Real-Time Bidding Is The Real Deal

You gotta love the perennial ad industry buzzword cycle. It helps ad folks like me sound smarter than we really are, but for most it just creates annoying distractions that garner a lot of undeserved attention (social media advertising has a great knack for doing that).

I'm here to tell you that this buzzword's the real deal, folks. And for travel industry advertisers, "real-time bidding" (RTB) presents the biggest potential to boost advertising efficiency since Google AdWords came along. Here's how it works:

Today, most of us buy ad network impressions in bulk. We buy into a particular channel, but for the most part the information we have about the individual browsers is in aggregate. They're in-market travelers. Great.

In reality, when you dig, there are in-market travelers that are traveling in six months, and there are in-market travelers that need to travel tomorrow. There are travelers who want to go to Bali for three weeks (in business class), and there are travelers that want to drive to a motel for one night. With most ad network buys, you're getting all of these user intent profiles, and you're paying the same amount to target each of them.

These profiles clearly aren't worth the same. I bet that United Airlines would pay a lot more to convert the guy who needs a last-minute (and thus full-fare) ticket than the budget-conscious tire kicker who is comparison shopping six months out. The airline has these data from cookies that get dropped when users perform searches on its own site, but without RTB, it bids the same for each of these profiles when it re-targets them across the web. Because not every bid is high enough, sometimes the airline loses and somebody else's ad shows up on a given impression when it could have been a United ad, if it had just bid higher for that impression.

RTB lets advertisers do just that: define a set of parameters under which they're willing to pay more, or less, for a given profile. And it's not that hard, thanks to a few really talented folks who have founded companies around this practice (see: AppNexus, Invite Media, MediaMath, et al.).

They manage your media buy and can adjust bidding -- in real time -- as a result of the factors that matter to you. All the work is done for you, transparently, and you get a neat report at the end of it all that shows you how many more conversions you generated as a result.

Just be careful when choosing a vendor (referred to as Demand-Side Platforms; "DSPs" -- yes another buzzword!). They're largely based on "black box" optimization engines that don't really explain themselves well. Get references, and test against a baseline. And then enjoy that extra revenue gained by more efficient media buying!

7 comments about "Real-Time Bidding Is The Real Deal ".
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  1. Darren Herman from The Media Kitchen, February 8, 2010 at 10:24 a.m.

    Great article Paul. The issue here is that "RTB" allows this to happen in real-time but only a tiny tiny tiny (did I say tiny?) portion of inventory is available today for this to occur. You can apply your methodology (valuation of individual impressions) in non-real time environments and still prove out the same thesis. You do not need RTB to make this happen.

  2. Paul Knegten from Dapper, Inc., February 8, 2010 at 10:47 a.m.

    Thanks Darren! I do think however that RTB makes it all the more valuable. It's the difference between trading on information you had about a company last week and breaking news that just happened.

    And you're right, it's a tiny portion of the media, but it's growing like crazy.

    Congrats on the new role, by the way!

  3. Eric Klotz, February 8, 2010 at 11:43 p.m.

    Hi Paul

    Darren is correct. Currently the RTB universe is small but it's growing very quickly for sure, and there is actually very good reason for the hype, as you've pointed out.

    The issues around RTB aren't just about finding the inventory or finding the right buy side partner. RTB is a buyer initiated concept, and while it's a good one, there has to be very compelling reasons for publishers to want to participate in the process as well. The benefits for them aren't as clear as they are for the advertiser.

    Keep in mind that the advertiser wants to pay as little as possible for that inventory. Per your example with United wanting to target a specific "traveler," I totally agree they'd be willing to pay more for a specific user in the right place at the right time, but how much more? And what data needs to be passed in order to get a real-time bid that may not be much higher than a segment based buy?

    The risk to payoff ratio for pubs isn't quite where it should be on a large scale, and I think leveling the playing field will be key in driving the growth of RTB.

    There has been a lot of positive progress made in the past year with RTB, and there are a lot of really smart companies working to make it a positive experience for all parties. The potential for large scale success is there but everyone working in this space should understand that the buyers only represent one part of the RTB process.

  4. Barry Dennis from netweb/Omni, February 9, 2010 at 12:34 a.m.

    Link to SIgnup is busted.

  5. Robert Deichert, February 9, 2010 at 9:17 a.m.

    In the short run I agree that RTB could lead to advertisers effectively mining publishers for high ROI impressions. As competition increases prices will rise and ROI will drop and normalize. It's similar to PPC keyword marketplaces.

  6. Zach Coelius from Triggit , February 9, 2010 at 2:42 p.m.

    Great post Paul, glad to see you are liking what your are getting with rtb.

    Darren, great to see you last week. The volumes in RTB are growing at about 100% month over month. I don't think it is going to be tiny for long.

    Eric, the data that we have been collecting from running rtb buys for the last year shows a really significant increase in average ecpm as we can bid more efficiently with our clients dollars and reduce waste. From our end it looks like RTB is good for both sides.

  7. Eric Klotz, February 11, 2010 at 12:39 a.m.

    Hi Zach,

    Agree that pubs are seeing greater eCPM w/ RTB. We see it too for sure. But I think Robert from Weather Channel nailed it.

    Lets not get too caught up in honeymoon phase of RTB, and realize that publishers need to utilize their own data in the way that is best for them - not just for the advertiser - and have safeguards to ensure high pricing, or the big payoff could end up being just short-term rather than it being long-term.

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