Tag Archives: RTB

Understanding Real-Time Bidding in 30 seconds.

According to Wikipedia – Real-time bidding (RTB) refers to the means by which ad inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction. With real-time bidding, advertising buyers bid on an impression and, if the bid is won, the buyer’s ad is instantly displayed on the publisher’s site.

Wow ! That’s a lot of jargon for any non-digital person to understand. Let me try to break this down and share a story around the media content that you consume almost daily i.e. Newspapers.

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Story 1: 

You received a newspaper and see ads on the first page which is same for everyone in your whole town. That essentially is ‘reserved buy’ of inventory.From an advertisers perspective he went ahead and booked the ad space in advance paying whatever was asked by the newspaper.

RESERVED BUY

Story 2: 

You received a newspaper and see ads on the first page which is same for your whole block and ‘could’ be different for the people living in the next block.
In this case the advertisers met at the newspapers office a day before and placed their respective bids for the blocks citing relevance of the audience to their product. Say an advertiser X with the highest bid for your block won to show his ads for your block. This is a regular ‘bidding based auction process’ followed by most. e.g. ‘Google Adwords’.

bidding process in an auction

Story 3: 

You received a newspaper but it didn’t had any ads till the time delivered to your doorstep. As soon you picked it up to read suddenly an ad appeared on it. The same happened with every single person in the town. Everyone had different ads to see, with some having same ad as well. Plus every page that you flip on the newspaper has an ad tailor made for you based on what you did on the previous page – all in the very instant!

The advertisers waited till the last moment for you pick up the newspapers and then decided how much to bid for that individual ad for you, based on your age, gender, location and 10 other things. They waited till the very end so as to gather feedback on who is viewing the newspaper and then show up the desired advertisement. The advertiser X won the bid for you and showed his ad at that very ‘instant’.Similarly this was done for every person of the town in the very instant they picked up the newspaper. This is now called Real time bidding.

oh hell yeah

So as WIKI says – “Real-time bidding (RTB) refers to the means by which ad inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction”

Thus Ad-inventory is the ad space in your newspaper, per-impression is the ad-view by you, and programmatic instantaneous auction is the the real time instantaneous bidding by buyers, competing for showing you their respective ad.

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Now I might have left some details while explaining this answer but largely from a consumer point of view you will just see the ads without actually knowing how they are served.

The challenge for me was to keep it very plain and simple for a layman to understand. In story 2, the auction process is nearly real time instead of a day before and far more complex using 2nd price auction methods. But in essence the bidding is done ‘largely’ without any individual customer feedback loop mechanism like in RTB.

Please do comment if I could have made this more simpler.

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