Real  Time  Bidding  

DigidayWTF  –  Alanna  Gombert  4/30/15  

Real  Time  Bidding  -­‐  Breakdown  •  What  is  Real  Time  Bidding?    •  Is  it  really  Real  Time?    •  What  is  caching?  •  What  elements  determine  ad  decisioning?  •  Tree  +  Bayesian  •  Bid,  Ask  Call  –  Second  Price  AucLon      

Real  Time  bidding  (RTB)Defined  eMarketer: Real-time bidding (RTB) is a digital advertising technology that lets

marketers buy and publishers sell display ads dynamically, in real time, on an impression-by-impression basis.

Scott Spencer, Director of Product Management, Ad Exchange, Google

"Real time bidding (n); 1) A technology introduced in 2009 to make it easier for ad networks to

buy only the inventory they want. 2) A common buzzword that is part of everyone's business plan in 2013. 3) The act of buying digital inventory from multiple publishers on an

impression by impression basis, typically involving an auction pricing mechanism.

4) One of the biggest opportunities for publishers to participate in new media spend, but not a panacea if done in isolation.

Is  it  really  Real  Time?    Real  Time:  of  or  relaLng  to  a  system  in  which  input  data  is  processed  within  milliseconds  so  that  it  is  available  virtually  immediately  as  feedback,  e.g.,  in  a  missile  guidance  or  airline  booking  system.  Source:  Google    Real  Time  AdverLsing  Systems  rely  on  historical  data  that  is  cached  as  well  as  secondary  or  primary  test  variables.      Cache  update  cycles  maUer.  The  newest  data  will  help  you  make  the  best  decision.            

What  is  a  Cache  and  Decision  Flow  Cache  (compuLng)  -­‐  Wikipedia,  the  free  encyclopedia  en.wikipedia.org/wiki/Cache_(compuLng)  Wikipedia  In  compuLng,  a  cache  (/ˈkæʃ/  KASH)  is  a  component  that  stores  data  so  future  requests  for  that  data  can  be  served  faster;  the  data  stored  in  a  cache  might  be  the  results  of  an  earlier  computaLon,  or  the  duplicates  of  data  stored  elsewhere.    Decision  Flow:      Impression  -­‐>  Bid  Engine  EvaluaLon  -­‐>  Decision  (Bid  or  no  bid,  price  to  bid  based  on  historical  data  or  price  floor  +  potenLally  ad  quality)        

What  Elements  Determine    Ad  Decisioning?  

•  TargeLng  •  Publisher  •  Audience  Segment    •  CreaLve  •  AdverLser    •  Floors  •  ProbabiliLes  and  Likelihoods  (click,  conversion  otherwise)  •  Learning    •  And  more!  

Tree  and  Bayesian  Network  Tree:  A  tree  structure  or  tree  diagram  is  a  way  of  represenLng  the  hierarchical  nature  of  a  structure  in  a  graphical  form.  It  is  named  a  "tree  structure"  because  the  classic  representaLon  resembles  a  tree,  even  though  the  chart  is  generally  upside  down  compared  to  an  actual  tree,  with  the  "root"  at  the  top  and  the  "leaves"  at  the  boUom.  Source:  Wikipedia    Bayesian  Network:  is  a  probabilisLc  graphical  model  (a  type  of  staLsLcal  model)  that  represents  a  set  of  random  variables  and  their  condiLonal  dependencies.  Source:  Wikipedia          

A  simple  Bayesian  network.  Rain  influences  whether  the  sprinkler  is  acLvated,  and  both  rain  and  the  sprinkler  influence  whether  the  grass  is  wet.  

Example  of  a  Tree  –  Source:  Wikipedia  

A  tree  structure  showing  the  possible  hierarchical  organizaLon  of  an  encyclopedia.  

AucLon  Mechanics  •  Vickrey  AucLon:  A  Vickrey  aucLon  is  a  type  of  sealed-­‐bid  aucLon.  Bidders  submit  wriUen  bids  without  knowing  the  bid  of  the  other  people  in  the  aucLon.  The  highest  bidder  wins  but  the  price  paid  is  the  second-­‐highest  bid.  Source:  Wikipedia  

•  Modern  adverLsing  aucLons:  adverLsers  are  charged  only  a  penny  more  than  the  next  lowest  bid,  with  some  adjustments  that  depend  on  the  quality  of  the  ad.  Source:  hUp://www.gsb.stanford.edu/insights/high-­‐price-­‐internet-­‐keyword-­‐aucLons  

•  Price  Floors:  Price  floors  may  block  algorithms  from  bidding  “true  value”,  especially  when  dynamic  CPM  is  employed.    

Four  Key  RTB  Publisher  Takeaways  •  Real  Time  Bidding  is  a  result  of  mathemaLcal  equaLons  derived  from  defined  

compuLng  and  math  principals.    It  is  not  magic.      •  Inventory  changes  and  shils  can  change  learning  and  valuaLon.  You  are  

changing  the  inputs.      •  Understand  how  your  exchange  determines  the  winning  adverLser  bid.  It  may  

affect  your  pricing  strategy.  Price  Floors:  Price  floors  may  block  algorithms  from  bidding  “true  value”,  especially  when  dynamic  CPM  is  employed.    

 •  ProgrammaLc  is  just  the  method  by  which  RTB  algorithms  are  deployed  across  

the  exchanges  and  inventory  pools,  usually  by  Demand  Side  Plaporms.