Real-time bidding (RTB) is a means by which advertising inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction, similar to financial markets.  With real-time bidding, advertising buyers bid on an impression and, if the bid is won, the buyer’s ad is instantly displayed on the publisher’s site.  Real-time bidding lets advertisers manage and optimize ads from multiple ad-networks by granting the user access to a multitude of different networks, allowing them to create and launch advertising campaigns, prioritize networks and allocate percentages of unsold inventory, known as backfill. 
Real-time bidding is distinguishable from static auctions by how it is a per-impression way of bidding whereas static auctions are groups of up to several thousand impressions.  RTB is promoted as being more effective than static auctions for both advertisers and publishers in terms of advertising inventory sold, though the results vary by execution and local conditions. RTB replaced the traditional model of selling inventories and enabled both publishers and advertisers to place right ads for the right users, based on real-time data  .
Research suggests that Real-time bidding (RTB) digital advertising spend will reach $23.5 billion in the United States in 2018 compared to a $6.3 billion spend in 2014. 
A typical transaction begins with a user visiting a website. This triggers a bid request that can include various pieces of data such as the user’s demographic information, browsing history, location, and the page being loaded.  The request goes from the publisher to an ad exchange, which submits it and the accompanying data to multiple advertisers who automatically submit bids in real time to place their ads.  Advertisers bid on each ad impression as it is served.  The impression goes to the highest bidder and their ad is served on the page.  This process is repeated for every ad slot on the page.  Real time bidding transactions typically happen within 100 milliseconds (including receiving the bid request and serving the ad) [ clarification needed ] from the moment the ad exchange received the request. 
The bidding happens autonomously and advertisers set maximum bids and budgets for an advertising campaign.  The criteria for bidding on particular types of consumers can be very complex, taking into account everything from very detailed behavioural profiles to conversion data.  Probabilistic models can be used to determine the probability for a click or a conversion given the user history data (aka user journey). This probability can be used to determine the size of the bid for the respective advertising slot. 
Demand-side platforms Edit
Demand-side platforms (DSPs) give buyers direct RTB access to multiple sources of inventory.  They typically streamline ad operations with applications that simplify workflow and reporting.  DSPs are directed at advertisers.  The technology that powers an ad exchange can also provide the foundation for a DSP, allowing for synergy between advertising campaigns. 
The primary distinction between an ad network and a DSP is that DSPs have the technology to determine the value of an individual impression in real time (less than 100 milliseconds) based on what is known about a user’s history. 
Supply-side platforms Edit
Large publishers often manage multiple advertising networks and use supply-side platforms (SSPs) to manage advertising yield.  Supply-side platforms utilize data generated from impression-level bidding to help tailor advertising campaigns.  Applications to manage ad operations are also often bundled into SSPs. SSP technology is adapted from ad exchange technology. 
Challenges with mobile implementation Edit
An individual’s browser history is more difficult to determine on mobile devices.  This is due to technical limitations that continue to make the type of targeting and tracking available on the desktop essentially impossible on smartphones and tablets.  The lack of a universal cookie alternative for mobile web browsing also limits the growth and feasibility of programmatic ad buying.  Mobile real time bidding also lacks universal standards. 
Automation and Programmatic
AUTOMATION AND INDUSTRY GROWTH
Despite the complexity of today’s digital supply chain, automation will continue to refine buying and selling processes and shift attention to higher-value marketing and advertising functions. Automated platforms and services can continue to drive industry growth through increasingly relevant and effective advertising, flexible publisher monetization opportunities, and enhanced consumer experiences.
The term “programmatic” has become ambiguous shorthand for some or all of a diverse range of platforms, tools, and processes in digital advertising. Now that automation via software and data has become the de facto means of executing digital and disruptive to most industries – understanding and evolving the roles and utility of each component involved in automation is critical to ensuring an effective marketplace.
Instead of relying on the false dichotomy of defining overall buying and selling practices as “programmatic” or not, IAB recommends acknowledging the broader and deeper implications of automation on the media industry, and proposes a framework rooted in the digital supply chain processes and tasks that can be partially or fully automated. The aim is to provide a common vocabulary and structure to:
- Promote informed conversations among buyers, sellers, and vendors – supporting evaluation, negotiation, and activation of platforms and tools that can enable effective advertising
- Highlight areas where automation hasn’t yet been enabled, beyond the scope of what may have been considered “programmatic” historically
- Support consistent benchmarking of marketplace sizing, investment, and attitudes
Key Concepts as Automation Evolves:
- Data Quality & Identity Resolution
- Inventory Quality
- Brand Safety
- Ad Effectiveness & Marketing Intelligence
- User Experience
- Organizational Alignment & Staffing
Programmatic buying and selling of advertising, real-time bidding (RTB), automation, and the buying and selling of digital media are changing rapidly. Approximately 20% of all digital advertising is sold by one machine talking to another machine—and growing rapidly. This creates significant opportunity to create efficiencies and new markets—and continue to drive advertising dollars to digital. However, it also raises potential implications and concerns for both the buy and sell-side in the digital advertising ecosystem, including:
- There is significant confusion in the marketplace over terminology regarding programmatic, RTB, programmatic direct, programmatic premium, and other terms being used interchangeably;
- Many emerging technologies are creating significant value but there is also a lack of clear technical standards to ensure interoperability across different platforms;
- Buyers and sellers are concerned with the limited transparency and proliferation of vendors involved in the programmatic transaction; and
- Programmatic raises internal organizational challenges for publishers, agencies, and brands alike—especially for publishers and their existing direct sales teams in regards to commissions, incentives and training.
To help ensure that programmatic creates value for the entire marketplace and continues to drive advertising dollars to digital, IAB has developed a programmatic agenda focused on building market clarity and education in the programmatic landscape, and working on solving operational issues.
IAB Programmatic Activities
Market Education and Clarity
- Working with premium publishers to establish market clarity and education around the programmatic ecosystem
- Conducting thought-leadership research study, with Winterberry Group, to provide an effective roadmap to “programmatic” capabilities
- Identifying and addressing mobile programmatic issues
Solving Operational Issues
- Digital automation – standardize, implement, & support adoption of common datasets for IOs, media plans & invoices
- Open RTB – Supports development of OpenRTB specification
- Ensure that QA Guidelines reflect updated programmatic disclosures
For more information on the IAB’s work on programmatic marketing, please contact Benjamin Dick, [email protected]
Additional Resources Include:
Programmatic advertising has become one of the fastest growing segments of digital marketing due to its inherent abundance and efficiency. But with so many different terms being used, how does one know exactly what it is?
Real-time bidding is the buying of ads through computer-run, real-time auctions. The inventory is bought blind, whereby the advertiser only knows the category of site that the ads will appear on, but not the exact site. An Open Exchange allows many buyers to bid on the inventory of many publishers in an auction environment, and is the most standard way to buy inventory.
Ad exchanges store numerous sites and thus provide an abundant amount of inventory. Moreover, the infrastructure of the ad exchange made the media buying seamless and more efficient for marketers. The ad exchange model follows the same concept as the real stock exchange. Publishers place their inventory in the exchange at lower rates and the traders, who will be marketers in this case, will bid against available media and whoever bids higher will win that impression.
If you’re looking for the most cost effective way to buy with access to the largest audience, fully-automated Open Exchanges could be the way to go.
A Private Marketplace (PMP) is an invitation-only RTB auction where one publisher or a select number of publishers invite a select number of buyers to bid on its inventory. Inventory purchased is transparent – the buyer knows exactly which site the ad will run on. With Private Marketplaces, the general premise is to skip the exchanges altogether.
With Private Marketplaces your buying platform (DSP) plugs directly into the premium publisher’s inventory source, combining the strengths of both buying approaches to essentially create a third buying approach. The inventory transaction is within an auction environment but the terms of the deal are pre-negotiated between the buyer and seller and the advertiser must be approved – so it is more manual than open exchanges. A unique identifier is generated to represent the terms of the deal that was made between the buyer and seller – this is called the Deal ID.
Traditionally, one would utilize the direct IO buy to achieve a branding objective, while buying on the open exchange in hopes of getting conversion volumes at a super low eCPM. Deal ID allows you to easily reach premium placements on-demand through your DSP platform, while also giving you a way to apply your first party data to any and all premium placements.
So what does this mean, and why should you care about your data being applied to premium placements?
- In very simple terms, with Deal ID’s you are able to apply all the same techniques and strategies that you’ve had success applying in open exchange buys, across 100% premium placements.
- You can access inventory before it hits the open exchanges and potentially gain additional reach (access to users who might not be found across the open exchanges).
- And just like in the exchange, when your data is applied you are only bidding and buying that cookie/impression/user which meets your criteria, so you are not buying heaps of useless impressions at $20 flat CPM and hoping the people you want to target are a match with one particular publisher. You can buy 10 impressions or a million impressions – it’s totally up to you and depends on your appetite for premium inventory.
- You also get “premium” access at a lower price than you’ll likely get with Programmatic Direct. The rates usually seen are something in between open exchange rates and IO direct rates.
Programmatic software also allows advertisers to buy guaranteed ad impressions in advance from specific publisher sites, which is referred to as Programmatic Direct. Not to be confused with Private Marketplace (RTB), Programmatic Direct is direct sold, guaranteed inventory, that doesn’t require human intervention to run (non-RTB).
Under programmatic direct deals, a publisher’s sales rep may negotiate an arrangement with an advertiser that includes top-tier inventory like home-page- takeover ads at a fixed price for a guaranteed number of impressions. It’s the equivalent of booking a hotel room directly through the hotel, rather than from an online retailer like Expedia.
Canadian marketers prefer direct deals to better control price levels rather than the open RTB market. Publishers have typically protected premium inventory for direct sale on programmatic direct models. The thinking goes, however, that CPMs for both premium and non-premium inventory will adjust to market prices and spread the benefit between publishers and advertisers.
In 2014, the IDC estimates $674.9 million in display ad spend will be conducted via premium programmatic. By 2018, this number is projected to reach $9.3 billion.
Programmatic Direct is a good choice for companies focused on brand safety, inventory control, premium placements etc.
Understanding RTB, Programmatic Direct and Private Marketplace
The online advertising industry is populated by an array of media-buying methods, making it increasingly difficult to comprehend, even for the most seasoned marketers. While terms like programmatic direct, real-time bidding (RTB), and private marketplace (PMP) all fall under the programmatic umbrella, it is worth remembering that they are quite different concepts.
Before going deeper into the inner workings of RTB, programmatic direct, and PMP and discussing the differences between them, let’s clarify what the term programmatic means in the first place.
What is Programmatic?
There is no industry-wide consensus as for the term’s definition, but it’s fairly safe to say programmatic refers to the use of various technology, algorithms, and user data to quickly and efficiently automate the process of buying and selling of online media.
Programmatic is a concept opposite of traditional manual-insertion orders, whereby advertisers would contact publishers directly to purchase ad space, online or otherwise. This is also known as manual media buying.
Before programmatic media-buying, brands negotiated contracts with publishers in person.
In the early days of online advertising, the traditional process of manual media buying involved the following steps:
- Campaign and creatives were set up and placed in the advertiser’s ad server.
- Ad codes were delivered to the publisher (e.g. via email).
- The Ad Ops team on the publisher’s side placed the codes in the publisher’s ad server.
- The campaign started.
Manual media-buying is relatively inefficient, offers limited scalability, and doesn’t allow advertisers or publishers to test and conveniently adjust their campaigns on the fly. This is because all changes to the campaign had to go through publisher’s Ad Ops (online advertising operations) and involved an array of time-consuming, manual changes to be made in the ad server.
These inefficiencies with manual media-buying lead to the emergence of programmatic media-buying.
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Programmatic technology was implemented in mid-90s and although it is a bit more complex, it offered a completely automated and efficient media-buying process. The technology allowed both advertisers and publishers to minimize human interaction, and thus vastly reduced the time it took to set up, run, and optimize media campaigns.
Here’s a look at how a typical programmatic media-buying process could be executed:
- An advertiser (such as a brand) hires an advertising agency to run campaigns on its behalf. The agency contacts an agency trading desk.
- The trading desk uses a demand-side platform (DSP) to manage the campaign.
- The DSP connects to an ad exchange (DoubleClick, AppNexus, Rubicon project, PubMatic, etc.), which combines inventory from ad networks and supply-side platforms (SSPs) with third-party data from a data-management platform (DMP) or data broker.
- Each time an ad space on a publisher’s site becomes available, the ad exchange holds an auction whereby the DSP bids on the impression submitted by the ad network or SSP.
- If the DSP wins the bid, the advertiser’s ad is passed on to the publisher and displayed to the visitor.
Manual vs programmatic
One of the key differences between manual and programmatic media-purchasing processes is the speed and convenience of launching and modifying each campaign, even when it’s already running.
Tasks that would take minutes, or even hours, to complete with manual media-buying take just milliseconds with programmatic media-buying.
With programmatic, starting a campaign requires signing an insertion order, setting up the campaign on the advertiser’s and publisher’s ad servers, trafficking tags, etc. Starting the campaign on a DSP (once the creatives are ready) is a matter of minutes. Any changes to the campaign made by Ad Ops in the demand-side platform are reflected almost in real-time.
The same tasks would take hours or days in non-programmatic campaigns.
This automation and fast execution offered by programmatic media-buying allows brands to react quickly to changes and make real-time optimizations to campaigns.
As mentioned above, the term programmatic covers a range of media-buying models, including RTB, private marketplace and programmatic direct.
Here’s a look at how they work and what separates them from one another.
Real-Time Bidding (RTB)
RTB is the most popular way of buying online media programmatically, allowing billions of ads to be served to Internet users on a daily basis.
It is an auction-based bidding protocol in which advertisers compete against each other to display ads to specific users. RTB offers a lot of capabilities and use of data, vast types of inventory, and is universally considered the most flexible model on the market.
DSPs can implement proprietary algorithms for custom bidding and targeting strategies utilizing AI and machine learning. Some platforms, such as AppNexus, give this possibility even to end customers (advertisers) through programmable bidders, for example.
RTB auctions are completely automated and are governed by various auction mechanics, with the ads targeted based on users’ cookies.
Real-time bidding was introduced in the late 2000s at a time when ad networks were suffering from either underfilling or overfilling.
This is where RTB emerged as a way to control the fill rate of a publisher’s inventory by using real-time auctions to trade remnant (unsold) inventory and dynamically balance publishers’ supply and demand.
While there are many AdTech platforms involved in an RTB media transaction, there are three platforms in particular that play a key role in the process: a demand-side platform (DSP), an ad exchange, and a supply-side platform (SSP).
We’ve written a lot about RTB in other posts on our blog, so you can read them if you need a quick primer to get up to speed.
The Benefits of RTB:
- Per-impression buying process. Real-time bidding allows brands to bid on individual impressions rather than agreeing to a predetermined fixed price. Buying in real time is cost-effective, reduces waste, and can prevent advertisers from overpaying for media.
- Advertisers and publishers use a single dashboard on their DSP or SSP to control their campaigns, rather than having multiple relationships with different partners.
- Easy testing and adjusting. The impression-level data obtained allows advertisers to analyze the efficacy with certain consumers, context, and creative. This can ultimately lead to a more adaptable strategy.
- Insights. Publishers have real-time information about their best-performing segments and know which inventory is most coveted by advertisers.
- Ability to sell remnant ad space. As RTB auctions are triggered automatically by the arrival of a target visitor, inventory that was previously unwanted and unsold can always be sold and “saved” from wasting.
Private marketplace (programmatic guaranteed, programmatic reserved, automated guaranteed, and the like), or PMP for short, is an invite-only variation of the RTB model.
It is an auction process in which just a handful of advertisers bid against one another to buy a publisher’s inventory. This method is typically offered by publishers with more premium (i.e. coveted and expensive) inventory—think major media sites like Forbes, Wall Street Journal or The New York Times).
Advertisers interested in such inventory can reserve, or guarantee, their ads before the publisher offers them in an RTB marketplace.
In private marketplace deals, there are no middlemen in the form of ad exchanges and SSPs, which allows advertisers to more carefully control and select the websites where they want to display their ads, but the benefits are, in fact, mutual; publishers get paid premium rates for their inventory, and advertisers buying inventory on a PMP get a bonus in the form of preferential access to the publisher’s inventory before it’s sold in public auctions.
Unlike traditional RTB auctions where the advertisers know little about the media buy (e.g. ad placement), PMPs provide both advertisers and publishers with transparency around ad placement and even pricing.
Benefits of Private Marketplace
- Transparency on purchased inventory and pricing: The publisher and advertiser both have a very clear idea of what kind of inventory they are buying, what CPM needs to be paid, and the type of creatives that are being displayed to users.
- Programmatic efficiency: Advertisers are able to quickly and effectively set new buys live on top-tier websites or even packages of inventory on specific segmented verticals.
- Becoming an industry standard: Available on many of the largest programmatic exchanges such as DoubleClick Ad Exchange, AppNexus, MediaOcean, and Kantar Media.
- Can remove the need for a direct-sales team: It can be quite expensive and time-consuming to manage a direct-sales team. PMPs can potentially replace a sales team with technology.
While one might assume that a private marketplace is usually for more premium inventory and open auction is for the cheaper, non-premium, remnant ads, this may not always be true. A private marketplace is just about the way of selling the publisher’s inventory. However, open auction may, in specific cases, offer better yield.
Programmatic direct is a one-to-one media-buying process much akin to the traditional method whereby salespeople met with advertisers in person to strike a deal.
It is a very similar model to the private marketplace, with the exception that advertisers and publishers agree on specific inventory based on a fixed CPM.
The process may require some human interaction; unlike in the case of a private marketplace, publisher’s sales reps may be needed to negotiate deals directly with advertisers. However, the publisher can also set fixed prices, and the advertiser can simply accept or not accept them, without actually negotiating the price. In such case, the experience is just as seamless as in the RTB open auction. Because the CPM is predetermined, there is no bidding process involving other publishers.
The rest of the process (the ad placement) is handled programmatically.
In programmatic direct, the media-buying process looks like this:
- An advertiser browses through a shop-like catalogue of websites.
- They choose placements, and configure flight dates and volume of impressions.
- They configure creatives and additional tracking pixels.
- They place an order on the platform.
- The publisher audits and verifies the campaign.
- The order is executed without additional involvement from the Ad Ops team, except for an audit which they carry out.
Ads sold through programmatic direct are often tied to premium publishers (think Forbes and The Wall Street Journal) who reserve a certain percentage of their inventory they prefer not to sell on the open market because they can demand a premium price from advertisers, who get guaranteed ad space in return.
Because they can still be sold through an API, with little or no direct human involvement, these ads are still considered “programmatic.”
Premium publishers often sell their inventory to premium brands through private auctions.
In addition to fixed-price advertising, some publishers (again, those with the most clout and in highest demand) organize private auctions, which gives them greater control both over price and which advertisers they sell to. Advertisers also prefer this model, as they can be surer where their ads will be displayed.
Advantages of Programmatic Direct
- Transparency. The bane of digital advertising has been, and continues to be, transparency. When it comes to the number of ads served and viewed, billions of dollars are wasted due to bot traffic. According to a recent report published by Digiday UK, 81 percent of the programmatic ad impressions in Japan in 2017 were fraudulent, followed by Brazil with 36 percent. The U.S. placed third with 35 percent. In the U.K., which has the third-highest volume of programmatic impressions available, fraudulent desktop impressions were at 15 percent.
It seems that transparency also pays off for publishers; knowing exactly how many impressions are to be served and which creatives should be loaded for which audiences helps optimize their workflow as well and gives publishers greater control over the context and look of their sites.
It seems like the transition from RTB to PMP to programmatic direct is dictated by many factors, such as the need for transparency, and more precise and guaranteed inventory purchasing. Importantly, it is worth it to emphasize that they are not competing, but complementary models designed to address the different needs of publishers and advertisers.
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What’s the Difference between Programmatic and RTB?
As a newbie, I’m still learning as I go. But one term StudyBreak Media so wisely made sure I was familiar with right away was programmatic. Why? Well, just do an online search for it and you’ll see. It’s a pretty hot topic; many consider it to be the future of digital advertising – that is here, right now.
At first, I had a really hard time understanding the difference between programmatic and real time bidding (RTB), a closely linked term. But as I started to research more and more, I realized I wasn’t alone. Nor was I alone in trying to learn what it all meant for digital advertising. Thank goodness.
So let’s break it down.
What does “programmatic” even mean?
I think it’s worth knowing the definition of programmatic before we get into how it applies to digital advertising.
By definition, something that is programmatic is quite simply of or according to a program, schedule or method. Applying programmatic to digital advertising, we can then reason that programmatic buying is just buying with a methodology.
So, what is programmatic advertising?
Programmatic advertising is a technology that allows advertisers to automatically target consumers based on certain metrics that are obtained through algorithms. In the past, if Dick’s Sporting Goods wanted to advertise to people who are interested in buying their products, they might target sports sites. Now, an advertiser can target consumers on any site by taking information like age, gender, what sites the consumer has visited in the past and if they have shopped for similar products already.
Wait, what is RTB?
Real Time Bidding, or RTB, is exactly what the name implies. The buying and selling of ad impressions is done in an auction that occurs in the time it takes your webpage to load. Usually, this is facilitated by an ad exchange or supply-side platform that helps connect the advertisers to the publishers.
As the impression loads in a web browser, information about the user gets passed on to the advertisers. Advertisers interested in the user will start the bidding process. The highest bidder wins.
Isn’t Programmatic RTB then?
It’s confusing, but thinking about it like this may help. Programmatic is a method to determine if the advertiser wants to purchase the inventory space. RTB is one way to purchase.
Not all advertisers who use programmatic utilize RTB to purchase. Programmatic Direct is a term used to describe more traditional buying with the use of programmatic technology.
So is this how the big publishers are doing it now?
Actually, publishers and advertisers have been slow to move on programmatic and RTB. A lot of the early hesitation for publishers was the fear of receiving low quality advertising on their site.
The truth is, RTB and the use of programmatic technology does not impact the quality of ads. And now, with advertisers and agencies becoming more and more interested in RTB buying and the increase in programmatic technology budgets, publishers can no longer ignore RTB and the use of programmatic within their own demand stacks.
Another obstacle has been the development of this technology. Both the buy side and the sell side must have the technology and processes in place to connect for the sale.
But this is technology after all, and things can and are changing quickly.
An article published by adage.com exemplifies the shift toward RTB and the use of programmatic technology. According to Ad Age Datacenter, American Express was the ninth-largest online display advertiser in the United States in 2013. Recently, the advertising giant sent out an RFP to some of the biggest ad-tech companies across the globe.
The request? “American Express would like to transform their Display Media Channel to become 100% programmatic,” the RFP stated. While this certainly won’t happen overnight, and American Express admits that, they are aligning themselves to work toward achieving this new target.
Can you sum this up for me?
Publishers should not fear programmatic and RTB, but rather take the time to learn how these different parts of digital advertising can impact the way they sell their inventory to advertisers. It’s important to keep up to-date with the advances in technology – remember this is a tech industry – and to at least start asking questions like, can this increase my ad revenue?
Reading this post is a great start, but if you want more information the Interactive Advertising Bureau (IAB) provides a great overview as well.