Varos Glossary

Real-time bidding (RTB)

What is Real Time Bidding (RTB)?

Real-time bidding (RTB) is a core component of programmatic advertising. Programmatic advertising is the overarching process of buying and selling ads in real-time based on a wide range of factors that dictate the price of a specific ad spot.

RTB is an important component of programmatic advertising that determines the pricing and processes of the auction. Thanks to RTB, both publishers and advertisers are able to maximize every ad spot.

How Does RTB Work?

RTB is the component in this process that receives an ad request, evaluates optimal pricing, and then receives bids from advertisers. The winning bid, which is determined by bid strategies set by the advertiser, wins the ad spot. A real time bidding algorithm both determines the price of the ad spot dynamically while also processing bids from advertisers.

The goal of real time bidding advertising is to deliver hyper-precise audience targeting, focusing your ad spend only on the most relevant audience. This is achieved because programmatic advertising decides on pricing based on the individual user rather than platform-wide or based on generalized information.

RTB considers a wide range of signals about any given user before determining pricing and triggering the auction. This allows organizations to configure campaigns based on the user’s information and maximize their ad spend.

Pros and Cons of Real-Time Bidding

The goal of real time bidding platforms is to benefit both publishers and advertisers by determining the precise costs of a specific ad spot, then receiving bids and ultimately showing the winning ad.

This process provides benefits for publishers, advertisers, and even consumers who would rather see relevant ads. Let’s explore some of the key benefits and drawbacks of RTB.

Benefits of RTB

Why have programmatic advertising and RTB become so popular in recent years? The two core benefits of RTB are:

  • Highly accurate audience targeting: RTB allows advertisers to have granular control over every ad they buy. Advertisers can then make sure their ads only appear next to their target audience since programmatic advertising considers a wide range of signals from the user about their interests, demographics, and behaviour. As a result, it’s possible for advertisers to generate more clicks and conversions when compared to other media buying methodologies.
  • More pricing control for publishers: Publishers need to ensure that every ad spot on their site generates the most revenue possible. RTB accomplishes this goal by calculating ad prices on the fly based on each individual user rather than using flat rates or more generic methods to calculate costs.

Drawbacks of RTB

We can see how RTB and programmatic advertising helps advertisers only spend their budget on the right people, while publishers can maximize revenue from every ad spot. However, RTB is not perfect, and there are some drawbacks to consider.

  • Less control over context: There is no human element involved in RTB, which is part of the appeal. Automation is at the core of the benefits it provides. However, there is the potential for ads to appear in the wrong context if the system misunderstands the signals it's receiving. For example, a news article about a plane crash might trigger an ad buy from airlines, but considering the entire context of the ad spot, it’s a bad time for airlines to advertise a ticket sale. Fortunately, the latest in AI and machine learning is advancing RTB to hopefully eliminate this drawback.
  • Possibly serving less-than-ideal content: A similar drawback for publishers is the potential for low-quality ads to win the ad spot, which harms the user experience and can affect overall revenue if the problem persists. The best way to counter this issue is to have an auditing process for ads participating in the program.