Back in 2006, I was frustrated that our ad network clients at Strategic Data Corp were having to redirect massive volumes of ad impressions to each other while they tried to find the needles in their haystacks of valuable users in their impression streams. Each had their own set of advertisers, publishers, and user data (such as retargeting) that made different impressions valuable to each. So once they got an impression from a publisher, if it wasn't valuable to that network, they would sell it to a competitor to recoup some of the cost.

Hence the idea for what became known as Real-Time Bidding — as well as what's now called Header Bidding.

I can't say with certainty that no one else had thought of this at the time. I haven't heard of anyone saying so, though. We did file patents on specific aspects of the idea. The first patent which most resembles Header Bidding is US Patent Application 20080162329. The rights to that patent were later acquired by the Rubicon Project as part of the acquisition of Fox Audience Network in 2010, which was formed out of the acquisition of Strategic Data Corp in 2007.

From Patent to Industry Standard

In 2007, we were acquired by Fox/News Corp, and we implemented the concept. At that time, we started requiring all of the ad networks and exchanges buying from us to switch to this method. This included RightMedia/Yahoo, AOL/Advertising.com, and the new AppNexus. At the Fox Audience Network, we also started buying this way from parties including OpenX.

Real-Time Bidding took the industry by storm and became the dominant approach to trading ad impressions through intermediaries — as opposed to simple brand buys made directly with publishers — within the online advertising ecosystem. It was an amazing process to see.

In 2009, working with Adam Bain (then head of the Fox Audience Network, later COO of Twitter) and Arnie Gullov-Singh (then Fox EVP of Product, later COO of Polyvore at Yahoo), we started proposing creating a standardized RTB ecosystem. I bought the domain openrtb.com on my personal credit card, which I then handed over to Fox and expensed. That domain later became the home of the OpenRTB consortium.

The Original 2006 Document

Below is an excerpt from the document I wrote with Fabrizio Blanco on November 29, 2006, in Santa Monica, California. It has been used as the basis for our patent filings. This is the first time it was published outside of the patent process.

Summary: This document describes a new method for creating an instantaneous auction for each advertising impression as it becomes available for display. The new method allows various advertisers and/or advertiser networks to simultaneously bid for an individual impression where the highest bidder then instantly shows their ad. This new method includes communication between various computerized advertising systems in real-time, creating a dynamic real-time bidding exchange that will maximize the value of each impression to the originator of the ad impression (the publisher).

This method has the further unique benefit of allowing the advertiser and/or advertiser network to communicate directly with the user's web browser and obtain all information about that user's computer that the advertiser otherwise can only see after they have secured the impression.

The Problem We Were Solving

Before this method, advertisers needed to bid a fixed price for a fixed timeframe and volume of impressions. The old methods did not allow advertisers to pay different amounts based upon information they knew about the user or impression that the publisher didn't or wouldn't allow targeting based on.

This was an extremely inefficient method of selecting which ad to serve. Enormous value was wasted because the active ad server needed to make the ad-serving decision without knowing the unique value of that impression to the different downstream advertisers.

Our Solution

The new method was to contact several downstream servers simultaneously in real-time and ask them to bid on the impression based upon information about the user and impression provided by the active ad server, as well as information the advertiser may already have on the user.

One particularly efficient method: the active ad server would generate and serve a script to the user's browser, which would in turn call each downstream server and retrieve their bids. The script could then compare the bids and serve the highest bidder's ad.

This approach also allowed downstream servers to interact with the user's browser in a way which provided the same information — such as cookies — as the server would receive if the impression was redirected to it. This meant the downstream server could consider factors not known by the active server: the number of times the user had already seen each ad, what other sites the user had visited, even past purchases.

Third-Party Recognition

The contribution has been recognized by several independent sources:

  • Wikipedia cites our patent (US 8,332,325) in the Real-Time Bidding article
  • VideoWeek published "Yield Optimisation In Its Original Form" (2023), documenting the origin
  • Related patents: US 10,607,261 (RTB/Programmatic), US 9,886,718 (Automated Upfront), US 9,898,762 (Multi-Market Auction Pricing)