By Sergio Lopez

One of the main advantages of Real Time Bidding (RTB) is that bidding can be run on an impression by impression basis, which means that we only bid on impressions that are relevant to your business, but what exactly does this mean and how it does it work?

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Impression by impression

A few weeks ago I wrote a post about the main reasons to use RTB. One of those reasons was the capability of bidding on an impression by impression basis, and consequently avoiding wasted impressions and money. I thought it would be useful to explain what “impression by impression” means and how it works.

But let’s take one step back. Do you remember when you had to look up words in the encyclopaedia, book plane tickets in a travel agency or wait for your friends at the football pitch because there were no mobile phones to organise a match? – Neither do I. As in many other industries, online display advertising has changed dramatically over the last few years. The industry is not just comprised of advertisers, publishers and agencies anymore. There are many new agents with different roles, but to simplify this post I’ll focus on just three players that we can find in the RTB landscape: Publishers, Ad Exchanges and Demand Side Platforms (DSPs).

The Agents:

The DSP: A Demand Side Platform (like DoubleClick Bid Manager) is a tool that allow us (agencies) to automate the purchase of online advertising on behalf of advertisers. We obviously need to use different strategies, targeting methods and bear in mind many parameters to reach the right audiences.

The Publishers: Owners of online publications who have the inventory available to sell.

The Ad Exchange: Open market places that enable advertisers to evaluate, bid on, and purchase ad inventory from publishers through real time auctions on an impression basis.

How does the exchange work?

How does the RTB exchange work

We (agencies), set RTB campaigns up on a DSP, making the most of each targeting method and bearing in mind things like campaign goals, historical & real-time data, budgets, frequency caps, geography, etc. We also set up the bids depending on how much an impression is worth to the advertiser based on their ROI goal.

The publisher provides its inventory to an Ad Exchange. When a user visits a publisher’s webpage and it begins to load, it sends information to the ad server about the available ad space (size, geographical location, content category, operating system…), using this information and matching parameters, the DSP (where we set everything up) decides whether we want the impression and how much we’ll bid for it, based on its unique value to you. The auction takes place and if our bid wins (based on the real-time market demand), our ads will be shown on the publisher’s webpage. This complex and amazing process takes place in only 100 milliseconds.

How is that possible?

Let’s have a look at one graphical example. There are two main components of real-time bidding that makes this possible: the Real-Time API (the “pipe”) and the Real-Time Bidder (the brain).

Real time bidding process

The pipe funnels information from the ad exchange (about the ad space and audience) to the brain.

The brain is going to evaluate each individual impression and will make the decision to determine whether we want that impression, what to actually bid for that inventory and which creative to show.

The combination of both elements is what makes RTB possible. RTB happens every time the “pipe” announces an impression and the “brain” evaluates it.

That’s essentially a simple explanation of how RTB works; as you can imagine there is a complex system behind it. Now that you know that it is possible to see when every impression becomes available and how we only bid on impressions that actually matter to your business, paying exactly what they are worth to you, why would you waste your money?

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Contact us to find out more about real-time bidding and how we can help.

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