Online advertising is primarily based on a cost-per-impression payment model (CPM), although there are many other payment models in online advertising such as CPC, CPA, CPI … In the case of advertising based on the CPM payment model, we know that we charge a certain price each and every time our ad is displayed to 1000 users. This cost is a sum of the cost of each of the impressions served, which average individual impression we can deduce by using a really simple formula:
CPImpression = CPM / 1000
However, we know that not all impressions cost the same neither have the same value, specially depending on the environment / space where we will publish our advert, on the time of the day, on the type of user who’s receiving the impression and many other factors.
This motif means that, on many occasions, we get ad impressions depending on what we paid for and at the stipulated price, and yet our ratios are not good.
How do we solve this issue? How do we improve the quality of our ad impressions? How do we increase our conversion rates?
The answer are Ad Exchanges and RTB: Real Time Bidding
Ad Exchanges are technological infrastructures – platforms – that connect advertisers and advertising media so that both can negotiate the price of each ad impression in real time basis.
Thus, advertising media display their spaces – holes for banners, videos, etc. – And the Ad Exchange offers advertisers the ability to include their creative inventory and to offer the price that seems more appropriate to them for the publishers to pay every impression they want to be made of their ads.
The system which decides the price to be paid for each impression is based on a real time bidding or auction system, as in many other online advertising systems, but adding the possibility of offering each and every space at a different cost in real time. This process is done in milliseconds, and is made possible by what is known as Big Data.
Following these parameters, the Ad Exchanges have the possibility of receiving millions of offers and so discern which impression the advertiser must provide in real time. Determining the cost that every impression should have depends on a DSP (Demand Side Platform), so it is its task, and this is why it is necessary to have a special DSP technology in order to be able to operate in Ad Exchanges.
Complicated? Let’s see how RTB (Real Time Bidding) works
Real Time Bidding completely revolutionizes the concept of advertising on Internet, offering the possibility of paying independently for each ad impression, rather than having to do pay for a whole pack of 1000 impressions, as we mentioned above.
If we want to understand how it works, we need to remember that advertising space offered by the media and the announcement proposed by the advertiser as two pieces of a puzzle that fit on the platform or Ad Exchange.
Once both sides are active at the same time in the Ad Exchange, impressions or spaces in the brackets are offered to all advertisers equally and at the same time, and just at the very moment when they occur, rather than the platform deciding what to offer to whom, or which ad to show to who, so never again the platform decides to offer the same impressions preset depending on a contract with the advertiser.
At that time, advertisers decide, following a bidding or auction system, whether or not buying an impression and can also decide to offer a different price for each impression.
In this sense, in order to evaluate the bid price, there are two main factors to take into account:
• The web site URL: when we say URL, we mean full website URL.
• User: whose data we have extracted thanks to different cookies.
What advantages does the Real Time Bidding have for advertisers?
Real Time Bidding offers advertisers advantages such as the ability to buy a unique impression only when the greater the chance of conversion is, depending on the user type and URL, which also allows an optimized ROI – Return On Investment -.
And what are the advantages for the media?
The main advantage for the media is to maximize revenue from their already existing advertising space, so that instead of selling a few spaces or a whole pack of spaces at low prices – which often generate many impressions that are not profitable – the RTB allows media to maximize its revenue for each individual impression.
In addition, thanks to RTB, media have access to third parties who take the risk of purchasing their advertising space inventory, so income brackets are secured even if the ads expose on them finally do not convert.
Would you like to try RTB solutions? Contact us! –
- In Crazy4Media DSP we offer all kinds of programmatic solutions for advertisers
- In Crazy4Media SSP we have Online display and video (mobile, tablet and PC) publisher solutions.
- And, if what you are interested in are advanced solutions in behavioral targeting and retargeting , please contact Crazy4Media DMP
So, what are you waiting for to optimize your online advertising? ; )