Affiliate Software Affiliate Marketing What is Real-Time Bidding (RTB) and how does it work?

What is RTB - Real-Time Bidding and how an Affiliate Marketer can benefit from it? This article will give you the best and most understandable.
Affiliate Valley Affiliate Valley 1 month ago 0 48609 3 min

Today we are going to be talking about Real-Time Bidding. Here, advertisers all across the world bid for available advertising space on websites. These websites have impressions that any number of bidders or potential advertisers bid for that space. 

Most of the time this concept is described in a complicated way but it is not that complicated. We are going to explain it in simple terms so that you can get a better understanding of how RTB works. Understanding how RTB works is a very important aspect in the media buying world especially to advertisers and affiliate marketers wanting to increase their revenue. 

When people hear the term programmatic, they just think that it because the advertising process is controlled by software that can take into account lots of other parameters which will be impossible if doing it manually. While this is true, RTB is much more complicated than that.

What is Real-Time Bidding?

Basically, RTB involves two sides of an equation. On one side, you have websites that have ad space and the other side has advertisers that want to show ads. It is nothing more complicated than that. 

Real-time bidding allows the advertisers to instantly bid on the ad space when it is available. 

Within 50 milliseconds of when a surfer loads a website, thousands or millions of advertisers are bidding to show their ads on the space available on that website. 

This process could not happen before because computing and internet speeds did not allow for such a real-time thing. This is incredible democratization of ad spending. 

There was a time when it looked like Google was going to control the web advertising world but with RTB it becomes impossible. Because on the supply side, there are many networks of websites. 

So, every time when someone opens these websites anywhere on the web or on any device a notice is sent out to the people who have an ad to show or the demand-side platform (DSP). 

So let's use an example of a website that is in the Google Content network. 

So when a surfer comes and loads a website from their browser that has an ad space to display banners. 

So, what ad is the website going to show on that space? 

Well, it is going to ask the Google Content Network. Unfortunately, the Google Content Network has no idea. 

But it is going to find out. How is it going to find out? 

It is going to do so by sending a notification to the DSPs. The DSPs hold all the available ad inventory. 

So where do they get the ad inventory? 

Well, they have user bases, self-service platforms, or they have relationships with agencies that supply them with the ads. These ads may be banners, videos, etc. 

Since the advertisers are so many, they have to bid for that spot. So, they will send a bid. 

They will not bid every single time based on their targeting data. This targeting data contains information on what group of people the advertisers want to see their ads. 

It could be based on geographical location, sex, race, habits, etc. So, if the signal from the website does not match with their targeting data, they will not send back a bid. 

If the signal from the website matches with their targeting data, the advertisers will send a bid. Since many of them are bidding for the same ad space, Google is going to accept the highest bid. This means that the ad of the advertiser who pays the most money will be shown in that space. 

So, for example, let’s say the visitor opens a Tech blog and visits 10 pages on the website. This blog has on the top of each page a banner ad. The bidding starts when the visitor opens the site. The advertisers will offer their biding prices and frequency cap (the number of times the ad is shown to the same person in a day on the same site).

Let’s say the first advertiser offers a bid of $1.9 CPM, with a frequency cap of 4. 

The second advertiser offers $1.5 with a frequency cap of 5, and the third offers $1 CPM with a frequency cap of 6. 

So, who wins the spot? 

It is obvious that the first advertiser won, but they will not occupy the ad space forever. Since they have a capping frequency of 4, the visitor will see a different ad by the time they get to the 5th page. This is because the ad can be shown only 4 times to the same user in a day.

The next advertiser to take the spot is the one who bid for $1.4 CPM, with a frequency cap of 5 and their ad will be shown to the user for the next 5 pages. 

The advertiser with the lowest amount and a frequency cap of 6 will get only one impression. 

There are also other pricing models that the advertisers can use such as CPC and CPA that allow for greater flexibility. 

The advertiser may decide to bid higher or lower depending on how valuable and impression is for them. This can be known using cookies that store users browsing habits and share with the advertisers. 

Ad targeting has become so effective and it is a little scary. For example, you may visit a website wanting to buy a watch. For some reason, you leave the website and open a blog to get some news. On that news blog, you will find the ads to the watch website you just visited. You may keep finding the ads on the next 5 websites you visit. 

What are the benefits of Real-Time Bidding?

In General terms, RTB provides greater efficiency. 

Publishers are able to do specific ad targeting that gives them better conversion rates, and advertisers can choose exactly where they want their ads to be placed.  

Publishers are now able to set the minimum prices for their inventory. This is to make sure that the value of the media inventory does not fall.

Affiliate marketers can now significantly increase their performance because RTB works well with verticals and specialized sites. 

You are able to increase your profits due to increased competition among advertisers. 

Conclusion

Real-Time Bidding has come to simplify the complex bidding process. Affiliate marketers are now able to increase their earnings with it. We hope that this article has given you the information you need about Real-Time Bidding. Make use of it and climb your way to the top of the affiliate marketing world. 

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