Understanding Real-time Bidding for AVOD Services

Author: Jonas Rydholm Birmé

Real-time Bidding Marketplace

There are a number of ways this demand can be met and I will not go into all the various commercial agreements here, and in this article focus on the concept where the demand/buyer side and supply/sell side meets on a “marketplace” where Impression Opportunities are sold to highest bidder. An auction that happens in real-time when an Impression Opportunity is created, i.e. a user is watching. This is what we call a Real-time Bidding Marketplace.

Waterfall Auction and Header Bidding

When a user starts playing a program and just before it reaches an ad break the following takes place on the marketplace without the user noticing it. In the background the publisher provides a floor price, or minimum bid, to one of the demand sources. The first demand source offers its highest bid and if this bid does not exceed the floor price the publisher goes to the next demand source. And the first demand source to meet the floor price is the winner. This is referred to as a Waterfall Auction. The obvious problem with this is that if the demand source next in line would have offered a higher bid the publisher would have earned more money. The other option is Header Bidding which means that the publishers offers the inventory to several demand sources and chooses the one with the highest bid. The issue with header bidding is that it can lead to longer time to select a winner, and a challenge to manage for ad insertion in live programs when you have a very short time to react as it is not always known in advance when the break will take place.

Open RTB

The communication protocol between buyers of advertising and sellers of publisher’s inventory is an open industry standard called OpenRTB. A project that was launched in 2010 and started as a pilot project between three demand-side platforms (DataXu, MediaMath and Turn) and three sell-side platforms (Admeld, PubMatic, and The Rubicon Project). Version 1.0 was released in December 2010. In January 2012 with the release of version 2.1 the standard was adopted as an IAB standard, however the governance over the technical content and specification remains with the OpenRTB community and its governance rules.

  1. The Video Ad Inserter (either server-side or client-side component) issues an Ad Request containing tags, user data, IAB categories, device data, and desired duration to fill to the Sell-side Platform (SSP)
  2. The SSP constructs an OpenRTB Bid Request that is “broadcasted” to the Demand-side Platforms (DSP) on its list. Including in the Bid Request a floor price is set.
  3. Each DSP responds with a Bid Reponse and its bid.
  4. The SSP chooses a winner (waterfall or header) and sends a notice to the winning DSP with the settlement price.
  5. In response to the win notification the SSP receives the Ad Markup including impression tracking URLs, creatives etc.
  6. The Ad Markup is then returned to the Video Ad Inserter.


There are a number of ways advertisers can target the ads, in our context for example: keyword targeting, geo-targeting and contextual targeting.



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