What You Need To Know About The Revolutionary Arrival Of RTB/Ad Exchanges

by John R. Osborn, Sep 25, 2012, 10:26 AM

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The past year has seen a revolutionary advance in techniques and the participants in a process that has several names: RTB (Real Time Bidding/Buying), Media Exchanges, Ad Exchanges, Media Trading.

Huge leaps forward in “Big Data” are driving dramatic changes in many industries, including marketing. Digital RTB Exchanges are already handling trillions of buy/sell transactions monthly across online display, mobile (tablet, smartphone) and OTT T/V (Over-The-Top or non-cable/satellite) digital platforms.  This is an unprecedented level of efficient and optimized buying for both sellers and buyers. The traditional, time-consuming direct selling/buying process is joined and supplemented by this new kind of “stock exchange” for targeted/addressable media impressions.

High-powered platforms and algorithms instantly match across-the-board sellers’ inventory with competing buyers’ specs and bids.  Rich and extensive data reporting (engagement metrics, audience metrics -- even third-party or proprietary brand metrics) actively inform buying and selling decisions, supporting budget shifts, inventory management and targeting adjustments in real-time.

IAB has a great graphic illustration here of today’s RTB/Ad Exchange workflow.

There is an alphabet soup of jargon surrounding this process. Here’s a brief lexicon:

• ATD (Agency Trading Desk) – Agency holding company interface/overlay to Demand Side Platforms providing a “dashboard” and RTB staffing to serve clients of the company’s agency roster.
• ITD (Independent Trading Desk) – Trading Desks not affiliated with agency holding companies.
• DSP (Demand Side Platform) – Technology platform that organizes buying parameters/pricing and interfaces with RTB Exchanges to match up, optimize and order impressions/inventory buys.
• DMP (Data Management Platform) – An addition to a DSP where a marketer synthesizes and stores data derived from past and current buys and proprietary or 3^rd party data to constantly improve results of buys.
• RTB (Real Time Bidding/Buying) Exchanges – The platform where the vast array of “Demand Side” specs and bid “ceilings” are matched with “Supply Side” inventory and pricing “floors” to connect and complete deals between buyers and sellers in an efficient, millisecond-long process.
• SSP (Supply Side Platform) – Technology platform where content providers/publishers organize selling parameters/pricing interfaces with RTB Exchanges to match up, optimize and complete sales.
• Ad Networks – Ad networks have served as sales representatives for digital content providers, aggregating a number of publisher sites for more efficient selling, usually excess inventory sold at lower rates than direct.  Since this role is now being taken on by data-powered SSPs, many Ad Networks are now partnering with or becoming SSPs.

To see the breadth of companies that have appeared or migrated to this emergent business model, take a look at this chart from Luma Partners showing nearly 300 T/V companies. 

While this all looks very complex and can be intimidating to a traditional media or even digital person, in fact it provides enormous simplification to a highly fragmented media world. Varick Media Management cites a ThinkEquity analysis comparing online publisher inventory (impressions) being sold in 3 different ways from 2007 – 2012.  It confirms the rapid expansion of the RTB/media trading model (non-guaranteed biddable) compared with direct sales (guaranteed) and sales through ad networks (non-guaranteed, non-biddable):

 

Selling Model                                                                        2007                        2011

Guaranteed (Direct selling)                                                     11%                         7%

Non-Guaranteed, Non-Biddable (Ad networks)                         89%                         58%

Non-Guaranteed, Biddable (RTB/Media Trading)                        0%                         35%

Estimated impressions analyzed                                                10 million +            18 million +

 

Though profitable direct sales as preferred by large brand advertisers are not eliminated, new opportunities in RTB/ad exchanges abound, with the overall market expanding.

Here’s a short video by independent trading desk Digilant (formerly Adnetik) illustrating with clever audio/visuals how these enormous data processing systems handle the trillions of buy/sell transactions.

Engagement and interactivity are the key RTB qualitative offerings that differentiate these T/V buys from linear television. Viewers “click-to-view” video content and agree to pre-rolls and/or mid-rolls, offering real, trackable engagement. New interactive formats for video include links to mini-website experiences for deeper drills, actions on Twitter and Facebook and connections to games and other social media functions.

DSP TubeMogul cites eMarketer and BreakMedia data that suggest by 2015, digital video ad spending should exceed $7 billion from the current level of just over $2.5billion. Based on indications from current marketers, 45% will come from online display budgets, 32% will shift from TV budgets, while Print, Outdoor, Search, Social and pure ad budget growth will also contribute.

For a deeper dive on this subject, my primary source of learning comes courtesy of Prohaska Consulting, with a training program entitled “How Be a Digital Media Trader.”

This is the first of two articles and provides basic background important to my second theme (opportunities). The two articles together make the case for how the “RTB/Ad Exchange” T/V Buying & Selling revolution will significantly influence a broadly accepted T/V business model.

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