Solving RTB's Pricing Crisis

Programmatic platforms and bidding systems were designed to democratize the display-ad space. These solutions meant that advertisers would no longer need to spend on “black box” or “blind” buying solutions that failed to provide brand quality and return on investment. By bidding in an auction, buyers could apply their own value to audience targets and gain a clearer understanding of how much acquisitions and conversions really cost.

That has not proven to be the case, however, because two inventory suppliers still control most of the exchange trading: Google and Facebook. Despite all efforts at transparency, buyers still lack visibility into what others are paying for inventory, so while they may set their own value for inventory, they lack a clear view of the entire market. Black boxes still reign. The only way to break the dominance is through a consortium effort in which buyers and sellers share pricing information to create a valuable and trusted market place.



Most agencies have fully adopted RTB and many have built their own trading desks on behalf of clients. These agencies work with lots of publishers on direct buys, and have access to some RTB data across all of the clients running through their trade desks. That gives them a look at a small portion of the market, but it lacks the scale required for true understanding. Even the tech platforms that promise transparency offer only limited visibility into their own, siloed data. While they provide very valuable insights and serve their customers well, their sizes pale in comparison to Google and Facebook. Using the data at hand to build a model that truly reflects the entire market would be inefficient for an individual entity or agency, and would be inaccurate.

But if agencies and advertisers banded together with their demand-side platforms to share data about their actual spend, they could quickly and easily gain insight into the prices of inventory across the market. Each agency or buyer understands the true power of their spend. By pooling that information, along with the data they receive from their tech providers, they can develop a consortium approach that constructs an accurate picture of the market. This same approach has been proven by the financial and airline market place by Bloomberg and Prism, respectively.

The challenge, of course, is that agencies don’t necessarily want to share their pricing information with their competitors. It’s no secret that publishers offer bulk discounts to advertisers, and some relationships in this industry result in discounts between buyer and seller. That’s the case with any business, especially the media business. But as publishers set up private marketplaces and explore other programmatic solutions, some have raised questions about collusion with ad buyers. Divulging pricing information may be a very sensitive subject, and it could have a lasting effect on publisher-agency relationships, but it will certainly ensure that there’s no collusion going on behind the scenes in “black boxes.” 

And this would be the only way to truly understand the digital auction market place. Advertisers have complained about blind activities and the opacity of some exchange partners and Ad Networks for the better part of a decade. If they truly want to escape this model and understand how pricing works across the online ad ecosystem, they should form a marketplace powered by collective insights. The only way the community can move on is by trusting one another.

Advertisers today are much smarter about programmatic buying and selling. As publishers continue to advance their knowledge and solutions, the market will continue to advance. But that doesn’t necessarily give marketers a better understanding of whether they’re spending too much, too little, or the right amount. If we’re going to talk about the benefits transparency provides for the whole advertising community, then the solutions must touch the entire ecosystem. When everyone is open about their spending, buying and pricing, charges of collusion and accusations of black-box price gouging go out the window.

Big suppliers like Google and Facebook are good for advertisers, because they offer scale and can reach millions of consumers. But without accurate insight into what these and other suppliers actually cost, advertising will continue to fall short in effectiveness and measurability.

The real endgame is bringing buyers and sellers back together with transparency, ensuring that the partners that serve them are enabling real growth.
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