How RTB Is Lifting CPMs

by Andrew Casale, May 17, 2012, 1:46 PM

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Agencies and publishers are showing more interest in programmatic ad buying and selling based on positive results from early adopters of real-time bidding (RTB). For publishers, RTB is creating more demand and driving up CPMs. Here’s why:

In ad sales, getting on media plans is a challenge. If impressions don’t garner results, advertisers can move publishers, networks and DSPs off a plan quickly. However, agencies are allocating more budget to programmatic buying in exchanges, mostly through DSPs. When publishers sell via RTB in an exchange, they can get multiple cracks at a client’s budget. Publishers working with exchanges that integrate with leading DSPs can hedge their bets. If advertisers change DSPs, the publisher can still get the campaign, because another DSP partner will likely get that budget. Advertisers consistently spend, regardless of the DSP they work with. Publishers will likely retain the budget in some way.

Advertisers that retarget exclusively have scale problems. They work with a finite amount of data, making them undesirable partners for the largest ad networks unless the advertiser is significant. Site and search retargeting through RTB exchanges make the ad buy practical regardless of the client or audience size. DSPs, with access to infinite amounts of targeted media, can give retargeting real scale, an important consideration when reaching in-market audiences.Publishers can maximize exposure to the marketers, leveraging this channel to drive CPMs up. Local Advertisers

Like retargeters, local advertisers had difficulty getting ad networks and publishers to run campaigns because budgets were typically too small. If local advertisers wanted impressions in one Zip code, they’d work with several ad networks at small spend levels to achieve scale.With the variety of DSPs, publishers can use exchanges to aggregate the demand of SMBs and run their campaigns to make local advertising worthwhile. RTB helps access budgets from local advertisers that were mostly impractical in the past.

In a media plan with publishers and ad networks, if one partner underperforms, it can take weeks to manually adjust the plan. The result? Incumbent networks take on more spend, agencies try to fit new networks on the plan, then spend is redistributed. Automation can show campaign results immediately so agencies know how to quickly allocate spend based on individual site and impression insights. High performing impressions rise to the top and garner more campaign budget, while wasted impressions are removed.

RTB automation will lift CPMs and create new display advertising opportunities, as evidenced by the trend of publishers creating private marketplaces that facilitate direct deals with agencies. These relationships lift a publisher out of the sea of impressions available for bid on open exchanges and create demand by enhancing the overall consideration for the impressions.

On a premium publisher’s home page, if 20% of ad space is sold direct, 80% went unsold because the sales force couldn’t get consideration for more budget. It’s not because the impression is inferior quality. Publishers with large scale should have a conversation with agency partners about automated and guaranteed ad delivery because that 80% of inventory is just as valuable as the other 20%.

To lift inventory value out of the remnant bucket, publishers must have a conversation with the buy side rather than leaving it up to algorithms alone to pluck out those impressions. Advertisers use exchanges because purchasing impressions is simple. Private marketplaces magnify this effect with direct deals struck at the same ad delivery speed and effectiveness of programmatic buying. The ease of automation grows ad budgets by drawing more buyers to each display impression. The more ad budgets grow, the more RTB will continue to lift CPMs.

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