Definition: Auction

An auction in digital marketing refers to the process of how an advertising platform decides which ad to show to a user at any time.

It’s called an auction because that’s how it works, just insanely fast. A person loads a webpage on their computer, which makes an ad request to the ad server. In a fraction of a second, a real-time bidding process then occurs.

The ad server then sees which ad it can deliver to that user at that time of day, in that place, on that site. Each ad campaign running on that ad server then ‘bids’ to be delivered, based on those criteria (as well as others).

The ad which wins will generally be the one that will make the most money for whoever owns the ad server. This means delivering ads that are most likely to fulfil their goals based on targeting that has been set up.

If a user is likely to click on an ad or to convert, then a CPC or CPA will be delivered. If not, then they will probably see an ad booked on a CPM basis.

If no ad campaign wins the auction, then an ad server will fall back to delivering its default ad or switching to a remnant network.

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