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Tuesday, January 24, 2012

How do ad exchanges and real-time bidding platforms work? - Quora

How do ad exchanges and real-time bidding platforms work? - Quora: "How do ad exchanges and real-time bidding platforms work?"

When a user lands on a site whose inventory is sold through an exchange, what happens? How do exchanges integrate and apply targeting data from a data provider/data exchange? How do they handle all of this in a handful of milliseconds?

The process is fairly expensive, from a latency perspective.

Here is what goes on:
  1. The real-time-bidding (RTB) platform receives an HTTP request from the user.
  2. It then reaches out to its bidders (ad networks) while providing all the necessary context (user segmentation, site information, other metadata), over HTTP.
  3. The bidders (each) get this context, make a micro decision about the impression in concern in real-time, and respond back with a Yea or Nay. If Yea, they also submit a price they are willing to pay for that impression (generally CPM, at this stage).
  4. The RTB platform gets all the bids and chooses a winner based on its decision algorithm. I would imagine most cases it is price-based, unless there are bilateral arrangements.
  5. The user is then issued a HTTP redirect to the ad network who won the bid.
  6. The ad network serves the ad.

Hope that helps!

The guys over at Pubmatic have a good white paper about this, if you are interested in learning more.

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