Getting real about RTB

Getting real about RTB
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There’s nothing new about bidding for advertising spots. Before the Internet, even traditional media that sold on ratecard would issue heavy discounts if there was excess inventory, and the sales team would be out to find the buyer prepared to pay the most. This lengthy process started early; in TV-land that often meant major brands or agencies buying up time months in advance. It wasn’t a perfect system, but the concept of getting the best price for a limited commodity has always been the aim.

Google changed the scene in the last decade introducing AdWords. Now small businesses could buy advertising based on keywords, and their exposure was based on how much they were prepared to pay. The price was determined by demand and the number of participants vying for the limited inventory could change by the hour. Advertisers were bidding but, unless they watched over their campaigns and resubmitted their bids every hour, it wasn’t real-time.

Of course Google is only a slice of the vast pool of available online inventory, each offering a myriad of ways to reach prospects. Ad exchanges emerged to amalgamate data and enable consolidated targeted buying across multiple sites. Late last decade demand side platforms sprang up, providing the means for buyers to work across multiple exchanges using the same targeting criteria.

Real time bidding (RTB) was the natural progression. Just as Google had done years before, the best advertising spots could be offered to the highest bidder, at that precise moment in time. Algorithms were built to help planners determine which items to bid the most for, based on the objectives of the campaign and the supporting data provided by the exchanges.

It’s been a runaway success. RTB accounted for 68 percent of the spend on Google’s Double Click Ad Exchange in May last year, from just 8 percent in January 2010. That’s a meteoric rise, but the impetus has largely been confined to display advertising. Forrester reckons RTB for video advertising will happen, but not overnight. Their forecasts suggest that RTB will account for 30 percent of all online video spend in the US next year.

Australia is still a little way behind the US, even though some organisations might claim otherwise. In truth there are a few smoke and mirror tactics being used, giving the impression that bidding is happening in real-time, when it’s not. What’s often happening is that networks are buying up a slice of inventory and selling it on to their clients – not real time and tying inventory to a slice of the potential universe of buying. Such practises distort the advantages of RTB, but probably make advertisers feel like they are getting the best deal.

So, what’s stopping us having more genuine real-time bidding. I believe there are two main reasons. First, there’s a lack of video inventory. Slower speeds and usage limits mean we download a fraction of the content of our US counterparts. Australia is rolling out faster broadband – potentially the fastest in the world – but the speed of the rollout is slowing us down.

Secondly, there’s a lack of trust. Publishers are concerned that RTB will hit their yields. It’s not the case, of course. Sales teams can still develop premium campaigns using their prime inventory, with RTB helping to monetize what’s left. Real time bidding will ensure the maximum price for those placements that were previously unsold, undercharged or thrown-in free because it was too hard to do anything else.

This second point calls for greater education of the benefits of RTB for advertisers, publishers and agencies. Publishers need to realise that it’s an opportunity to improve revenue. Agencies need to understand that creative planning is still required, so their role is still vital. Advertisers will be easily swayed once they see the figures that show how effectively RTB can improve their reach and frequency.

Publishers also need to address the first point – the need for more online video. Consumers demand it, it generates revenue and with the rise in the demand for connected TVs (something Australians have been quick to adopt) the opportunity is there for the taking.

Phil Duffield is the managing director of Adap.tv.

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