Real-time bidding (RTB)

Real-time bidding (RTB) is one of the main ways in which online ads are sold: each time a person opens a web page or an app, the space for one ad is auctioned to many advertisers, and the auction ends in a fraction of a second, before the page has finished loading. RTB is the best-known part of programmatic advertising, which means buying ads automatically through software, rather than through phone calls and contracts between people.

Here is how an RTB auction works in general. A person opens a page, and the page has an empty ad slot. The publisher's selling software, a supply-side platform (SSP), sends a bid request to an ad exchange. The request describes the slot and what is known about the viewer, such as the city, the device and the topic of the page. The exchange passes the request to many advertisers' bidding programs, called demand-side platforms (DSPs). Each DSP decides, in about a tenth of a second, whether this viewer is worth showing its ad to, and how much to bid. The highest bid wins. The winner's ad is sent to the page and appears. Prices are usually quoted per thousand showings of an ad, which is called CPM.

Why sell ads this way? A publisher may have millions of ad slots a day, each seen by a different person. No sales team could price them one by one. Through RTB, each slot goes to the advertiser who values that viewer most at that moment.

Take, for example, a cricket score page during a match. In the moment the page loads, a car maker, a food delivery app and a bank may all bid for the same slot beside the score.

Consider a logistics company that needs 200 drivers. Programmatic job advertising places its job ad on hundreds of job sites, and software adjusts how much the company pays each site for each application.

Say a software company wants to reach only the finance heads of 300 chosen firms. An account-based marketing (ABM) platform tells its DSP to bid only when a viewer appears to work at one of those firms.

How is RTB different from a direct deal? In a direct deal, often called programmatic guaranteed, the advertiser and the publisher agree a fixed price and a fixed number of showings in advance. Software still delivers the ads, but there is no auction. RTB sets the price again for every single showing.