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Real-Time Bidding 101: Everything You Need to Know

By Jenna Bruce on Tue, Feb 24, 2015 @ 08:19 AM |


If you’ve moved any of your marketing campaigns online, you’ve most likely learned display advertising has become inefficient because, up until recently, publishers have had no way of measuring the value of the website visitor to which the banner ad is displayed. This has created a situation where advertisers see little ROI on their display marketing budgets because a majority of impressions are delivered to website visitors who are not their target demographic. Enter real-time bidding (RTB), a process that finally allows advertisers to value an impression first and then bid on it in real time.

It’s Like the Stock Market for Display Ads

Through a reputable media marketplace, publishers and advertisers can make exchanges that make financial sense to both parties. Much like the stock market, where market shares become available and buyers quickly compete for them (the highest bidder winning the shares), impressions become available Real-Time Bidding 101: Everything You Need to Knowand advertisers then may bid on them, with the highest bidder winning that advertising space. Because it uses real-time user data to measure the ‘going value’ of impressions, RTB allows publishers and advertisers to make adjustments to their ‘bids and asks’ as the market fluctuates.

How is all this possible? Once an ad impression loads into a visitor’s Web browser, data about that particular page is forwarded to the ad exchange marketplace where the ad space is auctioned off to the highest bidder. The winning bidder’s ad is then almost instantly loaded into the webpage. It’s not called “real-time” for nothing.

The Benefits of Real-Time Bidding to Advertisers

We’ve already mentioned the fact that real-time bidding is a much more efficient process of buying display ads, but let’s take a look at a few more reasons why RTB greatly benefits today’s advertisers.

Better Testing Equals Improved Response Rates

When dealing with batch-oriented data, which can take hours or even days to access and analyze, advertisers find it next to impossible to make crucial adjustments to their tactics and campaigns. But with RTB’s real-time feedback, advertisers can quickly and easily evaluate multiple strategies, switch ads based on audience engagement, and greatly improve response rates.

Real-Time Bidding 101: Everything You Need to KnowIdentify Garbage Inventory

According to one troubling stat by ComScore, 31 percent of ad impressions cannot be viewed by users. Shady web publishers are also responsible for online ad fraud that totals about $400 million per year, according to Adweek’s Mike Shields. Basically advertisers are spending on impressions that often end up on ghost sites or buried under other pop-up ads. Then there are the really dishonest publishers who stack ads below the fold so no one ever sees them.

Another benefit of real-time bidding are the analytic tools that help spot fraudulent behavior by showing ads that have either very low click-through rates, indicating no one is seeing them, or extremely high click-through rates, which are generally a result of the publisher using bots to pad impressions.

More Transaction Transparency

Because buyers and sellers negotiate directly with one another via these media exchanges, market forces then become the only drivers of price so advertisers can’t be overcharged. Also, the fact that individual ad impressions are auctioned off leads to a fragmentation of the market, which leads to equilibrium prices. That’s a win for both advertisers and publishers.

Better Inventory

Through these media auctions, advertisers have access to better, more efficient inventory. Better inventory means a higher return on investment, and a higher ROI means a bigger bottom line.

With all these tremendous benefits it’s no surprise RTB growth is on the rise. The digital landscape has become increasingly crowded and competitive. More ads are being shown to Internet users than ever before and these users have a small attention span when it comes to being marketed to. Advertisers who leverage the real-time analytics delivered by RTB will remain ahead of the pack.

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