Real Time Bidding—Online Advertising Explained For Small Businesses
Updated · Oct 21, 2022
Online advertising is a multibillion-dollar industry and it will only get bigger. The internet and the interconnectivity that comes with it have made it possible for businesses to advertise directly to those most likely to convert and do it for the cheapest prices possible.
Real time bidding (RTB) is central to online advertising, but it can be quite a confusing topic. As such, we prepared a brief guide to walk you through it if you’re a small business.
We’ll explain this core process of RTB marketing and provide some info on how to start quickly using it.
What Is Real-Time Bidding?
RTB is a way for buyers (you, the business) of digital advertising to purchase ad space on a per-impression basis via an auction system, similar to financial markets.
RTB allows ad buying to be done through an automated process. This can make it difficult to determine the final cost of an ad campaign, but you do have the ability to cap spending.
The buyer selects some targeting criteria (e.g. demographics, interests, location), and the auction's winner is determined by who is willing to pay the most per impression given those criteria.
Real time bidding advertising can be used for display advertising, video advertising, or native advertising. If all this sounds a bit too “techy,” don’t worry; we’ve got a simple analogy.
Advertising Auction House
In RTB, there are three parties involved:
- The advertiser. In this case you. You want to post ads in prime spots on relevant websites.
- The publisher. This can be a website or app offering ad space. They want to sell this space to the highest bidder with a relevant ad.
- The exchange. This is the place that facilitates the bidding on ad space. It matches relevant ads with relevant spaces, and the bidding begins.
Think of it as an auction house. Imagine you have a simple RTB ad about Italian coffee pots you want to post. The exchange selects all publishers that are relevant to that niche.
The other publishers could be a coffee blog, a home kitchen appliance website, and an Italian travel website. The exchange will comb through the potential candidates and select the best fit.
Then the bidding begins. Your ad is placed alongside others, and the one that is willing to pay the most wins the space.
There are billions of auctions occurring online every day, as an auction happens every 100ms (or a 10th of a second).
Getting Started Easily
Many small businesses are unsure of how to get started with advertising.
That’s why we propose Facebook advertising as an entry point to real time bidding platforms. It’s relatively easy to set up and manage.
Mind, we’re not talking about advertising on the Facebook Marketplace. Instead, we’re referring to Facebook for Business.
With Facebook, the process is simplified because Facebook is the publisher and the exchange. Rather than sending ads out to websites, you can ask Facebook to let you bid on space on the site itself, Instagram, or Messenger.
This gives you a guaranteed audience and can help protect against ad fraud.
How to Advertise on Facebook
First, you’ll need a Facebook Business account. You can find a quick guide on setting one up right here.
Then it’s just a matter of clicking on the “ads” tab and getting starting.
How Does Facebook Advertising Work?
There is a major difference in how a Facebook RTB auction works compared to other networks, and that’s its qualification criteria.
Here’s the breakdown.
Unlike many other ad exchanges, Facebook doesn’t just look at the price of your bid, and the relevance of your offer.
It also looks at the estimated engagement your ad will get, and it looks at the quality of the ad.
This means that your ads are being used most optimally, and it ensures a higher standard of advertising that maintains the integrity of the network.
Facebook also has strict rules around targeting, in order to protect ad viewers from discrimination and promote fairness.
Facebook allows you to set bidding strategies for RTB ads in three main ways
- Lowest Cost
This is the default setting, and if you select it, Facebook will ensure you get as many buys as possible for the lowest price.
- Cost Cap
This more advanced strategy means you get the best exposure, but you can set a spending limit. Your bids will fluctuate in price but altogether won’t exceed the cap you set. You will get a varying number of ad placements.
- Bid Cap
This is similar to the previous option, but instead of setting a cap on total cost, you set a cap on each bid so that no individual bid can be above a certain amount on the RTB platform. This way, you can budget and ensure a specific number of ad placements.
Picking a strategy will depend on your corporate budgeting process, so be mindful when deciding.
There are numerous benefits to online advertising, but it has to be done smartly. That’s why if you’re a small business, we suggest starting with Facebook. It will give you hands-on experience with online advertising without the need to become familiar with more obscure and intricate tools.
Once you've got going, you can then explore RTB advertising further. As a next step, we’d suggest looking into Facebook Audiences, which will allow you to bid for ad space off Facebook, through its network of affiliated sites.
It’ll also be beneficial to familiarize yourself with the difference between impressions and clicks.
As a small business, whether you’re fully ecommerce, brick and mortar, or a hybrid, it’s important to understand how advertising works and be familiar with real time bidding.
RTB marketing is a powerful way to make the most of your advertising dollars and to make sure you’re boosting your conversion rate.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.