Real-Time Bidding (RTB) explained
Real-time bidding is a type of programmatic buying that involves an auction for an ad space that takes place in the time it takes an ad impression to load.
How Does Real-Time Bidding Work?
The way it works is as follows: when a visitor stumbles upon a web page which the publisher has signed up for, an ad exchange or supply-side platform, the whole web page is loaded apart from the ad itself. In place of an ad there is a special piece of code that makes a request to a publisher’s platform such as an SSP. This request comes along with visitor characteristics, such as device type or country of origin.
The SSP then connects with a DSP to check which campaign is looking for this type of an audience. All advertisers that target the criteria the visitor meets participate in an auction. The bids were already set when advertisers were creating their campaigns.
The DSP determines the winning bid and collects the payment for the ad impression. The payment can be settled using one of two models:
- First price auction – bid and price are the same
- Second price auction – the price for an ad impression is the second highest bid in the auction
Finally, DSP delivers the ad to the web page server so the visitor can finally see it.
The whole process lasts fractions of a second, ideally the time it took a web page to load. Hence the ‘real-time’ part of the name.
Is RTB the same thing as programmatic buying?
No, RTB is a type of programmatic buying but there are more types. Mainly there is direct programmatic, a purchasing model reserved for premium publishers that want a price for their placement to be negotiated separately, directly with selected advertisers.
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Why is RTB important?
RTB is the next level of price negotiations that is cost-effective and efficient. It allows to quickly determine the market price for each placement.
RTB vs Header bidding
Header bidding is a new approach to how platforms handle selling ad inventory. The typical RTB-style auction works on a waterfall model. This means that there is a queue of buyers that can have a shot at purchasing ad inventory, but only after buyers higher in the queue bought better parts of it. The lower you are in the queue, the lower the price is but so is the quality of traffic.
The Queue (or a ‘waterfall’) looks like this: First there are direct orders that buy premium traffic for a fixed price, then there’s a regular RTB auction and the remnant traffic is sold to fallback companies, such as Google Ads.
Header bidding initiates the auction way earlier than the RTB waterfall, which starts only after a page is loaded. Header bidding, as the name suggests, starts when a header (so a beginning part of a web page) is being loaded. It allows all parties to bid for traffic before the waterfall cascade of buyers in the queue. This way advertisers can purchase premium ad space and publishers can get higher prices for their traffic.