How Does Real-Time Bidding Work?
Ad placements that are determined by real-time bidding involve three parties:
- Ad Publishers – Publishers include websites, mobile apps, and other platforms that sell digital advertising space to advertisers via digital ad exchanges.
- Ad Exchanges – Ad exchanges like Google AdX (previously known as DoubleClick Ad Exchange) provide the platform and infrastructure that enables advertisers and publishers to buy and sell ad space/impressions through real-time bidding.
- Advertisers – Advertisers are the in-house marketing teams or paid media agencies that purchase ad space from publishers to reach their target audience.
Real-time Bidding Explained
When a user visits an ad publisher’s website, a bid request is immediately triggered. Bid requests include information about the ad space available on the page, as well as data captured from the user (demographics, browsing history, location, etc.).
The bid request is sent by the publisher’s supply-side platform to an ad exchange, where the request will be automatically and immediately forwarded to multiple advertisers.
Advertisers use specialized bidding applications or demand-side platforms to analyze bidding requests in real time, estimate the value of an impression based on the available ad inventory and user data, and deliver a rapid, automated response that includes a bid for the impression and the appropriate ad creative.
Once the bids have been finalized, the ad exchange will complete the auction and the highest bidder will see their ad placed on the publisher’s website. Publishers can usually set a floor price for their ad space to ensure adequate compensation for the impressions they deliver through RTB.
The entire process of RTB, from the initial bid request to the final ad placement, is completed in just fractions of a second.
What are DSPs and SSPs?
Demand-side platforms (DSPs) and supply-side platforms (SSPs) are software platforms that help advertisers and publishers manage ad inventory and purchasing across multiple ad exchanges and networks.
DSPs deliver centralized access to large volumes of advertising inventory by providing a single interface where advertisers can:
- Manage multiple ad exchange accounts,
- Engage in real-time bidding across multiple ad exchanges,
- Track the outcome of every ad impression won via real-time bidding,
- Optimize ad campaign performance, including metrics like cost-per-click or cost-per-action, and
- Leverage bid shading algorithms to avoid overpaying in first-price auctions.
SSPs provide a single interface where digital ad publishers can manage their advertising inventory, auction ad space to advertisers via real-time bidding, and collect revenue from multiple ad exchanges.