Real-Time Bidding for Programmatic Ads — Here’s How It Works
As a marketing leader with experience at several different tech companies, I’ve become an expert at real-time bidding (RTB) for programmatic ads.
This process is often one of the most efficient and cost-effective ways to purchase ad inventory online.
But, even for experienced marketers, real-time bidding can be confusing. That’s why I wrote this article: to break down what RTB is, how it works, and the pros and cons of using it — in plain, jargon-free English.
Table of Contents
In a traditional media buying process, the marketer has to buy ads manually.
Let’s say I find a magazine that serves my buyer persona. I ask the magazine publisher for their media kit, I choose the ad dimensions that fit my budget, and then I buy an ad for a certain amount of time. Once the time runs out, the ad is taken down.
Real-time bidding eliminates most of that work. With RTB, you can get space in that magazine — and hundreds of others — by letting a Demand-Side Platform (DSP) automatically choose the best publishers and ad spaces, and then bid on them for you.
You just set targeting parameters, such as maximum bid price and target audience. Then, the DSP uses these parameters to automatically determine where your ads are placed.
If you place the highest bid, the publisher accepts your ad automatically. Real-time bidding does all the bidding for you, so you don’t have to take any additional steps.
As Mandar Ambekar, founder and managing director of blueShepherd GmbH, explains, “The Real-Time Bidding process is like an auction, but it happens in the time it takes for a webpage to load. Advertisers compete to display their ads to a specific audience based on criteria like age, interests, or browsing behavior. The highest bidder wins, and their ad appears on the user’s screen.”
Real-time bidding is the driving force behind most programmatic advertising campaigns. Advertisers can buy ad inventory, place those ads online, and ensure that they get a certain number of impressions with their programmatic advertising campaigns.
Still confused? No worries. I’ll break down the concept of RTB and programmatic advertising further below.
Real-Time Bidding Terms to Know
There are several pieces involved in the real-time bidding process. Before we put them all together, let’s take a look at each piece one-by-one.
- Advertiser: The advertiser is the company or brand that wants to place an ad online.
- Demand-Side Platform (DSP): The Demand-Side Platform is the service that advertisers use to launch their ad campaigns.
- Publisher: The publisher is the website or online property that wants to sell ad space, often referred to as “ad inventory.”
- Supply-Side Platform (SSP): The Supply-Side Platform is the service that publishers use to make their ad inventory available. SSPs use ad exchanges to run auctions where ad spaces are instantly purchased by the highest bidder.
- Ad Exchanges: The ad exchange connects companies who want to advertise with publishers who want to sell ad space. Ad exchanges carry out the bidding transaction automatically in real time by connecting Demand-Side Platforms and Supply-Side Platforms.
- Impressions: Impressions refer to the number of times an ad is seen or scrolled past. In the real-time bidding process, advertisers pay per thousand impressions. This cost is known as the cost per mille, or CPM, of a campaign.
How does real-time bidding work?
Below, I’ll share what this looks like in action, explaining how real-time bidding works from both the advertiser’s side and the publisher’s side.
Setting Up an Ad Campaign as an Advertiser
On the advertiser side, marketers use DSPs, or Demand-Side Platforms, to set up ad campaigns and track their performance. To determine what ad inventory to bid on, advertisers will set targeting parameters.
For instance, a brand may only want to target users who are in a specific region or who have visited their website recently.
Importantly, there are many tools that today’s marketers can use to help them develop effective ads. For example, HubSpot’s AI Video Ad Creator makes it possible to quickly and easily produce video advertisements, while its Free AI Headline Generator tool can create tailored headlines for any target audience.
Then, once the ad is crafted and the campaign is set up, the advertiser’s DSP will evaluate ad potential in real time. The DSP can then decide whether or not to place a bid, and how much to bid, on a given ad space.
Listing Ad Inventory As a Publisher
Publishers, on the other hand, use Supply-Side Platforms (SSPs) to list their ad inventory and the prices they charge.
When creating these listings, they’ll want to include key information that DSPs will be looking for to evaluate whether a specific ad space is a good fit for their target market. That includes the type of content on their webpage and the types of ad space available.
Meeting in the Middle at the Ad Exchange
Next, the advertiser and publisher will meet in the middle at the ad exchange: the marketplace where the real-time bidding actually takes place.
Advertisers set their bid through their Demand-Side Platform, while the publisher’s Supply-Side Platform either accepts or rejects the bid. The prices are negotiated based on cost per thousand impressions, or CPM, so the advertiser isn’t paying based on uptime or even ad dimensions. Instead, they’re paying for the number of times, in thousands, that their ad is seen.
Still confused? Don’t worry — this can be tricky to wrap your head around. Let’s go through a real-world example to illustrate what real-time bidding can look like in action.
Real-Time Bidding Example
Let’s say I’m the marketing manager for Silk, a UK-based beauty brand that just launched a new brow line and is running a marketing campaign to promote it.
I set up the ad campaign on a Demand-Side Platform (DSP) where I specify that I want to target users who regularly shop for makeup products, who are located in the Manchester area, and who are between 18 and 30 years old. I also note that I only want my ads to be shown on sites related to beauty and lifestyle.
So, what happens next? A user visits a publisher’s site, and the publisher’s Supply-Side Platform (SSP) sends a bid request to the ad exchange. Then, my DSP evaluates the impression’s value. The DSP determines whether the user meets the parameters outlined in my campaign, and if they do, the DSP submits a bid.
Of course, not every bid is a winner. But if Silk has the winning bid, then once the page loads, the user will see my ad, and Silk will pay the cost associated with the bid.
That’s real-time bidding on a single ad space for a single user — but most likely, this process will happen thousands of times on different web pages over the course of Silk’s ad campaign. Silk’s paid ads manager will then monitor the ad’s performance on the DSP to see whether the ad is reaching the desired audience, or if the parameters should be adjusted.
How Much Does Real-Time Bidding Cost?
As with any marketing tool, the cost of real-time bidding for programmatic ads varies substantially depending on your unique use case. But first, remember: The price of an RTB campaign is measured by the cost per thousand impressions or CPM.
In my experience, the CPM for a given ad campaign will change based on who your target market is, the budget you’ve allocated to the campaign, and how long you’ve allotted for the campaign to run.
If you’re looking to reduce the cost, you can adjust these factors to be more limited. In contrast, if you have more budget available, you can always explore opportunities to expand these factors.
In general, the CPM for a campaign targeting a niche audience will be higher than that of a campaign targeting a broader audience. Of course, there are substantial advantages to targeting a more niche user base. However, if you’re looking to reduce the cost per impression, broadening the audience may be helpful.
How to Measure the Success of Real-Time Bidding Ads
Of course, any marketing strategy is only as useful as your ability to measure its success. When it comes to real-time bidding on programmatic ads, there are several metrics that I’ve found can be effective ways to measure how well a campaign is working.
On the most basic level, I always start by simply measuring impressions.
Impressions are the easiest metric to track, but of course, just because someone sees your ad doesn’t mean they click through to visit your website, let alone buy your product.
That’s why click-through rate is another important factor to consider: How often are the people who see your ad actually clicking on it?
Beyond impressions and click-throughs, I’ve learned that it can also be helpful to explore more nuanced measures of user engagement. For example, a website visit is one thing, but how long do users stay on your website? How many pages are they visiting on your site, and which pages are they spending the longest on?
Tracking metrics like these can help you get a more detailed view of the actual quality level of the leads you’re paying for.
Finally, I always remember to zoom out and look at bigger-picture measures of success as well.
What is the ROI of the overall campaign? What percentage of ad impressions ultimately convert into purchases? And how loyal are these customers once they convert? Do they buy once and then churn, or do they become lifelong evangelists of your brand?
Accurately measuring success is no simple task, but factoring in a range of metrics and considerations like these can help to ensure that you invest your ad money as effectively as possible.
Real-Time Bidding Platforms
Now, you know what RTB is, and you’ve started thinking about how to measure success. But what does it take to get started implementing a programmatic ad campaign? There are several tools I recommend to help you get started with real-time bidding on programmatic ads.
I’ll start with the advertising side, showing which tools can help you buy space to place your ads online. Then, I’ll move to the publishing side and feature tools can help you sell your ad space.
Real-Time Bidding Platforms for Advertisers
As an advertiser, you’ll want to find a Demand-Side Platform (DSP) that allows you to manage several ad campaigns at once. I recommend looking for a DSP that lets you set specific targeting parameters, such as users’ most-visited websites and preferred brands.
Here are a few of my favorite options.
- AdRoll: This simple self-serve Demand-Side Platform is a good fit for beginners in the programmatic advertising space.
- mediasmart: This more advanced self-serve Demand-Side Platform offers detailed targeting and segmentation capabilities. As such, it’s a good fit for more experienced marketers who have already set up ad campaigns with other tools, such as Google Ads.
- theTradeDesk: This Demand-Side Platform allows you to place ads on multiple devices, including TV ad rolls, online videos, music streaming devices, mobile apps, and publishers across the web — so it will be a good fit for marketers who are planning to advertise across all of these channels.
Real-Time Bidding Platforms for Publishers
On the other side of the equation, if you have ad inventory to sell, then signing up with a Supply-Side Platform is essential to take advantage of real-time bidding. With an SSP, you don’t have to speak with any advertisers or do any of the manual work associated with account management.
Here are a few of my favorite supply-side channels that can help publishers sell ad inventory through real-time bidding.
- Magnite: This Supply-Side Platform is best for large-scale ad inventory sellers who also want to sell ad space through Private Marketplace (PMP) and Programmatic Guaranteed (PG) systems. It’s a good fit if you’re an experienced ad seller who wants to upgrade to a more capable system.
- Index Exchange: This simpler supply-side marketplace allows you to get started with selling ad inventory on multiple channels, including display, video, mobile, and native. As such, it will be a good fit for publishers who would like to start selling ad inventory or who plan to take advantage of all these available channels.
Still not sure if buying or selling programmatic ads through real-time bidding is right for you? Below, I’ll go over some of the most important pros and cons to keep in mind when deciding whether to invest in RTB.
Real-Time Bidding Pros
Better Tracking
As TeqBlaze CEO Anastasia-Nikita Bansal explains, real-time bidding provides marketers “real-time insights and the ability to adjust campaigns on the fly.” She continues, “[This] ensur[es] advertisers can optimize their ads to reach the right audience at the right time, thereby reducing wasted impressions.”
In other words, with RTB, advertisers can monitor their campaigns easily without relying on vendors. No need to reach out to multiple publishers and ask for reports — you can get all the data you need yourself on your DSP.
This also gives marketers the agility to pivot quickly if their campaign isn’t performing as expected. For instance, you might find that switching out one keyword for another may boost your campaign’s performance and align better with the audience you want to reach.
Real-time bidding with programmatic advertising enables you to track your campaigns and easily identify opportunities for improvement.
Better Targeting
In addition, when purchasing ads through RTB, you buy one impression at a time.
That means every time a website visitor or mobile app user visits a publisher’s site, you get the chance to assess that person’s profile and see whether it matches your target audience. This makes for more accurate targeting, as you can ensure your ads only reach the right people at the right time.
Indeed, “RTB has a clear edge as compared to traditional forms of media buying,” notes Shridhar Mishra, chief business officer of the EMEA and APAC regions for DIGIAD DMCC. Specifically, he argues that “the performance [of RTB] would be quite better since you are going contextual and targeting the most relevant audience sets.”
More Cost-Effective
Finally, one recent report found that, on average, programmatic ads cost up to 20 times less per impression than traditional ads. Moreover, I’ve found that the precision of real-time bidding allows marketers to spend their ad dollars on higher-value impressions.
Too often, I’ve seen brands launch marketing campaigns that reach their target market occasionally, leaving much of their budget wasted on users who don’t fit the brand’s profile. In contrast, RTB enables marketers to ensure that every cent goes toward targeting users who are likely to be interested in the brand.
In addition, RTB takes much of the manual labor out of the online advertising process, allowing marketers to focus on other efforts.
You can also complement your RTB efforts by leveraging a Free Paid Media Template to track and organize your media planning. With tools like these, marketing teams can get more bang for their buck, prioritizing high-value work.
Real-Time Bidding Cons
Compromised Brand Safety
Despite the many benefits of RTB and programmatic advertising, real-time bidding has real shortcomings to consider. First, it’s important to remember that where your ad shows up is just as important as who sees it. This is because consumers judge brands based on the content surrounding their ads.
Indeed, a recent survey found that 71% of U.S. consumers report that they would feel less favorably toward a brand if it advertises near inappropriate content, and 56% would be unlikely to engage with an ad that appeared near inappropriate content. This can be anything from a site that hosts pirated movies to a blog that promotes hate speech.
Due to the nature of RTB, there is a risk your ad may appear on a site with content you wouldn’t want your brand associated with. To mitigate this risk, marketers can put certain keywords and sites on a “deny” list.
That said, because RTB systems place ads automatically, there is no way to fully guarantee that your ad will never be placed next to unsavory content.
Potential Ad Fraud
In addition, I’ve learned that it’s critical to be aware of potential ad fraud. Ad fraud happens when scammers (or any parties with ill intent) try to trick digital ad networks by falsifying impressions and clicks using bots.
Obviously, bots aren’t real people — so they aren’t potential buyers you can eventually convert into customers. Because you don’t get to hand-pick publishers when you use real-time bidding, there’s a very real chance that your ad might be seen by bots instead of real people.
The rising sophistication of bots can also cause brands to gather inaccurate data on their campaigns, mistaking impressions or clicks by bots for real, human traction.
This form of fraud may happen without publishers’ knowledge, but some deceitful publishers fabricate impressions knowingly to steal from advertisers. One way to combat this is by using a DSP or ad network with fraud detection software.
But of course, even if you take reasonable precautions, this risk is also still always going to be present.
Real-Time Bidding is the Easiest Way to Increase Brand Awareness
At the end of the day, I’ve found that real-time bidding makes the online advertisement process fast and easy. While it’s not without risks, RTB and programmatic advertising means marketers can skip the back-and-forth previously associated with ad buying and focus instead on tracking the results.
You can also use HubSpot’s Ads Software to create personalized and targeted ad campaigns, and see which ads are turning prospects into customers. Ultimately, this enables brands to increase the ROI from their campaigns — and it empowers brands to grow better, faster.
Editor’s note: This post was originally published in March 2021 and has been updated for comprehensiveness.
