operation and usual DSP processes. Demand-side platforms allow advertisers to control the place, time, and way the ads are shown. They can also set the ads for specific markets or audience segments. All these make DSP a popular choice among those who want to get the maximum feedback from their campaigns.

RTB does not give advertisers the same level of control as DSP works as an intermediary between the publisher and advertiser making the ad and audience matching process easier. However, this can be seen as a disadvantage since publishers still need to know who they are targeting.

Still, programmatic advertising can help them solve the problem of inappropriate ad placement. Ad servers can detect which ads to show by analyzing the webpage content. This way, most users will not be aware that they are watching ads, whereas advertisers will be able to evaluate the campaign efficiency based on the website traffic analysis.

Advantages of Open RTB

Media owners can sell their inventories at competitive prices. At that, their audience only watches relevant ads. Real-time bidding also helps to sell all the ad slots, including the inventory surplus.

Advertisers, in their turn, have a chance to allocate their advertising budgets efficiently, buy targeted showings, and have centralized management for all their campaigns.

Conclusion

To sum up:

• RTB is a real-time bidding process that helps to sell and buy ad showings based on the second-price principle;
• The bidding sells not ad slots but ad showings to a specific advertiser;
• RTB is beneficial to all parties; publishers get an efficient monetization tool, whereas advertisers show their ads to target audiences.

RTB has significantly changed the ad purchase and sale process in the digital world, and it has had a considerable influence on programmatic and digital advertising as a whole. RTB allows advertisers to take part in bidding for every ad showing, which allows them to buy inventories at the best prices. This, in turn, helps them increase their return on investment rates (ROI).?

Real-time bidding also makes advertising budget management more efficient, as advertisers have a chance to buy inventories only on media that are the most relevant to their target audiences.?

Along with that, RTB can increase the competition complexity in the advertising market, as a larger number of advertisers are now able to bid on a limited number of ad slots. This may lead to higher prices for some categories of advertisers and make the competition higher.