The Potential of Real Time Bidding

Earlier in my career I spent some time working in Freeserve, then a leading Internet service provider (ISP). At the time it was one of the ‘poster boys’ of the domestic Internet scene in the UK, culminating with it’s successful float in 1999.

One of the functions of my role was to generate revenue for the ‘business channel’ of the Freeserve web portal, with advertising representing a key source. Media packs were thus produced which outlined some broad demographics about the ‘likely audience’. This gave advertisers a sense as to the ‘likely audience’ fit with the proposition they were advertising. Looking back now it is clear that this was a deeply flawed approach, which disproportionately rewarded the publisher who was essentially selling ‘real estate’ slots on their sites based on hastily created media packs.

As for measuring the success of campaigns? This was before click-through-rates (CTR’s) had even entered the ever expanding lexicon in the digital marketing space. The net effect was the advertiser base dwindled over time to the few large players with huge budgets who were more interested in brand awareness than anything else.

What I also remember most about the ad sales process was how time consuming the approach was. There was an internal ad sales team in Freeserve that I used to work closely with. They essentially sold access to the eyeballs on our site in the guise of ‘skyscraper banners’ which were very much in vogue at the time. This team were essentially intermediaries between me (as the publisher) and the advertisers looking to target the audience on the site. Discussions invariably included the following topics:

Could we deliver enough impressions?

What was an acceptable cost per impression (CPM)?

Would X advertiser be OK?

Could they try new ad formats?

Could they animate the banner etc?

In short, it was a pretty laborious and highly inefficient process, where repeat custom was hard to come by.

Programmatic Advertising

I had not given much thought to ‘ad tech’ in recent years, other than the fact I have a growing sense that the adverts I am seeing online are becoming more and more relevant. A second thing I have noticed recently is the increase in ‘adverts following me around the web’. So when I recently came across AppNexus, a NYC ad tech company specializing in programmatic marketing (with real time bidding [RTB] a key component) I was intrigued. Having looked more closely at the area, to say I was blown away with the potential is an understatement.

I simply feel that it is set to explode in a way that Ad Words did (when they first launched and introduced the powerful ability for marketers to advertise based on ‘search intent’ while also offering full transparency over the ROI).

What is Programmatic?

While there are many elements to programmatic marketing it essentially boils down to the automation of the exchange between the owners of content (media) and the marketers (or agencies) looking to advertise. Like all exchanges, the aim is to reduce friction, and transaction costs, while also bringing buyers and sellers together in sufficient volumes to ensure market liquidity.

While different exchanges exist, it is real time bidding (RTB) that excites me the most as it ensures all parties benefit from the transaction ‘in real time’ as the following example illustrates:

Firstly, let’s consider the key players and their requirements:

1/ The Web Browser or Visitor

2/ The Advertiser (via agency / direct)

3/ The Publisher (media site)

The browser enjoys ‘free content’ recognizing that the price for this is advertising – often in the guise of ‘banner adverts’. Up to now though, the average browser will probably have rarely engaged with the adverts, given the limited ability of advertisers to target effectively.

On the other hand the advertiser is looking for opportunities to target their key audiences in a cost efficient manner, while also having an ability to assess the efficacy of the campaign.

Finally, the site owner wants to monetize their content, without incurring excessive transaction costs as part of the process. The more they can earn from adverts, the greater the viability of their business (if advertising is a key element of their business model). Hence advertising success will be correlated directly with the depth and quality of the content they produce.

Using a Real Time Bidding Exchange

A browser navigates to a website that is using an ad exchange to serve adverts on its site. Before the page loads fully, data is pinged across to the exchange. This data will range from information about the hardware device, the location, the browsing history etc which together creates a strong profile of the impression (user). In mere milliseconds the exchange ‘auctions’ this impression, to the highest bidder and the winning advert is rendered. The beauty of what has just gone on is that all parties have benefited from this transaction which has occurred in mere milliseconds.

Who benefits?

The key here is that all parties can benefit from the platform use.

1/ The browser is likely to get a more relevant advert increasing the likelihood that they will engage (although matters get complicated a little when multiple users share the same device as is obvious when I get served products matching my wife’s browsing habits).

2/ The advertiser is essentially bidding on an impression which is highly targeted, and is delivered in an extremely efficient manner. The platform also help them to measure the effectiveness of their spend.

3/ Finally, the publisher (or site owner) is also getting rewarded for producing quality content that attracted the browser in the first place. The more attractive the content, the greater the rewards, and the use of an exchange is a lot more efficient than following the old Freeserve ad sales approach described above.

The above combine to make this a very powerful advertising technology, and one which will grow strongly in the years to come. The growth in mobile will also create huge opportunities, given the ability to target users ‘on the move’ and to use location based data to serve adverts relevant to the user in ‘real time’ (time and location representing two powerful data points upon which marketers can target).

From an industry perspective, we are already beginning to see the emergence of a more competitive environment than the more monopolistic ‘pay per click’ industry which can only be a good thing for the wider marketing community. The acquisitions by Google (DoubleClick) and Facebook (Atlas) in this space, coupled with the investments by the likes of WPP and Microsoft in AppNexus are strong signals of the scale of the opportunity here.

In summary, I believe the broader programmatic space (of which RTB is just one aspect) is destined to grow strongly. Whether these tools can evolve the platforms to the point where SME’s can participate, will be a key element in terms of the size of the prize. After-all, this was a key element of the success of Ad Words, as it enabled smaller niche providers direct limited marketing budgets to an area they could control and measure (in stark contrast to most other advertising media). One thing is sure though, despite modest awareness of the benefits of programmatic to date, it will be a tool in all marketers armory before too long, adding paid to the focus on owned and earned media.

This post first appeared on my personal blog at AlanGleeson.com

Alan Gleeson is a Senior Marketing Manager based in London, U.K.