What Is RTB?

by | Jun 4, 2019 | Guides

RTB (real-time bidding) is the buying and selling of impressions using automated auctions.

If you use the internet, RTB impacts your life on a daily basis. It’s the technology that allows personalized ads to populate in fractions of a second, giving rise to the “click economy” where clicks and impressions (i.e., eyeballs viewing your site) are the media industry’s bread and butter.

Setting the Right KPI Expert Guide Subhead: Educate

What It Means to Buy and Sell Impressions

 

At the end of the day, publishers have impressions to sell that advertisers want to buy. RTB automates the process to make it cheaper and more efficient.

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Newbie Note
Impressions are the measurement of how many people see your ad. They’re bought on a CPM basis (cost per mille/thousand).

So, a $2 CPM means it costs $2 to put your ad in front of 1000 sets of eyeballs.

To make this automated buying and selling of impressions happen in real-time, a constellation of technology cropped up.

We have a simplified overview in our Beginner’s Guide to Programmatic Advertising article, but the gist is in this graphic:

Setting the Right KPI Expert Guide Subhead: Educate
When a user goes to a website, the website owner (publisher) has ad spaces available for purchase, called inventory.

A set of tools and platforms, called Supply Side Platforms (SSPs), help the publisher manage their inventory, package it as impressions and get it all ready to sell at a decent rate.

An ad exchange then facilitates the process of bidding on those impressions. To make those bids, advertisers use their own set of tools, like Trade Desks and Demand Side Platforms (DSPs).

Along the way, decisions are made based on what is known about the user — if they’ve visited this page before, if they’re interested in travel, if they’re currently shopping for shoes, etc.

Advertisers set parameters around what impressions they want to bid on (e.g., I sell sneakers and only want to buy access to people who play sports) and the whole ad tech stack kicks into gear.

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Newbie Note
Ad tech, or advertising technology, is a catchall term for any piece of technology that facilitates modern advertising.
All of this happens in a matter of milliseconds, hence “real-time.” The technology behind it is as robust as it is complex. It’s a science in itself to master it all.
Setting the Right KPI Expert Guide Subhead: Educate

The Magic of Ad Exchanges

 

None of this would be possible without ad exchanges. In fact, the invention of the first ad exchange, Right Media, made RTB possible in the first place.

Ad exchanges function as a giant marketplace for impressions. Publishers throw in all the impressions they want to sell and advertisers bid on them.

The big innovation this introduced is that advertisers no longer needed a direct relationship with publishers to get their ads seen.

In other words, a mom-and-pop looking to expand their business nationwide didn’t need to have contact at New York Times to get their ads shown there. They’d buy some impressions through an ad exchange.

As you can guess, this had a huge impact on the landscape of modern advertising.

Yes, the technology is complex, but there were some pretty fundamental power shifts this introduced that have wide ranging impacts. Let’s dig in.

Setting the Right KPI Expert Guide Subhead: Educate

The Impact of RTB

 

Here is how we categorize the impacts (good and bad) of RTB:

 

Democratization

RTB makes incredibly powerful technology available to people who previously could never dream of access.

What used to be a gatekept process became much more open. As our own Kyle Kienitz, Director of R&D, says:

The original promise of real-time bidding and programmatic advertising was the democratization of ad tech.
– Kyle Kienitz

In the early days of the internet (think early to mid 90s), buying “impressions” used to be done behind closed doors and over business lunches.

Banner ads were treated like internet billboards and bought in a similar way. Some of the technology that underpins today’s RTB ecosystem was restricted to early paid search advertising.

You could kind of buy impressions in the way we do today, but it was really expensive, really manual and in many ways, probably not worth it.

Ad exchanges cracked the code in the early 2000s by applying RTB technology to display advertising. New York Magazine goes much more in-depth into the surprisingly captivating origins of Right Media, the first ad exchange as we think of them today.

The ultimate point is that RTB makes it easier and cheaper than ever to buy and sell impressions.

Quality

 

We’ve all seen more than our fair share of bad, annoying ads.

While things are getting better thanks to the Coalition for Better Ads and others, there was a while there where the age old Jeff Goldblum quote rang true:

Your scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.

– Jeff Golblum

Because ad exchanges removed the traditional media gatekeepers, if you wanted an ad to go up and had the money, there wasn’t a whole lot stopping you.

There was just a lot more ads out there and a good chunk of them just weren’t that great.

Overall, timing and placement started to take precedence over creative quality. The result is a less than optimal user experience for many publishers.

Fraud, Malware & Other Bad Stuff

 

One of the most striking quotes from New York Magazine’s article is when one of the founders of Right Media talks about the effect of ad fraud:

One of the worst days of my life was getting a civil investigative demand from the state of Washington threatening to shut the system down because [our technology] was being used as a distribution engine for malware. 

-Mike Walrath, Founder of Right Media

As Confiant aptly puts it, some of the “most sophisticated advertisers [are] criminals using the industry for their own, selfish ends.”

The same was true, if not more so, back then.

When you think about what RTB technology is capable of, no wonder it became a kind of honeypot for bad actors.

It’s easy and relatively cheap to get your stuff, no matter how good or bad, in front of thousands and thousands of people.

The industry adapted, but so have the bad actors. Things are handled for the most part.

Most of the fraud originates from a minority of platforms, as Confiant reports in their most recent Demand Quality Report (a must-read).

“Almost 60% of Malicious ads came from just three SSPs”
– Confiant Demand Quality Report for Q1 2019

The point is that RTB makes fraud an everyday reality in the lives of advertisers and publishers.

Things are improving quickly, but it’s still an issue you need to take into account for each campaign by using brand safety and ad fraud vendors like our partners MOAT, IAS and others.

Privacy

 

The whole  point of RTB technology is to hit the right person at the right time. But how do you know who to hit and when? Personal data. And lots of it.

It’s a hot topic here in 2019, especially in regards to Facebook. The general public is becoming more and more aware of just how much of their data is given out and put up for auction.

The big development in the past few years is the passing of the EU’s General Data Protection Regulation (GDPR), which essentially requires users to specifically opt in to having their data collected.

In the US, the California Consumer Privacy Act will have similar requirements when it goes into effect.

It’s not just governments trying to reign in the collection of personal data, companies like Apple are taking a strong stance against it with their Intelligent Tracking Prevention. Facebook and Google are starting to follow suit as well.

And there is some interesting technology coming up that completely sidesteps RTB altogether, like Basic Attention Token in the Brave Browser and Solid from Tim Berners-Lee (the inventor of the world wide web).

It’s something to keep an eye and how all these privacy issues shake out in the coming years will determine the future of the RTB model we’ve relied on this past decade or so.

Complexity

 

RTB is complex technology and every year brings more complexity.

In 2010, the infamous LUMAscape graphic, which outlines the entire ad tech landscape, had about 100 companies. In just seven years, that ballooned to around 5000 and hasn’t slowed down.

It’s just too much for people to wrap their heads around, so they outsource it, hire huge internal teams or a mix of the two.

The complexity is due to many factors, but we can sum them up into three:

  1. The sheer amount of data
  2. The number of issues to account for (like ad fraud)
  3. Government and industry-driven regulations

All this on top of walled gardens, increasing consolidation and technological advancement.

It’s a lot to keep track of. A good place to start is with a central place to get a handle of it all. That’s what we set out to create with LumenAd.

Check it out and schedule a demo if you think it’s a good fit for your organization.

 

There are many more impacts RTB has that we could write a whole textbook about, like giving rise to the click economy, the effect on newsrooms, walled gardens and more.

 

We’re huge nerds about this stuff, so subscribe below for more insights or schedule a demo if you want to pick our brains.

 

 

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