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.