RTB Platforms: Lessons From Wall Street?

Real-time-bidding platforms are the buzz in the digital advertising space, heralded as the future of the ad biz with the potential to return the industry to the profitability of Mad Men glory days.

Proponents argue that the efficiency that RTB platforms provide will have a transformative effect, altering Madison Avenue's business from selling "sizzle" to the Wall Street model of delivering returns. Yet given the evolving state of the advertising business and Wall Street's recent flirtation with our economy's collapse, are we ready to bet the future of our industry on an unproven model? More importantly, what lessons can be taken from the recent banking debacle to ensure that RTB platforms are able to deliver on all the hype?

1. Standards - Financial markets are predicated on the idea that information about assets is what drives market efficiency. If RTB platforms are to deliver on the promise of efficiency, the display markets need a trusted source of information. Even in light of the recent economic crisis, few would dare buy a financial instrument that had not been rated by an independent, third-party authority.



Like financial trading markets, RTB platforms will require a standardized system of metrics that enable buyers and sellers to evaluate transactions across common terms. And in the case of digital media, such standards must encompass the quality, the brand safety and value of those impressions being traded. Without a standardized set of metrics through which to evaluate inventory, RTB platforms will just be another iteration of rate-card-based buying.

2. Transparency - Consistent with the need for standards across RTB platforms is the need for full transparency of inventory. Content rating standards are necessary for brands and agencies to buy and sell inventory efficiently, but without full source-level inventory transparency, RTB platforms will continue to be rife with the same placement quality concerns that many networks face. Brands will never be comfortable buying inventory across purely economic dimensions.

Given the impact that content associations can have on a brand, a marketer's first criterion for inventory purchase must be compliance with their brand guidelines. If an impression doesn't fit with a brand's image or values -- e.g., a family values-oriented CPG brand appearing on risqué adult-oriented sites -- no amount of targeting or buying efficiency will make it a "healthy" impression for the brand. In order for RTB platforms to ensure that all the impressions they are delivering are "healthy" for their advertiser clients, they must demand that publishers provide full, source-level transparency for all impressions they transact.

3. Liquidity - Liquidity is another key buzzword from the finance world. Participants in markets must have access to large pools of inventory in order to buy and sell at will. Much of the benefit of RTB platforms relates to the immense liquidity in the display markets -- with the exponential growth of "long tail" display inventory, RTB platforms are able to leverage the volume of this inventory to buyers' and sellers' advantage. But given that the majority of this inventory falls outside of the bounds of "premium publishers," the need for standards and tools to monitor this inventory becomes even more acute for brand advertisers.

Furthermore, as RTB platforms become utilized on a more mainstream level for premium and long-tail publishers alike, these standards and tools begin to have financial implications for publishers in terms of inventory pricing. If premium and long-tail publishers both use RTB platforms to monetize their inventory, publishers must be assured that there are protocols in place that will enable their inventory to command an appropriate price point. If advertisers are going to utilize RTB platforms to purchase "audiences" in lieu of "properties," a ratings system needs to provide insight into the quality and brand safety of inventory in such a way that will serve as a proxy for an understanding of the source of inventory.

4. Brand Safety - Wenda Harris Millard's now-famous declaration that impressions "must not be traded like pork bellies" hits on a key issue for RTB platforms. Ad impressions are not, like pork bellies, commodities. Most brands and agencies care passionately about the impressions they buy, and they believe that one impression cannot simply be swapped for another. This belief relates to the issue of brand safety or compliance with an IO regarding issues like adjacencies to hate speech or risqué editorial content.

In order for brands to embrace the mainstream use of RTB platforms, they must be assured that there are safeguards ensuring that they are able to utilize only the impressions that are safe and appropriate for their brand. Such brand safety technology must be able to provide real-time access to metrics that enable brands and agencies to make responsible, informed decisions about the inventory they are buying and selling.

The mainstream adoption of Real-Time-Bidding platforms will be an evolutionary milestone for the advertising business -- but as an industry, we are still adapting to the industry's recent advances in data and technology. Undeniably, the benefits afforded by RTB platforms can and will shake up the industry. But given that many of these platforms are just taking shape now, we have the opportunity to affect how these platforms will evolve in-market.

Clearly, there are lessons to be learned from both the financial markets' missteps and successes. And provided that the four themes described above -- standards, transparency, liquidity and brand safety -- are properly attended to, there's little doubt that RTB platforms can drive the long-term, sustainable growth that digital advertising has long sought to achieve.

3 comments about "RTB Platforms: Lessons From Wall Street?".
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  1. Hugo Ottolenghi, March 23, 2010 at 10:37 a.m.

    The Joost ad repeatedly enlarges over the headline. This annoyance caused me to stop reading.

  2. Ramsey Mcgrory from Yahoo!, March 23, 2010 at 10:52 a.m.

    Thanks for the post. A couple thoughts:

    -I wonder how far the financial market analogy goes here. Bank failures were in part due to the underlying inaccurate assessment of the risk at the transaction level (and portfolio) but also due to accentuation of risk using credit default swaps, and systemic risk created by the interconnected transactions b/w the parties. RTB provides no such risk accentuation (downside). Rather, it creates a more liquid market, minimizes redirecting b/w intermediaries and improves the user experience by delivering better advertising with reduced latency.
    - Price often dictates the level of transparency a buyer gets and that's a risk/reward trade off the buyer makes. 3rd party auditing can provide some assurances around contract adherence to allow for more advertisers to spend, but shouldn’t be used to circumvent the contract b/w buyer and seller. You didn’t imply that but I think a lot of buyers may think that is what they will get.
    - I agree that standards are needed in how we execute RTB, but many standards don’t allow for better audits, and many audits are problematic whether we’re talking RTB or normal ad serving. Verifying that an ad showed on a specific website is straightforward. Verifying that it was served to a desired audience is not straightforward b/c buyers and sellers have unique data. Auditors may actually have less data then buyers or sellers they are auditing. Buyers assume that a 3rd party auditor is more accurate but it’s often not the case.
    -RTB and auditing seem to be the hottest topics over the last quarter. Both are in need of a lot of open conversation around how and why it's done to set expectations and to really scale. Ad servers and the ad call process have to change, and clear data usage rights have to be established.

    Lots of work ahead for us all. Thanks again.

  3. Domenico Tassone, March 27, 2010 at 10:49 a.m.

    This article makes a lot of sense. Ad exchanges and trading make for handy metaphors but many are not convinced the hype is warranted. Caveat emptor.

    Also, we marketers are notorious for short-memories. How is this different from prior attempts by, and others? Will this time be different? Why or why not?

    I'd like to see a story on that from MediaPost or AdExchanger?

    Domenico Tassone
    Seiche Analytics

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