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Ad Tech Deconstructed: What is RTB, or real-time bidding?

by Katy Jensen on Nov 30, 2017

The world of ad tech can be confusing—that’s why we’re bringing you our Ad Tech Deconstructed series. We’re putting ad tech under a microscope to examine exactly how things work. For today’s installment, we’ll talk about what exactly RTB is and how it works.

At this point in our Ad Tech Deconstructed series, we’ve talked about how DSPs (demand side platforms) are used by advertisers to buy digital ad inventory and how publishers use SSPs (supply side platforms) to make that inventory available to advertisers.

Today we’ll talk about real-time bidding (RTB), a programmatic process through which DSPs and SSPs buy and sell advertising inventory. In RTB, DSPs bid on ad space that is supplied by ad exchanges or SSPs, which are platforms that access multiple ad exchanges. The winning ad is given to the highest bidder and is loaded nearly instantly on a user’s device. Because the process happens so quickly, RTB makes it so that the bidding can happen on a singular per-impression basis based on anonymized data about each impression.

When a user comes across part of a page or app where an ad is to be served, a request goes out from the SSP through an ad exchange. Connected to the ad exchange are DSPs, which are used by advertisers to respond to these bid requests based on the perceived valuation of that inventory. This valuation is based on factors such as where they appear on a page or app and the target demographic advertisers want to reach. The auctioned ad space then goes to the advertiser that has the highest bid and the ad is served within milliseconds.

RTB is the technology that propelled programmatic advertising forward, making advertising more efficient for both advertisers and publishers. Advertisers like it because it places an ad in front of the optimal viewer at the optimal price, and publishers like it because it gets them the most money for their ad inventory—and it all happens individually and instantaneously.
But as a programmatic form of ad buying, RTB not only gets its advertisers the best cost for the relative quality of the impression they’re bidding on, but it also allows advertisers to create value for their brand. But what it really comes down to is how programmatic optimally uses anonymized data to yield the best result for advertisers and developers.

Katy Jensen is AppLovin’s marketing cooordinator.

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