Interactive Advertising Bureau
03 April 2017

The advent of RTB

For a newcomer to the programmatic scene, an industry steeped in acronyms and specialised terminology, the task of unravelling its intricacies might seem daunting at first. The purpose of this article is to very succinctly outline the main features of the key players and tools used in real-time bidding (RTB), and to ease the transition into this field for someone with very little knowledge pertaining to it.

At the foundation of the RTB system lie the Advertiser and the Publisher. The former buys, the latter sells. The Advertiser buys inventory, a fancy word for the space the ads take on a certain page. The inventory belongs to the owner of the website, or the Publisher.

Initially, the two aforementioned entities, Advertiser (buyer) and Publisher (seller) conducted business directly. Because of the sheer volume of Publishers (to be read websites) out there, however, there was a lot of unsold inventory left over, so a huge number of those ad spaces we talked about earlier were left blank. This called for a more efficient and proficient way of doing business and going about selling inventory, a task taken up by the Ad Network. The Ad network - think of it like a convenience store - bought ad spaces (inventory) from the Publisher, packaged them according to various criteria, and sold them to the Advertisers who used them to... well, advertise their products and/or services.

Due to the relatively easy way of setting up an Ad Network and few limitations, a lot of them started cropping up, which made the whole business of finding the right package, at the right price (for both buyer and seller, mind you) that much more difficult and time-consuming. The Ad Exchange was created as a business model designed to make trading easier and quicker. It focused not on packaged inventory (sold in thousands of units using currency called Cost per Mille – or CPM), but rather on audience. So instead of selling virtual space (what an Ad Network essentially does), the Ad Exchange focused on selling the profiles of the individuals visiting the Publisher’s pages. This enabled the Advertiser to run custom-tailored ads on the Publisher’s website, which benefited all parties involved: Advertiser, Publisher, and User. Imagine, if you will, the convenience store; now picture yourself grocery shopping there and think of how much easier it would be if the store only sold what you needed. Think also of how profitable it would be for the store to be able to sell its entire (or as close to as possible) stock every single day.

So now Advertisers and Publishers could decide whether they wanted to sell and buy inventory or audience, and could choose between using the Ad Network or the Ad Exchange. The catch was that although an Ad Exchange offered a more targeted approach to buying ad space, and the Ad Network sold inventory in the millions, the whole process was still not terribly fast. Consider that the Ad Exchange functions like a Stock Exchange (thought the name was just a coincidence?); the Publishers put up audiences for sale, the Advertisers bid on the audience they want to reach, highest bid wins. Simple? Yes! Time-efficient? Not quite. Just like an actual stock exchange, split-second decisions could make the difference between scoring a great deal and missing out on one.

To streamline the entire process, some Advertisers chose to use Trading Desks or Demand-Side Platforms (DSP). Both Trading Desks and DSPs have the very easy task of using exceedingly complex algorithms to automate the trading process carried out on an Ad Exchange. This is what that real-time bidding thingamajig from the first paragraph actually is. Imagine machines into which you input a series of criteria (such as the size, shape colour and weight of the fruit you want from the convenience store for today) and it does the rest, buying (if you’re the Advertiser) what you need in the blink of an eye. But what if you wanted to sell automatically as well? If the Advertiser has a DSP at its disposal, the Publisher can use a Supply-side Platform (SSP). An SSP does for the Publisher pretty much what the DSP does for the advertiser, only instead of automating the buying process, the Publisher entrusts machines to take care of selling the inventory.

That’s pretty much it, as far as the basics of the basics go. But this is just scratching the surface. Programmatic is definitely a very complex and ever-expanding field, but it certainly doesn’t need to be a scary one, particularly now that IAB Europe created the Introduction to Programmatic Advertising course, designed to help you navigate this very hot (though quite intricate) topic. You can also watch this very informative video clip put together by IAB UK.

See you in the classroom!

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