The main participants in real-time advertising
Online banners are an established form of advertising, but are they still relevant? With the ‘banner blindness’ phenomenon, we could assume the answer is no. For a long time, display marketing was a rather neglected field, and businesses tended to focus more on search engine advertising (SEA). The most recent figures reveal that more money is being spent on digital advertising than search advertising. Thanks to new technology, the traditional principle of display advertising can shine in new splendor. Display advertising is constantly developing and real-time advertising contributes greatly to it: thanks to high efficiency, pinpoint targeting, and real-time auctions with real-time bidding, publishers get the best price, and advertisers get the best advertising space, which results in significantly less scattering loss. But how does supply and demand come together and what potential do ad exchange marketplaces actually have? To answer this, we examine the different participants and relationships in real-time advertising (RTA).
The development: from traditional display marketing to RTA
Traditional banner and display advertising have played an important role in the online marketing mix for a long time, but over time, marketers have started to concentrate more on performance-based formats (i.e. search engine marketing, affiliate marketing). Search engine advertising in particular once offered marketers many benefits compared to traditional banner marketing: efficient campaigns, better ROI (return on investment), and more relevance for the user. There are also many providers and networks which offered easily manageable platforms.
But display advertising is by no means old hat: thanks to real-time advertising and real-time bidding, it’s possible to achieve the same effectiveness and relevance with classic banner advertising as with SEA, for example. One problem with classic display banners is the relatively high scattering loss. Now, 20 years after the first advertising banner was created, there are new technologies available that can reduce the amount of loss through accurate analyses, custom business models, and real-time auctions.
Better targeting techniques
The aim of targeting is to customize your promotional efforts to suit a target audience. This means that users are only shown ads for products or services that they could potentially find interesting.
Targeting was a lower priority in the early days of online advertising. Ad banners were generally placed on thematically relevant sites (e.g. an ad for soccer boots on a soccer blog), but this environment targeting was far from accurate. This resulted in a lot of scattering loss since some companies’ ads were also being shown to those who weren’t interested.
Better and more sophisticated targeting options gradually emerged. Environment targeting is still used, but socio-demographic data is also included, which improves synchronization. Additional targeting techniques used in conjunction with real-time advertising include:
- Geo targeting
- Keyword targeting
- Context targeting
- Technical targeting
- Behavioral targeting
The options described above follow the user wherever they go online, and not just in a relevant environment. This makes it possible to reach the target group and potential customers regardless of their surroundings. Targeting and addressing individual customers takes center stage with real-time advertising. Every ad impression (i.e. every retrieval of an advertisement) is connected with a user profile. The ad exchange marketplace offers advertisers this exact profile in real time. All these processes are now automated so their effectiveness is hard to beat. Supply and demand come together at the touch of a button – manual price negotiations or lengthy advertising and ad text exchanges aren’t required.
Real-time bidding as a technical basis
The real-time bidding process is required for the efficiency described above, as it forms the technical basis. Many important components come into play at the ad auction. The most important include:
- Visitor: when a user clicks on a site that is connected to the network, the real-time bidding process begins. The user’s profile, which has already been determined by the Data Management Platform (see below), forms the basis for the ad relevance and also the relevance of the page impression for the advertiser.
- Publisher: blog or website operators can be publishers. This means they offer space on their sites specifically for advertising purposes. By connecting to a network, advertisers are able to participate in the RTB process and place their ads.
- Advertiser: businesses or agencies can be advertisers – they buy advertising inventory in order to target their adverts to specific groups.
- Supply side platform (SSP): SSPs are platforms that help web publishers to manage their advertising inventory. SSPs are generally bound to ad exchange platforms and attempt to sell ad impressions for as much as possible on behalf of their publishing partners.
- Demand Side Platform (DSP): Demand Side Platforms determine the demand depending on the offer from the supply side platform. Advertisers will find an interface for SSP and ad exchanges. Through the DSP, you can define campaigns and ads to fit the requirements of the target groups and take part in automatic bidding for advertising inventory.
- Data Management Platform (DMP): Data Management Platforms are used for collection, structuring, and supplying large data sets. The DMP operates in the background, but is a major player in the entire process since the inclusion of data plays an important role for the evaluation. The more the DSP knows about a user, the better it can judge whether an impression is suitable for the advertiser and their campaigns. Besides user data, other factors such as time, weather, or content categories play a part. All data is consolidated via the data management platform; the DSP accesses this data and evaluates the offered ad impressions
- Ad Exchange: the ad exchange is an online marketplace where real-time bidding takes place. This is where SSP and DSP converge. The difference between this and a typical advertising network is that a classic network can only offer bundled advertising space for an undetermined number of sites, but the ad exchange offers the advertiser concrete advertising inventory (ad impressions).
Real-Time Bidding: the process
When a user visits a website with available advertising spaces, DSPs and SSPs are activated. The SSP reacts within milliseconds and sends a request to the attached DSP. Every important piece of information and parameter such as the advertising space, content categories, and the unique user ID is communicated through the request. The DSP checks whether the ad is suitable for the user. To calculate this, processes are run internally, which first compare the user profile with the specified target group parameters and then selects the appropriate campaign with the highest chance of success.
If all requirements are met, the DSP makes an offer for the advertising space on the advertiser’s behalf. The SSP receives all the bids and the highest gets the contract – this advertiser’s ad will appear on the site. Users don’t notice this as the whole process is complete in less than 100 milliseconds.
Reaching a market of millions with real-time advertising
Real time advertising is no longer a fad; a huge market has developed within just a few years. This is also evident when looking at the entire advertising market. Massive growth has been predicted for the online advertising market and positive developments are down to real time advertising as well as other sectors. New technologies and options in the targeting sector enable even more efficient targeting through display advertising. Advertisers now just need to make full use of these options.