What is real-time bidding?
Real-time bidding (RTB) is an online advertising buying method in which advertising inventory is purchased on a per-impression basis through a programmatic auction that happens in real time. Advertisers bid on available ad space through a demand-side platform (DSP), and the highest bidder's ad is displayed on the publisher's website. As a part of programmatic advertising, RTB allows for highly targeted and efficient ad buying, as ads are delivered to specific audiences based on browsing behavior and other data. It also allows for dynamic pricing, as the cost of an ad can change depending on the competition for a given ad space.
How does real-time bidding work?
Here is a step-by-step explanation of how Real-time bidding works:
- A user visits a website: When a user visits a website, the publisher's ad server sends a request to the DSPs. This request includes information such as the user's demographics, browsing behavior, and the ad space available on the publisher's website.
- Advertisers bid on the available ad space: The DSPs then use this information to determine which ads would be most relevant to the user and bid on the available ad space. Advertisers can set a maximum bid, which is the highest amount they are willing to pay for the ad space.
- The highest bidder's ad is displayed: The DSP with the highest bid wins the auction. Then the advertiser's ad is displayed on the publisher's website. This process happens in milliseconds, which is why it is called "real-time" bidding.
- Advertisers pay for the ad space: The advertiser is charged the amount of their bid, or the second highest bid, whichever is lower.
- Targeted and efficient ad buying: RTB allows for highly targeted and efficient ad buying. Advertisers can use data such as a user's browsing behavior and demographics to target specific audiences. This means that ads are more likely to be seen by people who are interested in them, increasing the chances of them being clicked on and converting into sales.
- Dynamic pricing: RTB also allows for dynamic pricing, as the cost of an ad can change depending on the competition for a given ad space.