Real-time bidding involves advertisers purchasing impressions in real-time from ad networks that provide access to publishers. Real-time bidding is foundational to online advertising in that it offers access to multiple online advertising and allows companies to launch ad campaigns on the fly.
Real-time bidding is the stock market of online advertising. It allows companies to purchase ad impressions from ad networks in real-time and expand their online reach to potential customers.
What is real-time bidding
Real-time bidding involves serving advertising impressions to the highest bidder. The transaction happens in milliseconds. A user visits a webpage and the company willing to pay the highest price to show its online ad gets its ad served to the user.
Real-time bidding involves many different data-driven calculations to deliver ads to a targeted audience. Demographic information, purchase behavior, and other data points that can be gathered on a particular user are factored into the bidding process.
It's based on available inventory
Prices are affected by the number of ad slots that are available on publisher sites. If a publisher has a backlog of inventory prices will be lower, whereas a in a tighter market prices will go up. Publisher's with tighter ad markets are generally seen as having access to higher-value consumers.
Why real-time bidding matters
Because real-time bidding is data-driven and looks at the demographics and other factors about individual users, including browser history, it can be very targeted to specific audiences. Users will often see ads on publisher sites from companies whose sites they recently visited.
Increasingly, ad networks can provide detailed reporting on how the audience is responding (or not responding) to an ad campaign, which allows advertiser and ad buyer to tweak strategies in real time to optimize campaigns.
It dominates the online ad industry
Real-time bidding controls the majority of ads that are delivered online and on mobile. Companies that want to compete for online consumers must be in the game or lose out to the competition.