• by Jim Caruso , April 29, 2014

The business world is prone to radical changes, and change brings a mix of feelings, many of them negative. Yet transition occurs whether industries embrace the change wholesale or initially resist. Look at the music industry, which went from selling CDs to MP3s to focusing on streaming services in a little more than a decade.

In digital advertising, marketers had barely begun to grasp the thousands of computations necessary to deliver an ad to a consumer’s browser when real-time bidding came along. Now, all of these computations are done in real time, with even more complex decisions added to the mix, but with the timing reduced to milliseconds.

If you imagine media buying as a two by two matrix, the left axis provides two options: open and transparent, and closed and siloed. “Open” buying means the buyer and seller have negotiated clear terms to provide the buyer with full visibility into where, when, and, to some degree, to whom their ads are served. This type of buying happens in a manual, pre-negotiated upfront transaction.

But sellers quickly realized there was a complementary way to maximize profits, which was to move away from providing transparency to buyers. They packaged inventory in a closed and siloed manner that blinded buyers to where a client’s ads ran. This was the network model.

The other option is real-time buying, which both sellers and buyers use to realize efficient and cost effective media transactions. There was concern associated with adopting real-time buying, however, which was sellers’ fear of losing control of their inventory. To combat this fear, sellers allowed for real-time buying, but kept buyers blind by holding them to the algorithms, constraints, and protocols of an individual marketplace.

This is what we commonly know as RTB 1.0. Still, it’s clear that something is lacking in this model. Big data brings a wealth of options in real time. Yet without transparency across marketplaces, how could buyers really feel comfortable knowing which marketplace is offering the best value to them for a given impression?

RTB 1.0 only allows buyers visibility into a single marketplace, prohibiting them from finding their ideal users across all available inventory. Due to the lack of data sharing between marketplaces, buyers could find a target consumer through one DSP, but never connect the dots to find the same user via a different DSP.

As both buyers and sellers better understand real-time technology, we may finally see the shift toward a new era of media buying: RTB 2.0. The true value to the buy- and sell-side is when buyers are able to see a snapshot of the entire market, to gauge the value of a user across multiple marketplaces. Real-time access to every possible data point helps buyers make smarter decisions about which impressions to buy, while simultaneously providing sellers with real-time pricing controls to accurately gauge and maximize the value of each request.

Of course, the move to this model will be slow, requiring many companies and technology to catch up. Furthermore, it requires marketplaces, some new, some old, to relinquish their control and become truly open to all buyers and sellers. There are certainly some people in the industry who have already embraced RTB 2.0 thinking, offering a glimpse of the benefits we're poised to gain when fair choice is the only option.