When most marketers and advertisers hear the term real-time bidding, they likely think of auction houses, not lucrative business strategies.
Many publishers are in the dark about real-time bidding, even though it’s a growing and highly profitable method of reaching consumers.
Until recently, companies would pay publishers a flat rate for a bulk number of ad impressions.
Real-time bidding allows them to pay for individual impressions at rates that reflect what they’re actually worth at any given point in time.
Marketers and advertisers target their ads—and ad dollars—to the most qualified prospects. Publishers earn more money as competing brands drive up the value of the ad spot.
But real-time bidding still intimidates a lot of would-be vendors and bidders. They struggle to understand how these advertising decisions can be made at a moment’s notice. But the theory behind real-time bidding is exactly the same as traditional advertising.
It’s just more targeted and more cost-effective.
Real-time bidding has generated $8.7 billion, so far this year, and is predicted to exceed $26 billion by the end of 2020. Even the most gun-shy brands have started to take notice.
How Does Real-time Bidding Work?
Real-time bidding operates using the same principles as traditional advertising. Brands want to get in front of prospective shoppers. Instead of trying to reach audiences by advertising broadly on sites they might frequent, real-time bidding allows companies to show ads only to those people most likely to buy.
Let’s say a customer opens a page on a popular entertainment website. As the page loads, it locates an available ad spot and scans the ad database for potential buyers. The database then connects to a supply-side platform to gather further information about the consumer and the opportunity before sending it to an ad exchange.
The exchange software hooks up buyers’ demand-side platforms, used to indicate how much they’re willing to bid and for whom. The highest bidder wins the impression.
This entire process, including ad selection and publishing for the consumer, occurs within milliseconds.
The programmatic nature of real-time bidding frees up valuable time and resources.
Marketing and advertising teams might spend weeks negotiating direct-buy contracts and planning traditional ad campaigns. They still might end up wasting resources on the wrong people, as well as paying the same rate for duds as they would for qualified impressions.
Real-time bidding enables brands to target the right people on a wider range of sites. Brands can see whether customers have browsed their sites before and predict how much they’re willing to spend.
This data drives smarter, more effective advertising.
Traditional methods, such as direct-buy advertising, force companies to strategize with publishers one at a time. Real-time bidding allows them to get in front of prospective shoppers throughout an industry.
Marketing Land uses the example of a company that sells to sports enthusiasts. Instead of advertising only with ESPN.com, the brand can partner with multiple real-time bidding enabled platforms and reach sports fans across several sites.
Getting in On the Action
While setting up a real-time bidding system isn’t difficult, it is a fairly involved process. Brands interested in using real-time bidding to better target ads and increase sales may want to partner with ad agencies that already have the infrastructure and expertise to do it right.
Trading desks or DSP intermediaries also allow brands to use existing real-time bidding APIs to connect with publishers, according to a Google whitepaper.
Publishers have to set up real-time bidding systems internally, but the potential rewards make it worth the effort. Before allowing partners to bid on impressions, publishers can set price floors to ensure they receive desired minimum payments for each.
This helps predict a baseline real-time bidding revenue, although the actual payout may be much higher depending on an impression’s desirability.
Working with the right publishers or bidders is crucial to earning the maximum ROI from real-time bidding opportunities. Brands should consult current partners to discuss priorities and get feedback on potential platforms before jumping into any agreements.
Sophistication is the key indicator that a system will produce the kind of ROI brands expect to see with real-time bidding, according to the Google report.
Everyone stands to benefit as real-time bidding gains momentum in the next five years. Brands can more effectively market to their desired audiences, and publishers can earn more by selling premium advertising real estate.
Consumers—who are becoming increasingly wary of impersonal, irrelevant ads—will likely see better offers as brands compete for their business in more sophisticated ways.
It’s a win-win strategy for those smart enough to embrace real-time bidding now.
image credit: Mathias Rosenthal