Real-time Bidding (RTB) refers to the buying and selling of online ad impressions through real-time programmatic auctions. Real-time bidding has buyers who bid on an impression ad. If they win the bid, the buyer’s ad is instantly displayed on the publisher’s site.

Suppose, you browse a product, say a bag or maybe a flight ticket and do not make a purchase and leave that website. Now you open some another website, you see an ad of the same product you visited follow you everywhere. It might also be possible that you see an ad offering a great deal on what you looked for. How did this web page know what you were looking for? And, how did it reach you within seconds?

This is where Ad Exchanges, DSPs, SSPs and Real-time bidding come in play. These elements work together to ensure that an ad is served to the user. And, RTB decides which buyer gets to buy that ad and publish it to the user. The buyer/advertiser who is willing to pay the highest price for an ad, wins the bid. RTB auctions are often facilitated by ad exchanges or supply-side platforms.

How this works?

• A user visits a website – say to book a flight on Expedia.
• This triggers a bid request that includes user data such as location, demographic data, browsing history, and the page being loaded.
• This request goes from publisher to an ad exchange.
• Ad Exchange submits this information to multiple advertisers.
• These advertisers automatically submit bids in real-time to place their ads.
• Advertisers bid on each ad impression as it is served.
• The bidder who bids the most, wins and their ad is served on the page.
• This process is repeated for every ad slot on the page.

Real-time bidding happens within 100 milliseconds from the moment ad exchange received the request. Bidding happens autonomously and advertisers no longer need to negotiate with publishers or ad networks for prices. This has also made possible that ad reaches the right people, people who might be interested in it because they might have shown some interest in that product in the past. Ad Exchanges provide access to variety of ads across a wide range of sites that an advertiser can pick from. This helps advertisers choose the right ad and display it to the right people. The criteria for bidding can be very complex, taking into account everything from very detailed behavioral profiles to conversion data. Probabilistic models can be used to determine the probability for a click or a conversion given the user history data. This probability can be used to determine the size of the bid for the respective advertising slot.

Demand-side platforms (DSPs) give buyers direct RTB access to multiple sources of inventory. 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.