Real Time Bidding is here to stay.
RTB is the valuation and bidding on individual impressions in real time. The buying takes place over online media exchanges – basically media marketplaces – which connect sellers (publishers) and buyers (advertisers).
- A user clicks on a link to another webpage. During this time the full details of the impression are sent to the exchange: page environment (ad location, size, clutter) together with information on the website itself (contextual category, URL), along with the user’s own attributes (time zone, browsing history, geographical location, browsing language). This is called the ad request.
- A bid request is sent from the exchange to RTB Digital’s technology. This essentially asks (in machine language), ‘Do you want to place a bid on this impression based on its attributes?’
- The system values the impression by comparing it with the particular campaign attributes inputted by analysts. If the impression is valued sufficiently highly the system automatically places a CPM bid on the auction taking place for it on the exhange.
- When an auction is won, the RTB Digital’s system delivers a creative to that particular page environment.
Traditional online display, video and mobile display buying relies on the buying of impressions in bulk. Impressions on a car website can be lumped together with impressions on a news site and charged under the same CPM. More worryingly prices which advertisers pay for these impressions are not dictated by market forces, with negotiation and schmoozing playing a more pivotal role in price determination. Furthermore often there is a lack of transparency of the buying process, as well as opacity relating to reporting where the site where the impressions actually displayed.
RTB removes the middle man, by connecting publishers and advertisers directly across online media exchanges. This model aims to turn the online display world into a free market, where the forces of demand and supply are the sole determinants of price. The ability to bid for individual impressions on exchanges also leads to micro-segmentation of the market, leading to more efficient pricing benefitting both publishers and advertisers.
Real Time Bidding allows advertisers to stop wasting media spend on those impressions which aren’t targeting their core markets, and to place premium bids on the inventory and audiences which offer the most value. The improved transparency allows advertisers to see exactly where the impressions were served, ensuring brand safety.
Real Time Bidding is here to stay, and it is going to grow in importance over the coming years. The Pubmatic Ad Revenue Report (October 2011), forecasts significant growth across ad spend in Western Europe, with the UK leading the way with an average growth rate of 40% over the next three years.
The key drivers behind this growth can be broken down into two main categories: market acceptance, and data intensity. ‘Market Acceptance’ means that both premium publishers and brand advertisers are increasingly seeing the real time bidding market as a tangible alternative to network models. Premium publishers now understand that marketing their inventory over exchanges does not necessarily mean forgoing revenue. If advertisers are willing to pay £20 CPM privately, they will still be willing to pay this rate on exchanges.
Although there may be losses in CPM for some ranges of publisher inventory, it is well documented that this will frequently be more-than-compensated by the decrease in unsold ad space. With more premium publishers entering the market, this has paved the way for a number of brand advertisers to enter RTB. Initially seen solely as a medium for direct response, advertisers are now increasingly seeing the potential for RTB in branding campaigns.
The improvement in the quality and use of data has lead to increased ‘data intensity’ of campaigns. Intelligent algorithms now in place use this data as a key input to determine the true value of impressions, improving KPIs as a result.