I was having a discussion with a friend on IM, explaining to him one aspect of how RTB works. I thought I’d share it here.

It’s kind of like the Miss Wisconsin beauty pageant. Lots of young women who meet the organizers’ criteria enter the pageant. There is a judging process which ends in the selection of a Miss Wisconsin. Miss Wisconsin (MW) then qualifies to go the Miss America pageant. There is travel, lodging, rehearsals and activities but eventually the big day arrives where MW gets to take the stage in her quest to win the Miss America crown. There can be only one winner but along the way ladies like MW have experienced intermediate glory.

So think of Wisconsin as our real-time bidding system, and what happens there as the Miss Wisconsin pageant. For every impression in an ad exchange or aggregator (Miss America pageant) there can be only one winner, and so every bidder (state) puts forth their absolute best. California, Arizona and Delaware all want to win that pageant – and they’ve all held their own pageants ahead of time to put forth that one winner to go through to the final. Now some might argue that California is bigger and better than many of the other states (budget deficits notwithstanding) and should get more entrants into the Miss America pageant, but hey – this isn’t a representative democracy! One entrant per state only please!

Now think of 10,000 pageants a second and you’re starting to get the idea.

For RTB each bidder is conducting some kind of real-time assessment before deciding which bid to place on a given impression. It could be a complex or simple assessment, but more complex internal real-time decisions (local pageants) mean less time to prepare and compete at nationals.