There is a famous expression by Wanamaker that states “Half the money I spend on advertising is wasted; the problem is I don’t know which half”. When buying impressions in bulk, advertisers face the same issue by paying some specific amount of money for one thousand views. Although each impression brings different value to the business it is always got at the same cost as the other ones. With real time bidding advertisers get control over the ways their marketing budget is being spent and can decide on the amount they are ready to pay to have their ad placed in front of a particular customer separately.
For instance, consider a currency exchange service company. It will probably have far more success targeting at someone who has booked a holiday tour in another country rather than someone who has not even searched on that. What real time bidding does is that it allows advertisers to spend their budget according to the value each individual brings to their business by paying the highest rates to reach the customers who are the likeliest to make a purchase and skipping those who are not interested in making a real purchase at all.
So what does it take to conduct real time bidding advertising process? Firstly, there has to be a publisher who is willing to provide the inventory. In the beginning, it was only unsold inventory that was used for real time bidding however due to increasing advertiser demand and higher revenues for publishers, real time bidding is used in premium inventory as well. Then, there has to be a platform that makes advertising purchasing automatic and allows the advertisers to set the buying parameters of their campaigns. And of course, an ad exchange which is a special software tool that makes the purchase of inventory possible is compulsory. The whole bidding process takes milliseconds – time that is necessary to have the customer’s page loaded.
So here is the whole real time bidding process described at its most basic form. Ad Exchange conducts an auction each time when the publisher provides the inventory. During the auction the advertisers or their representatives place a bid for each impression according to the value this impression brings. Finally, the inventory is sold for the maximum price offered by the advertiser.
Adfonic has recently conducted a research to compare RTB with non- RTB methods for running mobile advertising and found out that the clickthrough rates for RTB ads is 97 % higher than for non RTB ads. The difference of 97 % is quite impressive and gives a reason to believe that real time bidding may be the future of online advertising. What is important is that real time bidding advertising has advantages for each member taking part in it – advertisers, publishers and customers. For advertisers real time bidding allows to target even more specific customer profiles than display advertising as well as not to waste money for the impressions that do not bring any value to the business. Customers get more relevant ads. And publishers are able to generate higher revenues as the inventory is sold through an auction at the highest price offered by the advertisers. Everything taken into account, real time bidding advertising really got all the chances to take the leading position in online advertising.
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