Online marketing is a hugely lucrative business and that’s hardly surprising. Advertisements are everywhere, and ad revenue is how a lot of websites or apps, especially those that are free to use, make money. In fact, as annoying as these advertisements can sometimes be, they’re largely the reason free-to-use services exist at all.
Online advertising sounds simple enough; an advertiser pays a content owner to display advertisements on their digital property. However, it’s important to note that there’s a lot more happening under the surface. Advertisers need to ensure that their advertisements are reaching the right audience, and this is why behavioral targeting is so important.
Of course, collecting data about a particular user is only half the battle. Finding a way to show them targeted advertisements is another challenge. Manually reaching out to content owners and purchasing ad inventory from them is slow and impractical. What if there was a way to automatically display relevant ads to a particular user on a page they are viewing, based on their preferences?
Enter real-time bidding (RTB).
A delightfully efficient advertising model
RTB is a form of programmatic advertising that provides advertisers with increased speed and efficiency. It’s an automated process that involves the purchase and sale of ad inventory on a per-impression basis.
It’s a fairly complicated process, but let’s try and break it down. When a user begins a browsing session on a webpage, an auction is automatically triggered for the sale of ad inventory on that page during that particular session.
These auctions involve several different entities and platforms working together. They are:
The advertiser: The entity that wishes to place an advertisement on the page.
The publisher: The page or other form of media (e.g., mobile games) where ad inventory is being sold.
The ad exchange: The platform that facilitates the auction.
The supply-side platform (SSP): An advertising technology (AdTech) platform that enables the publisher to manage and sell their available ad inventory.
The demand-side platform (DSP): A tool used by advertisers to manage their ad campaign. This is the tool that makes the bid for the advertisers based on the goals of the campaign and other predefined bidding parameters.
The RTB process involves the integration of the SSPs and DSPs with the ad exchange, which handles the auction itself. This process is completely automated and data-driven, and is completed in mere milliseconds.
Here’s the nitty-gritty of the RTB process: When a session begins, the SSP automatically puts ad impressions up for sale on the ad exchange while also sharing some additional information about the user behind the browsing session. This information is broadcast by the ad exchange to a group of DSPs that automatically place bids on that impression based on bidding criteria, such as budget and target audience. The highest bid is accepted and that advertisement is then shown to the user during that session.
RTB is an incredibly efficient system of advertising and is used throughout the internet.
An unsettling web of legal loopholesWith data privacy becoming an increasingly relevant topic, some of the privacy implications and ethical aspects of RTB are being put under scrutiny. For instance, the SSP broadcasts user information to help the DSP with its bid. This data is highly specific and can include data such as location, timestamps, and so on, and herein lies the problem.
The ad agencies claim that the data is anonymized, which is true; however, due to it being so specific, it’s fairly easy to tie it all to a particular individual. Also, it’s not just the winning DSP that gains access to user data. Every single DSP—and by extension, the advertisers that participated in the auction—get to view and use this data by simply bidding in the auction.
The worst part is the ad exchanges running RTB systems aren’t being transparent about the data that is being shared. Let’s look at Google, the single largest ad exchange, as an example. Google’s privacy policy very clearly states that it does not sell any personal data; however, it does share data with third-parties through its RTB system, and we’ve already seen that this data can be quite sensitive.
The road ahead for RTB
Despite how much simpler and efficient RTB has made online advertising, the privacy drawbacks are too significant to ignore.
 
Stricter regulations are being passed worldwide to crack down on behavioral targeting. With ad giants like Google phasing out the use of third-party cookies starting in January 2024 in an effort to curb cross-site tracking and improve data privacy, it’s possible that RTB as a concept itself might have to change on a fundamental level. Moreover, some experts claim that the very existence of this system violates GDPR principles. What exactly the future holds for RTB, however, remains to be seen.