Internet Advertising : Real Time Bidding 101

Date:   Thursday , June 09, 2011

Internet Advertising is globally more than a $50 billion industry now. There have been several innovations cantered around technology and data in this space, that have brought about path breaking changes in the way advertising is perceived in general. One such cutting edge trend on the horizon is called Real Time Bidding (RTB).

RTB is a new technology standard in the display (banners) advertising space. It allows buyers and sellers of display media to converse in real time and arrive at the best price for every ad impression. This happens in the background when a user opens a web page but before an ad is shown and it takes just a few tens of milliseconds to complete. More often than not, the best price is arrived upon using a bidding/auction model thereby valuing each impression optimally.

This is a fundamental shift in the way media buying generally works. For a long time, display advertising has been a people business. Publishers and advertisers strike deals over meetings, emails, faxes and phone calls – simple but highly inefficient. Buying is through pre-negotiated rates based on assumptions about the quality of media & audience and often, the media bought is not optimally valued. Multiple technologies have emerged in between publishers and advertisers, all have helped bring in incremental efficiency, but none have disrupted the landscape as much as RTB promises to. RTB can dramatically improve performance of display campaigns resulting in a win-win situation for all major stakeholders; advertisers benefit from improved ROI, the publishers benefit from increased yields for their media/impressions and the consumers are happy due to more relevant advertising. For the first time, display advertising has the potential to match and beat search advertising in efficiency and value created within the internet advertising ecosystem.

RTB is offered by sellers or aggregators of media through a platform that enables the bidding/auction model in real time. Buyers develop bidding engines which look at contextual and behavioural/cookie information to arrive at price quotes. The major steps involved in the process are as follows – a) A user opens a webpage on a browser, the seller’s platform collects contextual information about the impression and sends this to all the buyers b) Every buyer’s bidding engine then considers the contextual information about the impression, overlays any behavioural or cookie data and responds with a price quote/bid that the buyer is willing to pay for the impression c) The seller’s platform then compares all the bids from the different buyers and awards the impression to the highest bidder d) The winning buyer then displays an ad to the user
RTB sellers differentiate themselves by providing a transparent, simple & efficient platform for buyers to integrate as well as by providing richer & granular contextual information about every impression.

Buyers are investing in developing sophisticated bidding engines which take into consideration contextual information like banner size, website URL, ad placement, location of the user, keywords on the page, etc as well as behavioural or cookie information like user intent, impression frequency, user segments, recency, and more to come up with an intelligent price quote for every impression. Today, the major RTB sellers include AdExchanges like Google Adx, Appnexus, AdBrite, and Sell Side Platforms (SSPs or Yield Optimisers) like Rubicon Project, AdMeld, and others. The buyers fall under four major categories – AdNetworks, Demand Side Platforms (DSPs), Agency Trading Desks and Audience Targeting/Retargeting/Creative Optimization companies.

RTB adoption has been extremely fast because it presents many benefits to advertisers and publishers. Advertisers get more visibility and transparency in what they are buying; they can get complete information about the context of each impression. Advertisers also get much more control on their buys; they get better access to highly targeted audiences at a much larger scale than ever before; they do not need to sacrifice on the volume of campaigns now. Publishers get more visibility and control over which advertisements are getting shown; they can get complete information about the ad and brand getting shown and enforce block lists if they wish. Publishers can also control the rates at which the impressions are getting monetised. To some extent, RTB has also enabled publishers to earn on the data that gets generated from the ad impression on their website and not just for the media being sold. RTB technology itself has of course materialised due to a bunch of technical innovations around the processing and exchange of data in real time at scale.

Although it has been a dream run for RTB adopters over the past year or so, it does have quite a few challenges in store going forwards. A major concern from many of the large publishers is data leakage. Advertisers can extend audiences from large publishers and target them on other less popular and cheaper websites thereby reducing the payout for the large publishers in the long run. AdExchanges and Sell Side Platforms should come out with proper tools for protecting the interests of publishers in this ecosystem. Because modern day targeting relies so heavily on the use of cookies and data, concerns about consumer privacy have been brought to the forefront. Government proposals so far have been unclear at best and the uncertainty could hamper investments in the adoption of RTB among buyers/advertisers and sellers/publishers. Also, RTB is still relatively new and requires significant amount of technical expertise and investments in resources for buyers & sellers to adopt and integrate with their existing systems. Adding to this, lack of standards between the seller platforms makes integration efforts trickier. Hopefully, as the technology evolves and standards are put in place, we will see continued growth in RTB adoption.

Real Time Bidding emerged only in 2009 and it has taken the internet advertising market by storm. According to a market sizing study presented by Forrester in February this year, in 2010 advertisers spent $353 million in the U.S. alone on RTB buys. This is expected to be close to a billion dollars this year. This is almost 10 percent of the total display advertising market size. There is no doubt that RTB is here to stay and is expected to revolutionize display advertising in the next decade. The digital advertising ecosystem is evolving at lightning pace and is only going to get more complex. As new and better technologies emerge, it is imperative for various players in the ecosystem to adopt and adapt fast if they want to remain relevant.

The author is Co-founder & COO, Vizury