Real-Time Bidding: New
era of Digital Advertising
How Does RTB Work?
For example:
New technologies have introduced a variety of challenges to
advertising companies. RTB, or real-time bidding, addresses many of these
challenges by providing a direct and flexible method of matching consumers to
appropriate advertising content. It offers several key benefits to the buy and
sell sides.
Real-time bidding (RTB) will be a
significant factor in fulfilling the promise of online digital advertising,
which has been on the limit of dramatic changes for many years.
RTB, as defined by Parks Associates,
describes the automated process of buying and selling online display
advertising in real time, and it incorporates enhanced solutions in targeting
algorithms and data analytics in order to deliver better targeting, greater
control and more granular campaigns.
Given these strong benefits to ad buyers
and sellers, RTB is starting to claim more revenues in the online advertising
industry, and by 2017, it will account for 34 percent of all online display ad
revenues.
Challenges in Online Advertising
Several industry factors will drive this
shift to RTB. New technologies have introduced a variety of challenges to
advertising companies. Consumers can skip commercials or go completely
"over-the-top" in their video viewing, and they are now using
multiple screens to consume content. Parks Associates consumer research reports
over one-half of U.S. broadband households have a smartphone and nearly one-third
have a tablet. All these extra screens make it more difficult to follow
consumers and necessitate detailed tracking solutions.
These types of tracking solutions raise
privacy concerns, often cited by advocacy groups, which could lead to customer
rejection of the online advertising industry as a whole. However, Parks
Associates' report Advertising Strategies on Connected TVs finds 45
percent of U.S. consumers are comfortable with targeted ads based on their
TV-viewing habits. Over one-third are comfortable with targeted ads based on
their online browsing habits, according to the report Monetization of
Multiscreen Video: Content Owner Strategies.
While there are and always will be some
consumer segments unwilling to share any details of their buying and browsing
habits, many consumers are willing to provide personal details in exchange for
something of value.
The more significant challenge has been in
matching consumers with the appropriate content and, in some cases, matching
consumers with any content. For the past 10 years, companies looking to buy and
place online ads on a large scale typically have purchased blocks of ads,
usually in groups of 1,000, through ad networks. Agencies pay these ad networks
a CPM-based rate to reach audience segments with the understanding that a
portion of the online ads will not reach intended consumer targets. The
industry considers ad networks as "blind-buys": Buyers do not have
full control over ad placement; so as a result, ads can appear on any website
located in the network.
RTB
addresses many of these challenges by providing a direct and flexible method of
matching consumers to appropriate advertising content.
How Does RTB Work?
RTB is a
data-driven buying model through which ad agencies place auction-based bids for
individual ad impressions. This process takes place in milliseconds, allowing
agencies to adjust their strategies almost immediately based on the performance
of individual sites and ad impressions.
When a
user visits a website, in addition to serving up HTML code, the Web
server delivers an ad tag to an ad server, which ultimately sends the user's
cookie ID to an SSP (supply-side platform) or ad exchange to be auctioned using
RTB APIs. Buyers use that ID
data to value the ad impression and set their bids. In an RTB environment, ad
buyers analyze multiple variables of an ad impression, such as demographics,
geography, and publisher attributes. The ad exchange determines the winner, and
then the information flow goes back to the ad server to deliver the ad to the
user's browser. This entire process is done automatically, in real time.
Below are a few examples to
illustrate the meaning of RTB and its benefits beyond the standard targeting
parameters (Geo Target, Gender, Age, Category, Demographic, etc.). Let’s say we
want to set a maximum bid price for display ads in a campaign (bid = $1 DCPM).
We can set the system to change the bids according to a set of rules, and all
in real time (50 milliseconds before the ad loads)!
- If your ad appears below the fold - bid 0.25c
- If the user is seeing the ad for the first time – bid $1
- If the user saw the ad 3 times this week – bid $0.5
- If the user saw the ad 5 times this week – bid $0.1
- If the user saw the ad 7 times this week – don’t bid
- If the user visited your site in the past (retargeted user) – bid $3
- If the user visited your site and left at the checkout – bid $5 (and show him an ad with a discount!)
- If the user usually visits sites similar to yours – bid $2
RTB
offers several key benefits to the buy and sell sides.
Facebook and Ad
Exchanges
Source: ecommercetimes.com and adgorithms.com
Core
Benefits of RTB
Ad Buyers - Ad Agencies
|
Ad Sellers - Online Publishers
|
|
|
While
there are several paths for agencies to take when employing RTB, most use a
media buying desk (MBD) that relies on demand-side platform (DSP) technology to
access and bid on RTB ad impressions. An MBD is a buy-side platform that
consolidates the process of planning, buying, serving and reporting online
media campaigns, typically leveraging the technology offered by DSPs. Agencies
also compile proprietary audience intelligence profiles through their MBDs,
which integrate with third-party DSPs. DSPs connect ad inventory to agencies
and measure a campaign's efficacy against its goals.
Agencies
know who they want to contact due to data management platforms (DMPs). DMPs
provide audience intelligence across the entire digital ad ecosystem, not just
the RTB ad market, containing info on variables such as purchase intentions,
household demographics and behavioral patterns. DMPs collect, manage, and
evaluate online user information obtained from multiple media sources to
identify and create audience segments. They enable the delivery of the right ad
unit to the right consumer on the most effective media channel.
The
confluence of these elements boosts the overall value of the RTB process for
all players, so much that on the supply side, publishers are beginning to
release premium inventory to SSPs to capture larger shares of ad budgets
processed in RTB markets.
Facebook and Ad
Exchanges
In
mid-2012, Facebook announced the expansion of its growing display ad business
into the RTB marketplace, with several DSPs already testing the Facebook
Exchange, or FBX. RTB-enabled ad exchanges aggregate ad impressions across many
online channels and connect ad sellers to buyers. Primarily a sell-side
service, ad exchanges provide ad inventory details, such as website type, ad unit
size, and user geography to ad bidders (e.g., MBDs, DSPs, ad networks). They
also manage the entire ad-auction process - receiving the bid, determining the
winner and facilitating ad placement.
Within
the FBX system, brand advertisers can target Facebook users based on their
Web-browsing history, with ads displayed on a Facebook page based on
third-party Web browsing habits. It matches users more closely with not just
relevant content but with products where they have displayed purchase
intention. For example, Facebook Exchange can serve up ads about cheap flights
or local auto dealers to a user who has visited a travel site or the Ford home
page.
FBX
indicates Facebook is getting more aggressive in its advertising methods -- and
is forging new ways to build revenues. According to comScore, the social network serves
approximately one-third of U.S. display ad impressions, so the FBX could open
up a large source of ad inventory to the RTB market.
Facebook is competing with
other companies in the RTB market, notably Yahoo and Google, which have
established their presence in the RTB market through a variety of acquisitions.
Yahoo acquired Right Media in 2007, Rubicon Project purchased Fox Audience
Network in 2010, and Google followed suit in 2011 with the acquisition of
Admeld.
Growth of the RTB Market
Agency demand for cross-platform ad synergies will drive the
development and adoption of RTB sell-side platforms for emerging media,
particularly mobile, online video, and social media, but these markets will remain
small, with growth contingent on the maturation of the online display RTB ad
market. Even so, Parks Associates asserts this market will grow quickly. RTB is
a complicated process, with unfamiliarity and a lack of industry knowledge as
potential inhibitors, but even if they have any significant impact, they will
serve only to slow growth, not stop it.
The advantages of the RTB process to ad buyers and sellers
are simply too great to ignore. Ad spend will shift away from traditional
online display advertising to the RTB ad market as buyers become more
comfortable with the concept and realize benefits such as cost efficiencies,
reduced ad waste, rapid scalability, and improved control and transparency. RTB
revenues generated by online display ads in North America will reach US$1.6
billion in 2012 and $7 billion by 2017.
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