Real time bidding (RTB) refers to the practice of buying and selling display ad impressions through ad exchanges in real time and one impression at a time.
Buyers - agencies, advertisers and some networks - are usually connected to the ad exchange by demand side platforms. The DSP automatically makes the decision to buy according to different parameters entered by the advertiser (price, target, ad unit, etc.).
Sellers - publishers and some networks - are usually connected to the ad exchange through a seller side platform (SSP) upon which they deliver ad impression inventories and set floor prices.
Real time bidding on ad exchanges was initially used for selling remnant, second tier inventories or small publishers’ inventories but RTB is expanding to all digital advertising domains (premium inventories, native advertising, etc.). Sometimes, real time bidding for premium inventory is done on private ad exchanges.
According to different studies, RTB was making up approximately between 30% and 40% of total display advertising by the end of 2015.
For the ad market, real time bidding is a way to reach market balance and to reduce costs and processing times. Through algorithms used on DSPs and ad exchanges, it is also considered by buyers as a way to optimize campaign effectiveness.
It may be noted that, if RTB refers commonly to display advertising trading, the first use of RTB has been made on PPC search engine platforms. And soon RTB will be used for TV with programmatic TV.
See below some visual and video explanations of real time bidding:
An example from Google:
An example of real time bidding process for video placement (image source BRX):
Some good and clear illustrations through videos: