Saturday, March 22, 2014
Digital Monetization - RTB Technology creates an auction market for online ads
Here’s the challenge: how do publishers monetize content in a market where there is a growing supply of ads and a changing model for how ads are delivered and sold? Typically, the selling of digital ads has followed a direct sales route to clients and ad agencies. Now, a distribution model that is common in the IT industry is emerging in the digital publishing world: channel marketing, where OEM manufacturers have resellers for their products in addition to their direct sales force. This strategy enables companies to reach new markets that their direct sales team doesn’t talk to.

The first developments of this channel were the remnant ad networks. The most familiar are Google Ad Sense and Casale Media. Rates in these ad networks are $3-$5 CPM for impressions, where magazine publishers in the direct sale model like to sell at $20+ CPM. The pay-per-click model pays $1.50 click on average and you need to deliver 100,000 impressions to generate 100 clicks (0.1% CTR). The problems with this model are that resellers may cannibalize the direct sales; lower pricing that the publishers cannot control; and the need for economies of scale (i.e. millions of visitors and low ROI).

“Real-Time Bidding” technology is a new ad network that addresses some of the concerns stated above. It follows the principles of a commodity exchange market modeled after the financial sector. Publishers can list their ad inventory for sale in these ad exchanges with a minimum price. There are a number of exchanges that you can choose from and this inventory can then be purchased through a dealer network—software accesses these ad exchanges and bids on the inventory based on set target market criteria and budgets.

The marketing promise is that advertisers can target a user based on in-depth criteria and create a personalized message to optimize sales opportunities in an auction market for media purchases—all in real time.


 
Real Time Bidding Technology. (via Source‪go2mobi.com) Click to view large

The Real-Time Bidding model as explained on Wikipedia: “A typical transaction begins with a user visiting a mobile website. This triggers a bid request that can include various pieces of data such as the user’s demographic information, browsing history, location, and the page being loaded. The request goes from the publisher to an ad exchange, which submits it and the accompanying data to multiple advertisers who automatically submit bids in real time to place their ads. http://en.wikipedia.org/wiki/Real-time_bidding

“Advertisers bid on each ad impression as it is served. The impression goes to the highest bidder and their ad is served on the mobile page. This process is repeated for every ad slot on the mobile page. Real time bidding transactions typically happen within 100 milliseconds from a user visiting a website.
The bidding happens autonomously and advertisers set maximum bids and budgets for an advertising campaign. The criteria for bidding on particular types of consumers can be very complex, taking into account everything from very detailed behavioral profiles to conversion data.”

 
The Ecosystem (via businessinsider.com)

Publishers will have to learn new tech terms, like demand-side platforms (the technology that helps the bidder connect to the ad exchanges) and supply-side platforms (which help publishers manage multiple ad networks and connect to the ad exchanges). Data intelligence, creative optimization and ad/brand security companies are part of this system according to the Business Intelligence infographic above. Trading desks, another part of the ecosystem, are being established at major ad agencies like Media Experts.

Media Experts has released “Programmatic Trading Q4 2013 year end review of the RTB market,” a comprehensive report that shows who the players are in these auction model markets. According to the report, Media Experts leverages over 400,000 websites spanning display, video, mobile and social inventory to generate $133 million in e-commerce sales for its clients in the RTB market.

A representative from SiteScout, one of the dealers (demand side) that provides the technology for these ad exchanges, says that publishers can see a range from $0.50 CPM to $40 CPM depending on the market niche delivered. Dealers take a 20% commission from the publisher, and publishers also pay the ad exchanges a listing fee.

The challenges facing this new ecosystem are: addressing the privacy issues the come up when tracking people’s web surfing habits with spyware/cookies; and the task of weeding out websites that are contributing to click and impression fraud. I had Acuity Ads, another demand-side vendor, provide me with a list of sports websites that I could bid impressions on for a media buy. I picked out five websites and learned that two of them would never be on a media plan, but the other three would if they delivered my target market of M18+, living in Toronto.

Sample Websites
tigerdroppings.com (LSU College Football)
skysports.com (UK sports website)
tvembed.eu (Sports video aggregator that does not load on my computer)
atdhe1.net (Live video sports website, that only has a home page)
si.com (Sports Illustrated)

As a media buyer, I would be concerned with where my ads show up, and with ads showing on sites that would not be brand safe, no matter what the cost. I have heard stories from another media buyer about how a site they never heard of had generated so many ad impressions and clickthroughs. One vendor at DX3, a digital trade show that was held in Toronto this March, says that click fraud may be as high as 40% of all clicks. It has been estimated that bots generate 50% of all web traffic, so buying respected media brands is still very important in online media planning.

Programmatic media buying is an application of big data based on a person’s web surfing habits, and predicting when that person is at different stages of the buying cycle to determine what ad is delivered to them. This is like predicting when a person is buying a car, just shopping, or dreaming – a form of artificial intelligence. The jury is out on if there is a technology to deliver this with mathematical certainty, or if this just another geek pipe dream.
- Martin Seto
About Me
Martin Seto

 
Martin Seto is the principal of Reflex Media, a media consultancy practice offering media owners online publishing, ad sales and acquisition/selling brokerage services. His media services also include working with ad agencies as a media buyer/planner for tv, radio, print, outdoor and online. He has been in the advertising and media industry for 25+ years and he has been an instructor/speaker with Centennial College and at magazine conferences across Canada. He also moonlights as a pro goalie as a "rent a goalie" at mypuck.com.
Most Recent Blog Comment
Tracie Berardi says:
This is a really helpful overview Marty. You touch on good points in your blog. -- Tracie...
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