Born in 2009, Real-time bidding (RTB) is a method for buying and selling online display advertising placements in real time. Using an auction pricing mechanism, it allows these placements, or ‘impressions’ to be purchased through bids advanced as and when they become available. The highest bid wins the impression, and the relevant creative message is displayed in the slot.

The auction process takes place across media exchanges that connect sellers (publishers) and buyers (advertisers).

How it works

1. A user clicks through to a page on a publisher’s website, prompting it to load.

2. As the page loads the publisher sends out a bid request to demand sources including Demand Side Platforms (DSPs), exchanges and Supply Side Platforms (SSPs). The request includes information relating to the impression in question (e.g. the user’s IP address, browser language or demographic).

3. Based on these attributes, the demand sources calculate the value of the impression to the various advertisers they represent. Using internal algorithms and pre-set buying parameters, they decide whether – and how much – to bid.

4. The relevant (winning) ad is displayed on the page.

The whole process takes milliseconds. It causes no visible delay to the user, and occurs simultaneously for every ad slot on the page.

The advantages of RTB

Transparency

RTB has created a trading environment for display that more closely resembles the stock market model, where pricing is determined by the forces of supply and demand. As such it’s gone some way to removing the biases of the traditional media-buying process, which has typically involved advertisers approaching publishers directly to negotiate the bulk pre-purchase of ad space on select sites. It has become apparent that a large amount of inventory was not formerly being monetised and this additional liquidity has reduced CPMs in the short-term. Reduced prices have led to improved results for advertisers and demand and CPMs have been increasing again as a result.

Efficiency

Purchasing impressions in bulk, advertisers would typically pay the same CPM across the board despite the fact that some users in a segment will be more valuable than others. With RTB impressions are bought on an individual basis so that advertisers only pay for the most relevant users, thus achieving the maximum ROI. Thanks to RTB exchanges publishers are meanwhile able to work with hundreds of advertisers at one time, ensuring that they in turn make the most of their inventory by always selling to the highest bidder.

As trading is now done via web interfaces and trading tools with less emphasis on relationships and paperwork, display media has become faster and cheaper to transact thus increasing the value which accrues to advertisers and publishers rather than middlemen.

Real-time bidding: What next?

An 2013 IDC report, commissioned by Pubmatic, predicted worldwide RTB spend would increase from $2.7 billion in 2012 to $20.8 billion in 2017, increasing its share of online and mobile display advertising spend from 8% to 26%. RTB was the fastest growing segment of the digital advertising sector in 2013.

A number of factors are currently converging to shape the RTB landscape, the key themes are outlined below:

1. Mobile: RTB bidding on mobile has yet to take off in the same way as in the online display space. In Western Europe RTB spending accounts for less than 4% of total mobile display advertising spending. Expect the mobile space to be transformed in the same way as the online display space was when RTB’s share increases.

2. FBX: Facebook’s launch of the Facebook Exchange (FBX) in the RTB space has confirmed RTB as the future default trading method for online advertising. It is estimated that only 20% of Facebook’s inventory is currently available via FBX. If Facebook traded all its inventory, it would be second only to AppNexus with 20% impression volume market share.

3. Fight Against Fraud: As more premium advertisers turn to RTB to streamline their media-buying we can hope for further innovation in the area of fraud prevention to ensure brand safety and a clean market.

4. Emphasis on Viewability: As bidding is an evermore automated process we can expect emphasis to fall more on the actual ad experience, an important aspect of which is viewability; i.e. measuring whether ads are likely to be seen, how many are seen, and for how long. This will likely present a big opportunity for growth in the RTB landscape.

5. Creative Innovation: Ultimately the ad experience is defined by the creative message, and in the future we expect more brands to take on the next challenge of delivering an immersive ad experience, at scale.

We feel strongly that RTB is more and more about taking things beyond the click; the automated and human mechanics of trading are important, we now need to talk more about ad experiences and changing the mindset of people towards brands and products to increase the overall key metric, propensity to buy.

We don’t want to lose site of clicks, post-click and post-view windows, video completion rates and all the useful indicators of campaign performance at a granular level. We do want to bring the conversation back to what it is we’re trying to achieve in the first place, namely, behaviour change.

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