RTB Technology: What is it & Why Should Anyone Care?

Every so often there is a new medium and buzz phrase that comes along in digital marketing. Some of them go on to become mainstays of the industry and others quickly fade into obscurity. The current object of hype and buzz is real time bidding (RTB) technology. We’ll be looking at exactly what RTB advertising is and whether it is worthy of the hype.

And be sure to stop by our expert roundtable on RTB Marketing.

The Problem With Traditional Display Advertising

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Display advertising has been around since the early days of the web: advertisers purchase an ad slot on a publisher’s site, provide creative, and pay a fixed rate per thousand impressions (CPM) – a very familiar scenario.

There is a fundamental problem with this form of advertising – targeting, or rather lack of. It is a shotgun approach to marketing and many will tell you that this is an outdated strategy that typically tends to add to the white noise.

When compared to Facebook ads (which allow you to granularly target who will get to see your ads and when), for example, it is clear that display advertising in its historical form does not have a bright, long-term outlook and that its targeting and engagement aspects need to change.

Enter RTB technology.

Real Time Bidding In A Nutshell

Real time bidding, in it’s simplest form, is a method for serving targeted ads on a ‘per impression’ basis, with ad space being sold (and price determined) in an instantaneous auction, based on an evaluation of impression info and close matching to the advertiser’s target audience.

For example:

A publisher will have a number of display ad spaces available on their site, similar to the traditional model.

The difference, however, is that each of the ads will be sold on a ‘per impression’ basis to the highest bidder, with an ad exchange service (such as Google’s DoubleClick) preparing bids based on how valuable (targeted) the individual visitor is to the advertiser. The bidding and serving of ads takes just 100 milliseconds.

So the process is:

  • Visitor lands on a publisher page and initiates a request
  • Impression info is evaluated on behalf of the advertisers (location, demographic, interest categories, etc.)
  • Instant auction takes place at the ad exchange, with bids based on how closely the visitor meets the advertiser’s target demographic/requirements
  • Winning bidder’s ad is served to the publishers page in 100 milliseconds

This method of buying ad space is often referred to as programmatic buying and the advantages to the advertiser are:

  • Close targeting
  • Less wasted impressions (read: less wasted spend)
  • Pricing dependent on how valuable a customer is to the advertiser
  • Improved click-through rate (some case studies have shown click-throughs increase by as much as 6.5x)
  • Advertiser gets access to a large pool of websites
  • Creative can be easily changed as ads are drawn from a pool (the ad exchange) in real time

 

RTB Technology: A Hypothetical Situation

Let’s say we have a Company which has a chain of gyms on the West Coast. Perhaps they have 10 branches situated throughout the major cities in California.

The chain has a sign up offer and fitness class for women they wish to promote and they would like to advertise on the website of a major US fitness magazine. This initially sounds like a good match, however:

  • The website will almost certainly receive traffic from outside the US
  • How likely is someone to travel from the East Coast to a gym in the West Coast?
  • 60% of the visitors to the site are men

In a RTB deployment, our advertiser could bid more for the display space, depending on how closely the visitor to the publisher’s site matches his target demographic.

For example, visitors from outside the US might be ignored altogether, while the maximum bid could increase the closer the visitor is to California.

If the ad exchange can also determine that the visitor is female, then the bid may increase further to secure the impression.

Since the auction takes place in just 100 milliseconds, all the visitor will see is an attractive, closely-targeted offer, and they will remain blissfully unaware of the complex process that has resulted in them receiving 30% off their first 6 zumba classes.

Targeted traffic = improved click-throughs and conversions.

How RTB Technology is Expected To Revolutionize Mobile Advertising

With the huge increase in mobile web browsing in 2013, mobile advertising is atop of most ad agencies “must improve” lists.

The traditional CPM method of selling display ads has been difficult for publishers, with very low CPMs due to poor targeting and low click-through rates.

RTB technology of course solves this problem and location targeting will be a particularly potent weapon in the mobile market. Restaurants, for example, could serve display ads with lunch promos between 12 and 3pm to members of the public who are within half a mile of their branch and browsing on their phone.

As RTB technology increases its reach and spreads from desktop to mobile:

  • Click-throughs will increase
  • Conversions will increase
  • Advertisers will be prepared to pay more for those targeted impressions

 

So Is Real Time Bidding Worth The Hype?

The answer is a resounding yes, with the strong conditional that it scales effectively and becomes an affordable advertising channel for middle of the pack businesses.

The laser-focused targeting offered by the RTB model ensures that money is spent only when a prospect matches an advertiser’s target demographic and precious ad spend is no longer wasted on meaningless impressions.

The programmatic buying model for display advertising has saved was a declining and neglected sector of digital marketing and looks set to ensure banner ads will once more be an attractive medium for both publishers and advertisers.

Have any questions? Feel free to comment below.

Check Out Our Expert Roundtable on RTB Marketing!

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