According to research firm International Data Corporation (IDC), Real time bidding (RTB) for display will become a $5 billion industry by 2015. But will the success of RTB in display translate to other forms of advertising such as online video ads? While only time will tell for sure, early indications are pointing in the right direction.
What exactly is RTB? RTB is the process by which advertisers assign individual value to a particular ad impression by bidding on those impressions in an auction environment. The process was initially driven by demand site entities (ad networks, agencies, etc) to reduce waste in display adverting spend, but as time has gone on, the advertising industry has recognised the inherent benefit for publishers looking to raise CPMs – cost pre impressions.
RTB in Display
Since the early days of RTB in display, there have been several key benefits that have attracted advertisers towards the process. First and foremost is transparency. In an RTB environment, advertisers know exactly what type of inventory they are bidding on and what site it will go to, which is sometimes not the case when advertisers buy through an ad network.
Second is control. Buying via RTB provides advertisers the peace of mind knowing that they are in control over their buys. They can determine what inventory to bid on, at what price and on what site. Finally, it provides advertisers the ability to really target their campaigns when they incorporate additional site data. Advertisers know exactly which demographic is on each site and then they can buy inventory best suited for each campaign.
However, like most new technologies in this space, advertisers have expressed concerns. Currently, there is no industry-wide standard for RTB integration types in display and standardization is a must to decrease innovation costs and enable companies to realise the benefits of RTB. Due to some of the concerns,, there is a lag in RTB adoption among advertisers and publishers. As of March 2011, just 20 per cent of publishers offered ad placements via RTB as compared with 62 per cent of advertisers who have tried RTB, according to Pubmatic.
Opportunity for RTB in Online Video
While advertisers and publishers have used RTB in display advertising with much success, widespread adoption of RTB in online video is just beginning. As online video ads continue to grow, advertisers and publishers can benefit from the transparency offered by RTB when buying online video ad impressions.
Much like display, RTB for online video offers advertisers unforeseen transparency into the inventory they are buying as well as superior control as they decide what inventory to bid on and at what price. RTB helps advertisers to eliminate wasteful spending as they are able to use publisher site data, along with various third party data sources, to better target their ads, leading to more effective buys. As a result of the more targeted buys, publishers see higher CPMs, which over time will allow them to increase their rate card and make additional revenue.
RTB growth in the SpotXchange video marketplace has been over 100 per cent month over month. In order to continue to grow at this pace and succeed RTB in display, the online video advertising industry will need to address several areas:
- Industry Standardization – Similar to display, there is no industry-wide integration standard for RTB in online video. Several of the leading companies in this space including SpotXchange, Turn and Tube Mogul are working with the IAB to address this matter through the OpenRTB Consortium.
- Better Categorization of Inventory – The industry will also need to develop an industry definition for classifying information about inventory such as above the fold and below the fold placements. Each vendor in this space has their own definition and with consumers viewing content on various devices, the industry need to define these terms, which will help advertisers and publishers better price their bids.
- Maintained Publisher Control – There has been initial hesitation among publishers to make more of their inventory available through RTB, but as they begin to get more familiar with the technology and its benefits, more and more will offer RTB placements.
Just like in display, RTB for online video is here to stay. The figures prove that the industry is embracing this new technology and both advertisers and publishers are benefiting from the technology. As long as the industry continues to strive for standardization, and educates advertisers and publishers, RTB in video will outpace RTB in display within two years.
Mike Shehan, Founder and CEO of SpotXchange, the world’s largest video ad marketplace
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