Online Advertising

Media buying has come a long way from traditional mass-purchasing; it has evolved from buying ads directly from publishers, to purchasing through aggregators such as ad networks, to going through real-time exchanges that act much like financial markets. The most modern form of automated or programmatic media buying (i.e., no insertion orders or contracts) is made possible by the technology known as real-time bidding (RTB).

RTB allows the automation of the media buying process that up to now has largely been manual. This makes online advertising easier, less labor-intensive, less error-prone, and more efficient for both agencies and publishers in setting up and running a campaign. Costs are reduced, thereby improving profitability.

Buying ad inventory directly from publishers is like buying giant bushels of apples. You pay a fixed price for each batch, and receive various levels of quality within the bunch. But with RTB, you are essentially bidding for each apple (impression) based on its individual characteristics. This means that you still end up with 1,000 apples at the end of the day, but the overall cost for the batch will be a dynamic value derived from all the individual prices you paid for each, hence the term effective CPM.