The Blog

Cost Per Auction : Real Time Bidding Shakes Up Online Advertising

How about an eBay for advertisers? Say goodbye to bulk media buys around inventory that is racked and stacked so far in advance that advertisers have no room to maneuver.

Real Time Bidding (RTB) ad platforms gives advertisers a looking glass through which they can observe the "live" advertising inventory across publishers or a specific publisher and time their buys in a way that best meets their targeting and spend objectives.

Auctions have always been touted as the best price discovery mechanism in a true demand/supply scenario and online advertisers are looking for that extra byte from their buck.

The Usual Suspects

So is RTB the next big thing from some brash new start-up? Not quite, everyone from top dogs like Google, Yahoo!, and Microsoft to medium weights like Flurry and Pubmatic and rapidly emerging hotshots like Vistar Media and engageBDR have big plans for this space.

It's obvious that the technology behind an RTB platform is complex (real-time, scale, advanced metrics) and expensive. However, it's really the strong relationships with both brands and publishers that most full service ad networks can leverage that is the not-so-secret sauce of success.

Another indicator that points to the rise of RTB is the emergence of super specialists in what is still a new domain. Companies like Brightroll have rolled out products like VideoRTB+ for specifically online video ads.

Not a Done Deal

It's axiomatic of anything tech that the hype cycle always tends to hide some real challenges before everyone gets to immigrate to the brave new world.

Premium inventory being hoarded by publishers and not being released for RTB is a major problem. The view that an auction somehow would drive down the rates of such inventory and commoditize it flies in the face of the overall experience of an increase in CPMs with RTB.

The premium inventory issue is highlighted by even someone as bullish as engageBDR CEO, Ted Dhanik, who launched their own RTB platform, First Impressions, "Even though we believe that on the demand side mobile plus RTB would overtake standard display in the next few years, currently RTB is mostly remnant and Run-Of-Site (ROS)."

Dhanik is also not a fan of the viewing the ad exchanges as just "platforms." He says, "We are bringing a lot of our direct relationships into RTB, for the exclusive inventory, the above-the-fold placements, you know...publishing on the Comscore Top 1000."

Another issue is the one of walled gardens. Like with the app stores, the multiple ad exchanges from the powerful ad networks tend to promote closed ecosystems, rather than move towards the benefits of a larger single ecosystem for the advertisers.

RTB is also vulnerable to the same concerns in data protection and privacy as the rest of the online ad industry. Several pieces of new legislation are being proposed across the world in regulating the degree to which user data can be exploited for commercial opportunities.

Back to the Future

RTB's real game changing potential lies in its ability to one day have advertisers buy directly from publishers. One study, by Pubmatic and DigiDay concluded that 74% of advertisers would increase RTB spending if they were allowed to bid directly with the publishers.

While the U.S. will be the largest market followed by Western Europe, Japan's been playing catch-up fast and is slated to have higher RTB spending than UK, France and Germany combined by 2014. An IDC report estimates that worldwide RTB spending will grow from $1.4 billion to $13.9 billion in 2016.

That's not just some pocket change on the ad exchange!