What is Real-time Bidding (RTB)?

Real-time bidding is an automated auction-like process for buying digital advertising inventory based on a computer algorithm and data from the seller’s website. In other words, it’s a moment where advertisers bid for the exact users and their attention by placing bids based on user data and real-time audience insights. Each advertiser sets up their own rules for how much they are willing to pay for each individual visitor.

The seller is usually an ad exchange or a demand-side platform (DSP). Real-time bidding is the process that takes place when a browser connected to the Internet visits a website and an ad is shown based on the content of the website and the data collected about the browser. The browser reveals certain information about its user, such as its IP address and the time of day. The DSP collects data about the user, such as the operating system, frequency of visits and other demographic information. Based on this information, the DSP places a bid and decides which ad should appear. The website hosting the ad, called the publisher, receives the bid and decides whether to accept or reject it. The ad exchange is the third party that connects the advertisers and publishers, facilitating the real-time bidding process.

How Does RTB Work?

The main difference between real-time bidding and traditional bidding is that RTB occurs in real-time. When a user visits a publisher site and triggers an ad, a “bid request” is sent to the DSP. The DSP determines the value of the bid request, taking into account multiple factors. Some of these factors are: The user’s demographics, the content being viewed, the time of day, the location of the user, the user’s search history, and other factors. The DSP then sends a “bid response” to the publisher. The publisher chooses one of the bids and the ad is shown.