In 2023, mobile ad spending reached $362 billion, increasing by 7.7% from the previous year, indicating more demand for publishers’ ad spaces and traffic. While publishers have different mediums to monetize their apps and games, in-game ads are the go-to monetization avenue for both new and established publishers.
Google’s advertising environment constantly evolves as the traffic and demand from publishers and advertisers increase. Earlier, ads were displayed, and ad requests were fulfilled based on waterfall mediation, where publishers were restricted from scaling their revenue by leveraging real-time data.
To precisely solve this bottleneck, real-time bidding was introduced to offer more flexibility and revenue scalability options for publishers and game developers. In this blog, we dive into how exactly real-time bidding benefits publishers and the mechanism behind the concept.
What is Real-Time Bidding?
Real-time bidding is an ad fulfillment technique where ad units are sold to advertisers that place the highest bid for the ad unit. This method allows publishers to earn maximum revenue by simultaneously requesting multiple ad sources to fill up their available ad units.
What is the Difference Between Real-time Bidding and Other Models?
Real-time bidding is often confused with programmatic ads, waterfall, and header bidding, as these three concepts work similarly to an extent. At its core, these three models operate differently and serve a unique purpose. Here’s how.
- Real-time Bidding vs. Programmatic advertisements:
While programmatic ads are often sold and bought using real-time bidding, they can also operate independently. Real-time bidding is one of the methods (NOT the only method) used to facilitate programmatic advertising.
There are other ways to buy and sell programmatic ads, such as programmatic direct, private marketplace, preferred deals, etc. For instance, Advertisers can directly negotiate with publishers to buy specific ad units at a fixed price. Hence, real-time bidding is one of the elements of programmatic ads and does NOT define the entire concept.
- Real-time Bidding vs. Waterfall Mediation
Earlier, waterfall mediation was the standard method used to fulfill ad requests, and ad networks that had high eCPM in the past were given the first chance to bid on an impression. The highest bidder tops the waterfall list, followed by ad sources with lesser bidding value.
Unlike read-time bidding, waterfall mediation sends ad requests to each ad source one after another, and the order is sorted using the historical eCPM data. Other ad sources in the waterfall can fulfill the request when the top ad source cannot serve the ad requests. Hence, publishers were losing ad networks that might be willing to pay more for the ad unit in real-time.
As this method alienates advertisers who are ready to pay higher prices for ad requests, real-time bidding was introduced to eliminate these gaps, allowing publishers and developers to sell their ad inventory at optimal prices and maximize their ad revenue.
Real-time bidding and waterfall mediation can coexist; hence, publishers can leverage both real-time and historical data to sell their ad units to the highest bidder.
- Real-time Bidding vs. Header Bidding
Header bidding and real-time bidding are similar concepts. However, the demand they generate for each ad unit differs significantly. Header bidding calls for multiple demand sources to fulfill ad requests, such as supply-side platforms, demand-side platforms, and ad exchanges. In Real-Time bidding, the ad unit is offered to all advertisers in a sequential manner. Allowing higher-ranking bidders to bid first. Header bidding is a subset of real-time biding.
How does Real-time Bidding for App Advertising Work?
Before we get into how RTB works, let us understand the few fundamental elements that facilitate the RTB mechanism in app advertising.
There are two main elements in real-time bidding:
- AdMob Mediation
- Mediation Group
AdMob Mediation
AdMob Mediation is a feature within Google AdMob that aggregates multiple ad networks through one platform and manages the flow of ad requests to different networks. It is an intermediary between app developers and multiple ad networks. It aims to increase the fill rate and maximize revenue by routing ad requests to the best-performing ad network, whether based on eCPM (effective cost per mile), ad preferences, or other criteria.
Mediation Group
AdMob feature that allows publishers to group their ad units and configure the type of ad showcased in the selected inventory. For each mediation group, developers can set target location, audience, format, platform, devices, ad sources, etc.
Publishers can allot custom floor prices for each mediation group to sell their popular inventory at the best price possible. For example, you can create a mediation group that applies only to users from the US who are using Android and viewing rewarded ads.
Now that you know the fundamental elements, here’s how real-time bidding works.
Step 1: When a user opens your app or plays a game, an ad request is sent to AdMob.
Step 2: AdMob validates the request by mapping the requested ad units to the mediation group.
Step 3: Once it matches the ad unit with the meditation group, the ad sources allotted to the specific meditation group will bid for the ad unit.
Step 4: The ad source that bids the highest price for the ad unit gets the slot, and their ad is displayed.
While the process sounds extensive, all this happens in a millisecond to allow advertisers to bid for relevant ad units, publishers to sell ad spaces at optimal prices, and display relevant ads to the users.
How Does Real-time Bidding Benefit App Publishers?
- RTB allows multiple advertisers to bid for ad space in real time. This competition drives up prices, enabling publishers to maximize their ad revenue, as the highest bidder wins the placement.
- Each of your impressions is sold at optimal prices, as RTB does not rely on historical eCPM data or a fixed pricing model.
- RTB increases your fill rate and reduces unsold inventory as it simultaneously taps into multiple ad sources and networks.
- RTB allows you to match target users with relevant ads by allowing you to configure your ad preference and mediation groups.
- You can track each ad source’s performance and network in real time to customize your pricing strategy and scale your revenue.
- RTB is more effective and profitable than waterfall mediation or direct negotiation, as you can tap into eligible advertisers faster and automatically.
- RTB can coexist with real-time bidding, enabling publishers to leverage historical and real-time value to sell their ad inventory.
- Real-time bidding allows publishers to set floor prices to ensure their ad unit is filled out while keeping the doors open for the highest bid.
Are There Drawbacks to Real-time Bidding?
- For new developers or publishers with low app or game traffic, real-time bidding might not be beneficial since there is low competition to fill up ad spaces.
- It might be difficult for niche publishers or new developers to customize mediation group settings extensively while maintaining a healthy fill-up rate as the ad source options are limited.
- Real-time bidding comes with the risk of mismatch. As the process is automated, publishers do not entirely control all displayed ads. They may risk advertising a competitor’s or irrelevant ads that may not align with their platform.
- While RTB platforms offer some controls (e.g., blacklisting certain advertisers or categories), managing brand safety in an open bidding environment is more complex compared to direct deals or private exchanges.
- Sometimes, users may experience an increase in the load time for ads or the app itself, which can be frustrating where responsiveness is critical.
- Publishers may unknowingly serve ads to bots or fraudulent users, which can lead to penalties from advertisers and lower revenue.
- Besides having some control over settings, there is no foolproof way to ensure that only relevant ads will be showcased, as there is less human intervention.
- Publishers must set appropriate floor prices. If the floor price is too high, it may push away bidders, leading to unfilled inventory. If it’s too low, it may result in undervalued impressions.
If you are looking to implement real-time bidding for your app but are unsure how to go about it? YieldMonk can help! Drop us a line and we’ll set it up while you focus on your users.
