Is Real Time Bidding the Future of Advertising?


One of the hotter trends in the on-line advertising field is the rise of real time bidding (RTB). One journalist, Nick Saint, even went so far as to headline a recent RTB article “The Rise of Real Time Bidding is the Biggest on-Line Advertising Story of 2010.” How important is RTB and could it ever move beyond the web?

Real Time Bidding: 2010 Online Advertising Trend

Real Time Bidding – What is It?

Real time bidding combines web browsing behavior, sophisticated algorithms, and ad inventory platforms which make it relatively easy for advertisers to bid on specific audience profiles in real time.

Key players in the RTB space include AdMeld, Invite Media (recently purchased by Google), and AdSafe. Advertisers use platforms like MediaMath which combines all of the relevant data—who advertisers want to target, how much they’re willing to pay, etc.–to make buying on-line inventory simple and fast.

Real Time Bidding: Web Browsing & Behavior Analytics

The RTB Value Chain

Conceptually, RTB makes a lot of sense:  why buy inventory impressions when you can buy against a much more targeted audience? Everyone benefits:

  • Publishers can sell targeted inventory at higher prices
  • Advertisers are willing to pay a premium to get more targeted ad coverage
  • Middlemen supply the platforms and technology and benefit as well

Setting aside privacy issues, which the Wall Street Journal and others have reported on recently, RTB is a classic case of how marketers can operate in a more efficient manner with the right information and technology.

The RTB Value Chain: Linking Web Behavior & Publisher Demand

What’s Wrong with RTB

Sounds great, right? Currently, RTB is essentially focused on better targeting. And better targeting is important. In fact, past analyses using single source data from the TV world would suggest that better targeting based on buyer behavior instead of demographics can increase advertising effectiveness by +10% or more. But, there are important areas where RTB currently fall short:

  1. RTB doesn’t Consider the Contextual Power of Content – As I’ve written about in other posts, content—in this case web page content–makes a big difference in how your ad performs. If content providers had access to data showing how ads perform on brand recall, purchase intent, etc. in different content, this data could easily be factored into the RTB buying algorithms to yield a better advertising outcome.
  2. RTB doesn’t Focus on Business Impact – Why stop at better targeting? If the data existed, why not buy media based on actual impact—either brand equity improvements or volume and share growth? In the past, the industry got hung up on click-thru rates as a surrogate for impact—a bad decision. But, the general intent was a good one—to more closely link the impression to actual performance. In an ideal world, advertisers would buy inventory not just against a target, but against real business impact.
  3. RTB is only On-Line – On-line is important and getting more so every day. But, for some categories like CPG, TV remains the medium of choice for driving high levels of reach very quickly at relatively low cost. For RTB to really have an impact, it will need to migrate out of on-line and into the world of TV. As TV morphs into an increasingly “networked” on-demand form of entertainment, this is becoming more and more plausible—albeit still a ways in the future.

RTB—Where Next?

RTB is a great concept and its beginning to come to life on-line. The AdMeld CEO estimates that the 2010 RTB market will be approximately $1B, so this is no longer a niche phenomenon. But for perspective, this is still only 4% of estimated on-line ad spend, and just a tiny fraction of the $55.8B TV advertising market in the U.S.

Real Time Bidding: Small Percentage of Online Media Spend

All of the shortcomings outlined above aren’t meant to suggest that RTB is a bad idea. Far from it, I think it’s a huge advance forward and one that we should watch very carefully.

For RTB to realize its logical potential, it will need to increasingly measure brand impact and cross into other mediums like TV. But the potential is truly enormous—imagine being able to buy media in real-time based on how it actually builds your brand and your Marketing ROI.

Now that would be nirvana for any CMO or CEO—whether it’s the biggest advertising story this year or any other year.

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