The relationship between real-time bidding (RTB) and programmatic advertising is a tightly knit one. While both technologies revolutionized ad buying and selling, not many people understand the difference between the two.

Today, we’ll break down real-time bidding and define its role in the programmatic advertising landscape. Even though RTB is a giant step for online advertising, it isn’t without its challenges. Here’s all you need to know about RTB, its demands and current market trends.

What is RTB? Definition and usage

Real-time bidding is the automated process of buying ad inventory in digital auctions. This was a fundamental paradigm shift from traditional media buying, in which buyers would have to manually reach out to every publisher to compete for ad inventory.

In 2009 and 2010, when many programmatic companies announced support for RTB, few could anticipate how revolutionary RTB technology would be — and how out of hand the technology would get. Even today, few people can grasp the full extent of real-time bidding and just how advanced and all-knowing these systems are.

By systems, we’re referring to all the platforms that facilitate the real-time bidding process and make it as efficient as it really is. RTB is instantaneous, too fast for the human mind to comprehend, and at the heart of its incredible speed and accuracy is data — data regarding users, impressions, competitors and many other factors.

Every platform that comprises RTB has an important role to play in the matter. Supply-side platforms (SSPs) aggregate publisher and user data. This data shows the value of a publisher’s inventory impressions and every user that you would serve the ad to.

Demand-side platforms (DSPs) hold advertiser information: ad creatives, maximum bids, frequency, geo fancing and other relevant data. This helps brands make inventory buying decisions. Data management platforms help consolidate the surplus of data that belongs to brands, allowing DSPs to operate more smoothly.

Ad exchanges, otherwise known as marketplaces, are where SSPs and DSPs meet to do the actual bidding and trading. It intakes all the data from both sides and runs auctions based on all the available parameters.

MGID operates its own SSP, where advertisers can utilize real-time bidding to gain access to premium inventory using any DSP of their choice. That way, all of the auctions take place in-house where only the most vetted and carefully reviewed publishers are allowed.

RTB vs. programmatic advertising

Programmatic advertising is the process of using technology and algorithms to handle what was once a manual, labor-intensive task — buying and selling ads. It’s merely a catch-all term used to describe ad trading that’s automated rather than manual.

There are many ways in which ads can be traded programmatically, only one of which is real-time bidding. RTB is a specific instance of programmatic where ad inventory is sold at auctions that take place in ad exchanges.

However, there are other types of programmatic ads as well. Programmatic Direct involves one-on-one deals between individual publishers and advertisers. Unlike RTB auctions, Programmatic Direct gives precedence to certain publishers and advertisers.

There are also Private Marketplaces (PMPs). This is where exclusive publishers and advertisers get to trade with one another. You usually need an invite to be able to join a PMP.

Current market dynamics and trends

Current market trends indicate that real-time bidding is in constant growth. It’s a reliable indicator of RTB’s dominance in the industry and a projection of its relevance in the years to come.

Since 2019, digital ad spending continues to increase, and some segments are booming. Take Programmatic Digital out-of-home (DOOH) spending as an example. From $2.68 billion to $3.84 billion projected for 2022, there’s a clear sign that marketers find programmatic DOOH ads and real-time bidding reliable metrics of success.

The way users surf the web has also revolutionized digital ad trends. With more and more users on mobile devices and a mobile-first mindset, cross-screen and cross-format ad inventory is a necessity. Publishers can now sell ad inventory that’s viewport specific, allowing advertisers to fill with creatives that match the device specs.

Benefits of RTB for advertisers and publishers

While there are certain benefits that are specific to either advertisers or publishers, real-time bidding is beneficial to both in very similar ways.

For one, they both benefit greatly from buying and selling high-quality targeted impressions. Publishers come off with the best value proposition and advertisers get to buy more relevant impressions.

When a publisher’s reputation grows, so does the remaining inventory value. Previously unsellable inventory becomes available to the highest bidder, driving more revenue and new growth opportunities.

Then, there’s the matter of increased understanding of audiences. With all the data available to both publishers and advertisers, it becomes crystal clear who a publisher’s niche audience is, what their spending habits are and how to better meet their needs and expectations.

Last but not least, using technology such as real-time bidding to your advantage will optimize every aspect of ad trading and every little bit of inventory you have available. With all the data at your disposal, you can run the most optimal trades at any given time.

Problems and challenges with RTB

One of the most glaring concerns with RTB is ineffective user consent management. Privacy regulations such as GDPR and CCPA were not sufficient for regulating data collection and use. Even though a user may have approved one particular cookie by clicking on the publisher’s cookie banner, that consent couldn’t be tracked and managed in all further programmatic transactions.

There are other major privacy issues, such as access to user data that’s never been consented to. For example, even if an advertiser doesn’t win a bid, they still have access to all the bid data, including detailed user information such as geolocation, the device used and spending habits.

Another major problem that has recently surfaced is the alarming amount of fraud and market manipulations that is taking place. Like any other profitable venture, RTB attracted a whole bunch of unsavory characters who operate semi-legitimate DSPs or SSPs and aim to manipulate the system in order to make money. Publishers’ reputations end up tarnished and advertisers’ money wasted, and there is no industry-level solution in sight.

The best way to avoid such issues is to steer clear of unsafe platforms and join marketplaces where only tried and true platforms are permitted to join.

Final thoughts

Real-time bidding and programmatic advertising are here to stay. Marketing trends and dynamics are all the proof most marketers need to reliably increase ad spending and keep advertising budgets high.

RTB is the cutting-edge of programmatic, an ad trading system that both publishers and advertisers are willing to get behind. Despite all the challenges, it’s safe to say that RTB is here for the long haul and it will keep both advertisers and publishers on their best behavior.