Real-Time Bidding (RTB) industry is constantly rising as programmatic advertising continues to gain influence in digital marketing.
Experts are forecasting skyrocketing results in terms of growth, facilitating more than 20% of overall growth in US markets.
Think about it, billions of dollars in the US only, not to mention Europe and Asia where interests grow yearly.
For example, let’s say you’re on the web page; you’re casually scrolling through its content and the first thing you notice is that ads are adjusted to your preferences.
Is the government spying on us?
How do they know all of this?
Magic? No, not at all.
It’s Real-Time Bidding.
What exactly is Real-Time Bidding?
A server-to-server buying process in which ad space is bought and sold on a per-impression basis. It happens almost instantly through an auction that determines who gets the privilege to buy a specific impression.
In other words, Real-Time Bidding is an automated digital auction process done on a CPM basis. It occurs programmatically, virtually the same as in financial markets. If a bid is won, ads are immediately shown on the publisher’s site.
However, keep in mind that RTB strictly depends on supply/demand. If there’s demand for inventories, publishers get a fairly good price for it.
If the demand is less, ad earnings are low, it’s a constant cycle.
Seems simple, right? Let’s dive in deeper.
For Real-Time Bidding to work, there are three different platforms that need to be involved:
- Supply-Side Platforms(SSPs)
- Ad Exchange
- Demand Side Platforms(DSPs)
What is a Supply-side Platform?
Is what publishers use to sell ad space to advertisers.
What is a Demand-side Platform?
Is what advertisers to buy ad space and manage their campaigns. This is a platform where advertisers have a demand for ad space.
The best example? Google Ad Manager.
By having that in mind, it’s easy to conclude that the math behind is simple very simple:
Supply-Side Platforms + Demand-Side Platforms = Real-Time Bidding
But how does Ad Exchange fit into all this?
What is Ad Exchange?
Ad Exchange is a technology platform that facilitates the buying and selling of media advertising inventory from multiple ad networks. The main price determinant is bidding itself.
In plain English, this would mean that…
Supply-Side Platforms connect with Demand-Side Platforms through Ad Exchange.
Ad Exchange is basically a programmatic middleman in the process of Real-Time Bidding, but we’ll get to that later.
Since this is the only guide you’ll ever need, we’ll start from scratch.
Supply-Side Platforms: How it all begun
As soon as advertising switched from print to digital, way before Supply-Side Platforms even existed; publishers started searching for new methods to generate revenue. The most profitable revenue model was, ironically, the one that was there all along: Advertising
Display advertising emerged at the time and aimed at replicating printed ads in the online world, and that’s all Publishers needed to hear. They initially sold space to advertisers through direct sales, however, as the industry grew, so did the problems.
Direct sales had one major issue; inventories remained unsold.
This indicated that an intermediary technological platform was more than necessary. A platform that would effectively sell inventory through automated processes. And that’s how Ad Networks were born.
What exactly is an Ad Network?
A technology platform that acts as a broker between publishers and advertisers.
But wait, we were talking about SSP’s, what do Ad networks have to do with that?
Well, as Ad Networks started to show up everywhere, newer, more advanced platforms emerged as well. Platforms who became responsible for the decision-making process behind Ad networks – Network Optimizers.
In other words, they determined which ad network brings the best performance benefits.
When Real-Time Bidding was introduced in the 2000s, that’s when „Network Optimizers“ became Supply-Side Platforms. Now you know the history behind SSP’s, but…
What are Supply-Side Platforms?
SSPs allow publishers to connect their inventory to multiple ad exchanges and demand-side platforms.
So basically, it’s an advertising platform that allows publishers to: organize, sell, and optimize available ad space automatically.
The primary role of this whole process is to earn money on websites/apps through advertising formats. As years passed, SSPs modernized and expanded with many innovative ad exchange mechanisms.
But what does that mean?
Well, they allowed publishers to successfully integrate into DSPs (Demand-Side Platforms) directly rather than through other ad exchanges, but we’ll talk about that a bit later. For now, let’s just focus on how important are Supply-Side Platforms in Digital Advertising.
Supply-Side Platforms in Digital Advertisement
Due to their key role in RTB transactions, SSPs are seen as main players in digital advertising.
Because they initiate ad inventory sales on the publisher’s behalf through connections to ad exchanges, ad networks, DMPs, and DSPs. They simplify the complexity of the ad-buying processes to publishers, especially when it comes to multi ad network management.
This basically means that Publishers don’t need to worry about ad targeting when using more than one Ad network. It’s all done programmatically.
So what processes are done by SSPs?
- Real-time bidding transactions:
SSPs initiate ad space sales of Publishers to DSPs through an ad exchange.
- Ad Network optimization:
As previously mentioned, Publishers mainly use more than one ad network.
However, not all networks are the same.
For example, one network will pay $4.00 CPM under 20% fill rate; whereas another network will only pay $1.00 with 100% fill rates. That’s why SSPs determine which ad network to connect to when impressions become available to the Publisher and his website.
- Frequency capping:
SSPs and DSPs sync and match cookies to initiate frequency capping.
Frequency capping is a process where the number of visitors that have been shown an ad is recorded. After recording, that same visitor’s access to that specific advertisement is restricted. Which means that he can see it only once. This restriction applies to all websites that supply ads from DSP campaigns.
- Specific Ad networks that accept impressions from selected GEOs:
With SSPs, publishers can choose that only relevant ad networks are in this process.
- Ad network management – Latency variations and other discrepancies:
SSPs automatically select ad networks that are constantly offering the best latency levels. This directly benefits RTB processes. By viewing these processes and requirements, you can easily see why SSPs were originally called “Network Optimizers”. They successfully manage all variables and predict which networks will provide the highest, most effective results at the given time.
So how do SSPs work exactly?
Well, they can sell publisher ad space in numerous ways:
- Directly to Ad Networks
- Direct deals with Demand-Side Platforms
- Via RTB auctions
Publishers utilize SSPs to sell their ad space during RTB when:
- A publisher makes his ad space available on Supply-Side Platforms.
- Each time his web page loads, an ad request is sent to multiple ad exchanges.
In some situations, the ad request is sent to demand-side platforms, either:
- directly from an SSP
- to an SSP via publisher’s ad servers.
- Then, various DSPs place bids on impressions offered by publishers.
- After that, SSPs deliver winning bids to the website and display them to the visitors.
Not as hard as it looked at first, right?
What advantages do Publishers actually get with SSPs?
SSP-to-Publisher interface offers many benefits such as:
Automated Ad Space Selling:
Publishers can sell ad space to advertisers through all available ad formats from both desktop and mobile. SSPs (as well as DSPs on advertisers’ side) assist in the process of selling/buying ad space through automatization.
That’s why it’s called Automated Ad Space Selling.
SSPs give detailed information to publishers such as:
- Who is the bidder?
- How much ad space?
- How many advertisers are about to buy?
This particular process provides insight to publishers. It tells them the exact value of that same ad space to advertisers.
Multiple Network Aggregation:
SSPs typically run into issues such as
Ad space value depreciation if no single ad network or ad exchange bidders are present. SSPs (through connecting to multiple networks, ad exchanges, and DSPs) allow buyers to take part in RTBs. This process helps achieve better yields.
Yield Optimization with Price Floors:
Naturally, all publishers want to regain lost revenue caused by reductions in second-price auctions.
But wait, what reductions?
Well, reductions are simply basic differences between bid prices and clearing prices. Since SSPs allow publishers to both offer their ad space to buyers and give them higher pricing control, it’s really important to have price floors.
Price floors assure that ad space isn’t sold under certain prices. Period. Some SSPs and ad exchange mechanisms implement soft-hard price floor combinations. In such scenarios, the auction is transformed into a hybrid combination of first and second-price auctions.
SSPs offer high brand safety for publishers by being an intermediary. They do that by blocking unwanted ads from showing on publisher websites. This is done through “blacklisting” specific categories, ad domains, or perhaps selected creatives.
Because no publisher would ever choose to run inappropriate ads(if he’s not targeting adult traffic of course) instead of profitable, clean ads.
Main Features and Components
To make things easier to understand, we’ll split this list into two main categories:
Supply-Side Platforms are comprised of five components:
- Back-end and Infrastructures:
Infrastructures host various necessary back-end components From there, SSPs carry out all necessary technical processes that power its features.
SSPs integrate with other AdTech platforms to initiate ad space sales along with data-management platforms (DMPs) to maximize revenue.
- Ad Exchange:
Ad Exchange controls buying/selling of ads between advertisers and publishers. That means that publishers can directly connect (via SSP) to advertisers (via DSP).
Trackers collect data about publisher websites and their audience. Data is sent to other databases such as reporting databases.
- Reporting Database:
Receives campaigns and audience data from trackers.
This process allows publishers to generate reports as well as view their campaign analytics.
Supply-Side Platforms have 5 essential features:
- User Interface:
Used by publishers for campaign management. They view reports, billing managements along with other SSP features.
- Analytics and Reporting:
Once data is sent from reporting databases, publishers can create/view reports about ad space performance.
Ad space performance reports include key metrics such as fill rates, clicks, and impressions.
- Header Bidding:
SSPs have header-bidding functionality, which allows publishers to obtain bids from multiple sources (DSPs) before their ad server is called upon.
Basically, header-bidding enables publishers to manage different header-bidding forms and demand partners.
- Yield Optimization:
These features increase publisher revenue through improvements in fill rates, floor price settings, and auction mechanic management.
- Inventory and Campaign Management:
This feature helps publishers manage different types of ad space such as (display, native, video, and more, depending on the publisher).
It also allows Blacklisting/Whitelisting advertisers, Setting IAB categories, and blocking certain ad types.
How cool is that?
Custom Supply-Side Platforms
SSPs offer a range of features for publishers to earn money on their website. That’s why there are some benefits to building your own Custom SSP.
What kind of benefits?
- Ownership of Data and Technology:
If it’s yours, you have full control of both the technology and the data. This is extremely beneficial for companies that run more than one website.
- Elimination of Fees and Commissions:
Custom Supply-Side Platforms won’t eliminate all fees and commissions involved in media buying. But, it will, however, eliminate known hidden fees charged by SSP vendors. Hidden Fees are an extremely vast topic which will be covered in our blog very soon, so stay tuned.
- Control of the Product:
Custom Supply-Side Platforms allow companies to have full control over product road-map. This is ultimately giving them the freedom to build the features that they deem as needed.
Okay, now you’re all caught up with Supply-Side Platforms.
But as you can see, there’s more to Real-Time Bidding than just SSPs.
So let’s move on.
What are the Demand-Side Platforms?
As we’ve previously discussed, programmatic advertising plays a vital role in digital advertising. We’ve covered Supply-Side Platforms, a programmatic process that allows Advertisers(DSP) and Publishers(SSP) to interact.
But how do DSPs fit into all this? To understand that, you’ll need to understand DSPs first.
In plain English, Demand-Side Platforms is a software used by advertisers to buy traffic. Advertisers have full freedom to choose different ad formats and publishers to tailor their ads to their campaigns. And all of that in real-time.
Astonishing, isn’t it? Well, that’s not all .
There are two types of DSPs:
- Self-Serve Demand Side Platform
Where advertisers choose to manage their campaigns without the help of ad networks or professional individuals.
- Full-Service Demand-Side Platforms.
Where advertisers actually choose help from ad networks or individuals.
So how do I make a choice?
Well, it’s mainly focused on personal preference. In other words, If you’re working with large amounts of traffic then it’s probably a lot better to go with Self-Serve Demand Side Platform.
That way you’ll have full control over key metrics like bidding and targeting. But if that’s too much info for you, and you’re not that into numbers, you can always settle for Full-Service Demand-Side Platforms.
How does it work?
By using Supply Side Platforms, publishers transfer impressions into Ad Exchange where DSPs evaluate them based on specific metrics such as:
- cookie matching
- targeting settings
By analyzing these metrics, DSP determines the value of the impression itself. If it’s valuable, the DSP sends the highest bid that the advertiser is ready to pay for that specific ad. This whole process is being done through Real-Time Bidding. Why?
Because it’s much easier to negotiate over prices in an automated process that lasts only a few milliseconds. Why wait when you don’t have to?
Key features & metrics
Transparency and Clarity
DSPs allow advertisers to receive key insights about publishers. This help them steer their ad spent to only the highest traffic quality.
Automated KPI Optimization
This includes automated optimization tools like bidding autopilot. Bidding autopilot is basically a set of bidding rules that make automatic changes when necessary. Those changes mainly include whitelisting/blacklisting, bid pricing, traffic source analysis, and many more.
Queries per Second
Is a metric that tells advertisers how many times does the DSP receives calls for bids on ad placements.
Ideally, the DSP interface must get as close as it can to real-time in terms of statistics. The better the real-time, the larger the timeframe for an advertiser to react timely and analyze his campaign.
The cost always depends on:
- the overall size of the campaign
- the overall size of media budgets.
Besides that, it also depends on DSP vendor preferences. What this means is that they might charge you with a flat fee, or they can choose to take commissions based on volume.
Is it worth to build a DSP on your own?
A most frequent question asked by advertisers, ever. The answer is it depends. If it’s worth your time and effort, why not. But before you decide, take a look at these most common issues that come with custom DPS:
Getting exclusive traffic will always be an issue. Self-Side Platforms mainly send their bids to larger, more authoritative DSPs. They rarely send to smaller DSPs that don’t see as many impressions.
So how do I know if my DSP is small?
DSP’s that spend approximately $5 000 – $20 000 are considered as small DSPs. This leads us to the next main issue…
Large Starting Budget
Before you start to think about DSP development, think about this first. DSP’s main components are RTB bidders, ad servers, and data platforms.
Think about how much would it take to Develop such components. It would require huge amounts of cash, and a fairly decent amount of professionals around you.
So have that mind before you start making promises to yourself. And even if money is not the issue, finding an adequate software development expert is still really challenging.
And even if you find a good software developer, the costs of both the building and maintaining the platform are very high. However, there are certain situations where custom DSPs might be a good idea.
Think about this.
If you’re already paying huge commissions to your DSP provider, why not make your own?
It would save you a lot of money along the way. If that’s your go-to, and you want to build your own, then keep scrolling, you’re gonna love this one.
White Label DSP
So you’ve decided to create your own Demand-Side Platform. You have the money, but you don’t have the slightest clue how to start your project. Believe it or not, there’s a solution for that as well.
This leads us to the third and final DSP type – White Label DSP. White Label DSPs are basically technologies that are used as a basis for DSP creation. Kind of like a DSP template. It’s fully customizable to match your needs.
It actually requires minimum capital investments when compared to developing your own DSP.
It allows Ad networks and Agencies to generate high-quality advertising opportunities while having full control over budget distribution.
And with that you’re officially all caught up with everything.
Well, almost everything.
You’ve learned About Supply-Side Platforms, Demand-Side Platforms, and Ad Exchange.
You know how Real-Time Bidding works, and what it takes for one to work.
We still haven’t told you how the whole process works.
This is the part where you connect all the dots.
Great, let’s go.
How does the bidding process work?
As you’ve learned by now, RTB is basically an auction model. The process includes setting maximum bids that pay for placements and wining impressions above the next highest bidder.
What that means is that impressions are sold and bought instantly. When the advertiser wins, their ad instantly fills ad space of the publisher. Supporting Platforms such as Ad Exchange and Supply-Side Platforms, are also utilized within this process.
RTB auctions focus on impression-based biddings.
Ad Exchange receives bid requests when a user visits a website. Those bid requests contain different types of information such as:
- Browser history and more
Ad Exchange then passes bid requests along with the advertiser/buyer list.
They place real-time bids for ad impressions as it gets presented to the website user.
How awesome is that? It all happens in miliseconds!
The advertisers that bid the highest amount will win impressions and get it’s ad served in front of the site.
And that’s it!
This same process is repeated for every ad unit of the website.
Real-Time Bidding Advertising vs Ad Exchange
Real-Time Bidding and Ad Exchanges are, obviously, not the same. In case you get these two confused. Ad Exchange plays a vital role within programmatic advertising and is vital for RTB.
In other words, it’s helping RTB do its job, along with DSPs, SSPs, Ad Servers, Ad Networks, etc.
RTB is a process, and Ad Exchange is a software-based platform.
Therefore,it’s just a component of Real-Time Bidding. Still confused?
Okay, let’s put it this way..
RTB is a real-time auction in which Ad Exchange is a place where that auction happens.
Quick question before we dive in deeper. Is Real-Time Bidding the same as Programmatic Advertising? If your answer was yes, then you’re wrong again. Why?
Real-Time Bidding is not the same as Programmatic
RTB is a decision-making process within programmatic, but doesn’t necessairly mean that programmatic is essential.
Why? Very simple. Not every programmatic advertising uses RTB.
For example, Programmatic direct has sales made directly between advertisers and publishers.
This means that inventory (or ad space) is agreed under fixed prices and impression quantity is guaranteed. However, this execution is automated (programmatical, but it’s not RTB.
Get it now? Great.
Although you probably already know the difference between RTB and DSP, we’ll cover it again just to make sure.
Real-Time Bidding and Demand-Side Platforms
DSP (Demand Side Platform), just like Ad Exchange, is a component of RTB which plays a vital role in programmatic advertising.
It’s used by Advertisers who buy digital ad inventory through DSP programs. An RTB’s role is to make sure that this happens every time.
Other types of Real-Time Bidding
Mobile Real-Time Bidding
Designed for mobile ad inventory sales in real-time. However, there’s a catch. Mobile ad inventory includes both web-based inventories and app-based inventory.
Which means that…
You need two separate RTB protocols.
Besides that, app-based inventory does not support cookie tracking. Which makes targeting more difficult than it should be. However, because the number of mobile app users is constantly growing, this market is yet to reach its optimum potential.
Video Real-Time Bidding
Video RTB shows video ads as soon as impressions start. (users visiting your site). This is extremely helpful, especially for High ranking publishers such as Forbes that have already implemented video RTBs to increase their revenues.
So, with all this in mind, it’s only logical to ask yourself:“ Is programmatic the Same as Real-Time Bidding?
In short, patience is key here, at least for now.
That’s it, you’re all caught up now. But most likely still wondering how does this benefit me as a Publisher/Advertiser?
No worries, we got you covered.
How does it benefit Publishers?
- Technology-driven accurate pricings: Publishers receive more value for their inventory with RTB.
Advertisers can bid on precisely the highest bids to deliver impressions. Publishers frequently use Supply-Side Platforms to effectively utilize RTBs. Everybody wins.
- Remnant increase of inventory value:
RTB utilizes ad inventories that were previously seen as non-worthy. All it takes is for advertisers to place bids based on audience data.
- SSP control:
As we mentioned above, publishers need Supply-Side Platforms to participate in RTBs. Which means that all publishers have full control over which advertisers will buy their ad inventory.
- Understanding the audience:
RTBs also allows publishers to determine audience interest while fetching the best prices. This gives publishers valuable insights.Which is also increasing their ad inventory value/advertiser demand.
- Utilization of private marketplaces (premium publishers only):
Private markets only place a group of advertisers that can bid on publisher ad inventory. With RTB and private marketplaces, publishers effectively sell their ad space with larger transparency and control.
- Better performing direct sales:
Should a publisher choose to sell his inventory directly to advertisers through Supply-Side Platforms; then RTB can help them profit.
Well, publishers can determine what segments are standing out, at what price, and sell accordingly
How does it benefit Advertisers?
Generally, there are four vital benefits that RTB provides to advertisers:
- Utilized Media Buying:
Advertisers don’t need to buy ad inventory in bulk, nor do they lose money on untargeted/irrelevant investments. Techniques such as frequency capping and bid forecasting can highly increase campaign efficiency. How? By simply allowing advertisers to test, control, evaluate and predict campaign variables.
- Larger performance in Campaigns:
Advertisers can fully manipulate with their campaigns in real-time. Through adjusting bids and targeting methods they ensure top results and performance improvements.
Besides that, these are worth mentioning as well:
- Ad performance improvement
- Reduced media wastage
- Lower per acquisition costs
- Better targeting capabilities
- Larger transparency
- Less operational efficiencies
- Increased margins
- Accurate attribution
- In-depth insight:
While running RTB campaigns advertisers can transform and improve their marketing strategies. They learn to understand their customers over time while facilitating strategic approaches with impression data inside their campaigns.
- Brand protection:
Advertisers always protect their brand, it’s out of vital importance for them. RTB allows advertisers to specify where they would like to promote their product/service; while simultaneously preventing their ads from showing on illicit websites, ultimately assuring brand safety.
According to E-marketer, By 2021, it is estimated that almost 88%, or $81.00 billion, of all US digital display ad dollars, will be done programmatically.
While taking that into consideration, try to imagine how that growth impacts ad technology itself. So if you can’t beat them …join them, right?
But why is it growing so rapidly?
- Market Penetration
Refers to the fact that advertisers and publishers constantly use Real-Time Bidding. Captured market shares of indirect sales monitor the growth itself.
- Data intensity:
Refers to campaign data intensity which has been generated by quality/data use enchantments. Modern algorithms use data as a key input in determining real values of impressions, which improves key performance indicators.
Was this helpful? Do you have any questions? If so, do not hesitate to ask us.