July 4, 2020

Brand, Media & Advertising

Layman Series: Everything you need to know about programmatic advertising Part-2

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Layman series is an educational initiative to explain the most complex but critical topics and concepts in media and advertising in a very simple language. The inspiration comes from a learning technique called “The Feynman Technique” named after noble prize-winning physicist Richard Feynman. 

Part-2 What is Real-Time Bidding?

In part 1, I explained what is programmatic advertising/media and how it is different from traditional digital media buying. We also looked at how programmatic solved some of the biggest challenges faced by advertisers and publishers ( websites & apps). If you haven’t read part 1, I request to do that because that will set the background to understand part 2 which is on RTB (real-time bidding) one of the driving forces of all forms programmatic advertising be it video, display or audio.

In part 1, I discussed how programmatic A. automates the buying and selling of ads be it social, display, audio, and video across different websites and apps and not just a few where you as an advertiser are trying to reach out to your audience that matters to you and not any random person. B. It allows you to target the audience matters to you at the right websites & apps without any need of humans and paperwork as it happens through machine and technology.

Also, the publishers are able to sell thier inventory (ad space or impression) by connecting many advertisers and not just a few. Publishers are less stressed because they are now connected with thousands of advertisers and can sell their unsold inventory which was left after selling directly to brands or advertisers.

There is one thing that I want to highlight that when you as a brand buy ad/inventory/impression on multiple websites and show the ads, let’s call this process of buying ads and showing the ad to a user “ad-serving”. Do you know? it happens in less than 1 second in real-time as soon the user visits the website/webpage and he/she is eligible to see an ad. It’s the RTB that is used for ad serving i.e showing ads to a visitor of a website.

So, what is RTB (real-time bidding) and how does it come into the picture of programmatic advertising?

Let’s understand this with an example. TOI is a very popular website in India that receive millions of visitors in a Day from across the country to read news and consume content. The sports section of TOI is the most sought after category for brands like Nike, Puma, Redbull, and Addidas and every brand that I mentioned wants to show ads to users visiting the sports section. Don’t you think? There has to be a process or mechanism in place which helps TOI, in this case, to select one advertiser out of many. yes, there is a process and it’s called ad auction which is pretty much based on any traditional auction where are many buyers and one seller where sellers decide to which buyer I am going to sell and that depends on how much a buyer is willing to pay let’s call it “Bid” whosoever bids the highest wins the auction.

Online ad auction is pretty much the same, for every impression of an ad or when a user is eligible to see the ads as soon as he or she loads the page there is an auction happens and all the advertisers I mentioned who want to target that user on the sports section bid a certain amount to win that impression and show the ads. The only difference between that traditional auction and online ad auction is that in case tradition auction prices are set beforehand but in case online ad auction the bidding happens in realtime in 10 milliseconds or less.

The process of setting the price of an impression which is called bidding in realtime as it when users load the page is called real-time bidding (RTB). RTB is one of the key concepts not only in programmatic but all kinds online advertising be it social, display, video or search where multiple advertisers are trying to reach a user and they have to bid and compete with other hundreds of advertisers to target user/visitors and show their ads.

Adserving(the process of showing ads to the user) is quite a complex process which I will explain in Part-3. Let’s not be confused with the ad serving and RTB. RTB is used for ad-serving and it happens before an ad is served but how an ad is served will be explained in Part-3.