This post is about Real-Time-Bidding, Remarketing and AdExchange simplified. As we now know this automated buying and selling of online display advertising is relatively new in Finland and thus it must be opened for everyone in the industry.
The benefit for publishers and advertisers is that both parties gain more since every impression is sold and bought in auction happening real time impression by impression. Targeting options are almost unlimited and publishers also get the most out of every impression on their site, the best market price. One can easily say that Display 3.0 is here and the traditional buying and selling methods will be replaced by RTB in the long run in Finland too as is happening in US and central Europe.
There are three entities involved just like in stock market:
- Ad buyers – using Demand Side Platforms (DSP) such as Invitemedia (owned by Google) usually operated by Agency Trading Desks such as NetBooster Finland to maximize campaign ROI for advertisers
- Ad sellers (publishers/medias) – using Supply Side Platforms (SSP) such as Rubicon Project, Admeld
- Online realtime AdExchanges such as Google AdEx, Right Media
Example (by Alexia Nielsen):
Here’s a simplistic example of how real-time bidding (RTB) would work in the real world: A user spends a lot of time on financial websites, checking stocks and looking up Morningstar ratings. They arrive on a webpage that uses Real-Time Bidding to serve ads. On the back end, a major financial services provider has specified that they are interested in users that like stocks. A luxury carmaker has also indicated interest in this audience. The RTB system matches these advertisers with the user profile and they bid on the ad. Whoever has the highest bid wins, and their ad gets served.
Of course, all this happens in the blink of an eye. Advertisers don’t literally sit and bid on individual ads. Like Google AdWords, they set maximum bids and budgets. The user criteria can also be very complex, taking into account everything from very detailed behavioral profiles to conversion data.
Example (from Wikipedia):
An Internet user visits various sport websites. He arrives on a website (call it X) that uses Real-Time Bidding to deliver ads. In the background, an advertiser – a major beer distributor – has specified that they are interested in reaching sports enthusiasts. Several other advertisers also have expressed similar interests in sport lovers.
Before an ad is displayed all of these advertisers participate in a real time auction using their DSP systems to supply bids to the ad exchange to which the SSP system used by website X has floated this ad impression for sale. Whoever bids most wins the auction, and their ad gets displayed to the Internet user in question.
In our case, the beer distributor based on its proprietary data and 3rd party data about this specific Internet user decides to bid more for this ad impression than other competing advertisers. The algorithms of the DSP that our beer distributor uses predict a high probability of this internet user making a beer purchase and of a positive ROI on paying for this specific ad impression. Thus, the beer commercial wins the auction and gets displayed to the sports lover who visited website X.
Notes (by Wikipedia):
- Buyers are able to acquire impressions they want at a price that matches their goals and objectives. For buyers, RTB offers the possibility of buying only the impressions they need at a price they are willing to pay by utilizing proprietary optimization algorithms of DSP systems and data from various 3rd party providers to fuel their algorithms.
- Sellers use SSP with supply side algorithms to get the maximum yield out of ad inventory which is available to them to sell. The supply side algorithms are focused on optimizing yield by manipulating floor prices.
- RTB involves a real time auction for each ad impression in which buyers and sellers come to an agreement on the value of each ad impression and concluding the transaction.
- The basic premise of RTB is that ad impressions are not commodities to be sold in bulk, and that each ad impression is unique – the time of day, the place or website, the audience, the propensity of that audience to make a purchasing transaction at that particular time and place and given their transaction history.
- Auctions take place at a blink of an eye. A typical exchange imposes one tenth of a second for the bids to return.
- Volumes of bid requests and bids are also staggering. Google AdEx alone serves up 100 thousand bid requests a second.
If interested, drop me a mail niko.juntunen (at) netbooster.fi or give me a call +358-40-5522883. I am more than glad to help.