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Internet Advertising : Real Time Bidding 101

Gourav Chindlur
Thursday, June 9, 2011
Gourav Chindlur
Internet Advertising is globally more than a $50 billion industry now. There have been several innovations cantered around technology and data in this space, that have brought about path breaking changes in the way advertising is perceived in general. One such cutting edge trend on the horizon is called Real Time Bidding (RTB).

RTB is a new technology standard in the display (banners) advertising space. It allows buyers and sellers of display media to converse in real time and arrive at the best price for every ad impression. This happens in the background when a user opens a web page but before an ad is shown and it takes just a few tens of milliseconds to complete. More often than not, the best price is arrived upon using a bidding/auction model thereby valuing each impression optimally.

This is a fundamental shift in the way media buying generally works. For a long time, display advertising has been a people business. Publishers and advertisers strike deals over meetings, emails, faxes and phone calls – simple but highly inefficient. Buying is through pre-negotiated rates based on assumptions about the quality of media & audience and often, the media bought is not optimally valued. Multiple technologies have emerged in between publishers and advertisers, all have helped bring in incremental efficiency, but none have disrupted the landscape as much as RTB promises to. RTB can dramatically improve performance of display campaigns resulting in a win-win situation for all major stakeholders; advertisers benefit from improved ROI, the publishers benefit from increased yields for their media/impressions and the consumers are happy due to more relevant advertising. For the first time, display advertising has the potential to match and beat search advertising in efficiency and value created within the internet advertising ecosystem.

RTB is offered by sellers or aggregators of media through a platform that enables the bidding/auction model in real time. Buyers develop bidding engines which look at contextual and behavioural/cookie information to arrive at price quotes. The major steps involved in the process are as follows – a) A user opens a webpage on a browser, the seller’s platform collects contextual information about the impression and sends this to all the buyers b) Every buyer’s bidding engine then considers the contextual information about the impression, overlays any behavioural or cookie data and responds with a price quote/bid that the buyer is willing to pay for the impression c) The seller’s platform then compares all the bids from the different buyers and awards the impression to the highest bidder d) The winning buyer then displays an ad to the user
RTB sellers differentiate themselves by providing a transparent, simple & efficient platform for buyers to integrate as well as by providing richer & granular contextual information about every impression.

Buyers are investing in developing sophisticated bidding engines which take into consideration contextual information like banner size, website URL, ad placement, location of the user, keywords on the page, etc as well as behavioural or cookie information like user intent, impression frequency, user segments, recency, and more to come up with an intelligent price quote for every impression. Today, the major RTB sellers include AdExchanges like Google Adx, Appnexus, AdBrite, and Sell Side Platforms (SSPs or Yield Optimisers) like Rubicon Project, AdMeld, and others. The buyers fall under four major categories – AdNetworks, Demand Side Platforms (DSPs), Agency Trading Desks and Audience Targeting/Retargeting/Creative Optimization companies.

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