Real-time bidding (RTB) (noun)
also referred to as: real-time trading, exchange trading
What it means
Real-time bidding is a type of programmatic media buying in which media buyers bid against one another over individual ad impressions, as those impressions are shown to users.
When a user visits an RTB-enabled web page, ad placements on the page are auctioned off to advertisers who want to show their ad. Because the auction happens in the milliseconds it takes for the user to load the page, human buyers can’t be directly involved — they have to use computer algorithms. Bidding algorithms comb the ad exchanges — digital marketplaces where real-time auctions occur — looking for relevant auctions (based on price, quality, and characteristics of the user viewing the ad) and automatically placing bids based on programmed rules (for instance, placing higher bids on impressions that meet more of the desired criteria).
What it means to you
RTB is a means of buying digital media that puts all the control, and all the responsibility, in the hands of the buyer. Buyers and their algorithms can decide exactly which sites, ad formats, page positions and audiences they want to buy, and how much they’re willing to pay for them. But on the other hand, RTB buyers often don’t know the publishers they’re buying from, and they don’t have the same kind of quality assurances that come with an in-person publisher relationship.
RTB tends to be more cost-efficient than other methods of digital media buying because the majority of impressions on open RTB exchanges are low-CPM “remnant” inventory — the ad placements that are left over once all the best stuff has been sold to direct buyers. RTB started as a way to help publishers sell off their remnant, which, despite dirt-cheap prices, is hard to move because of the wealth of digital ad slots out there. But combine the low cost of remnant with the potential to target only high-value users in high-conversion-potential situations, and that inventory gets a lot more valuable.
The flip side of increased control is increased risk. RTB is sometimes called the Wild West of digital advertising, because many marketplaces (typically the less expensive ones) don’t offer guarantees against non-viewable, mislabeled, non-brand-safe, fraudulent, or otherwise low-quality impressions. Low-quality ads can be a significant risk on exchanges that sell large volumes of low-priced inventory. So the buyer has the power to chose exactly what they buy, and they can great deals on valuable impressions; but it’s also up to them to beware of bad sellers. (Just like shopping on Craigslist.)
As a method of programmatic buying, RTB is typically contrasted with network buying, where the network provider uses its own data and technology to place media dollars, and buyers have limited control over which impressions they’re buying. It’s also contrasted with programmatic direct, where a buyer forms a relationship with a publisher and negotiates bulk purchases the old-fashioned way, but uses programmatic technology for targeting during the actual execution of the buy.
Examples in the market
RTB auctions take place on ad exchanges, which sellers and bidders access either directly, through the exchanges’ user interface, or using separate software, called a demand-side platform (DSP) for buyers and supply-side platform (SSP) for sellers. Examples of large, popular open exchanges are Google’s Doubleclick Ad Exchange, Yahoo’s Right Media Exchange, OpenX and AppNexus. Companies like AppNexus provide a platform that publishers and networks can license to build their own ad exchanges and sell inventory via RTB. Although the largest exchanges focus on display advertising, there are also dedicated exchanges for buying video, mobile and native ads.