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#83: Real-time bidding: how online tracking helps serving ads

August 23, 2022 | 3 Minute Read

We all know this feeling. You search for a hotel in Paris and you keep getting ads for hotels and flights for weeks to come. Or something even scarier. You visit a blog post highlighting the first symptoms of a pregnancy. An hour later every single website on the planet advertises diapers and baby formulas. How is that possible? How do they know? And how did we get into this dystopia? All of this became possible with real-time bidding. The billion-dollar industry that tracks our every movement.

If you search for something in Google, Google knows that. That’s obvious. But how do they know you visited a website for mothers expecting a baby? This is possible with so-called 3rd-party cookies and tracking pixels. In Europe, almost every website asks you to allow storing 3rd-party cookies. How cookies work deserves a separate episode. But in short, every time you visit a website containing an ad served by Google, Google knows about it. If, on the other hand, that same website has a Like or Share button, Facebook knows you visited that website.

Well, they don’t know your name or address. Unless you login to Google or Facebook one day. But even without that, such companies build your online shadow profile. That profile contains a full history of websites you visited. Tracking code is present on almost every website these days.

So these companies may not know your name. But they can infer your geolocation, age, gender, interests, and even sexual orientation, race and political affiliation. However, if you find this is scary, that’s nothing. Google, Facebook, Apple, Amazon… they don’t really care about your profile. They only want to show you ads. The best, most effective and most expensive ads possible.

In the old days, ads were displayed more or less randomly. The car dealer’s website contained ads for spare parts. The Flower store advertised soil and fertilizers. Real-time bidding changed everything.

When you browse the Internet and the website wishes to monetize, it asks for example Google to provide an ad. Google receives that request, together with your tracking cookie. Now, Google forwards your cookie to hundreds of ad providers. Hundreds! These companies, which you might have never heard of, keep your full browsing history and profile. Each one of them try to figure out if you are an interesting ad target. For example, one ad provider may advertise flights and hotels. Another specializes in toys and clothes. Depending on your tracking profile, you might be more attractive to one or the other.

What happens next? An auction! One company may offer 1 cent to show you an ad. The other offers 1.1. Google collects all these bids and shows an ad from whoever offered the most. This process happens billions of times per second. Your every step is tracked so that hundreds of 3rd-party companies can serve you the most compelling ad.

In some sense, this process is brilliant. The time between visiting a website and serving ad must be below 100 ms. The whole bidding must take place in that time frame. Hundreds of ad networks must figure out in milliseconds who you are and what offer is most attractive to you. Imagine how much data they must keep!

Now you understand what happens when you visit a dog groomer’s website. Hundreds if not thousands of ad companies note that down. And they will use that information in the future. Talking about privacy…

That’s it, thanks for listening, bye!

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Tags: RTB, ads, cookies

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