The 5 Reasons RTB is less important than you think
All the hype in the display advertising industry has been around real time bidding for the last several years, and rightly so. Finding audiences with precision (cheaply) is marketing nirvana and, with all of the startup companies willing to work their tails off to make their “platforms” work for advertisers, the promise of media, layered with great technology, and tons of free service was hard to resist. Conference after conference, our industry leadership (well, actually I think it’s just the 30-odd people that speak at every conference) prognosticates on the latest data-driven success story, and ponders the meaning of the famed Kawaja logo vomit map, hoping that their flavor of audience technology gets acquired. But, like the old George Clinton lyric goes, the fish don’t know they are wet. After drinking the RTB Kool-Aid for so long, the real time practitioners may not realize that this fundamental driver of the display advertising ecosystem may not be as important as we all think. Here are five reasons to hedge your bets with RTB:
Quality Matters: Sorry, exchanges, but inventory quality still matters—a lot. The notion that you can splash a little bit of data on top of $0.25 CPM banner inventory and turn it into $5.00 gold was never really real in the first place. The great thing about RTB isn’t the enormous amounts of data you can apply to a media buy—it’s the enormous scale and price advantage that exchange buying brings. In a CPA-driven world, the most important metric is the cost of media. Today’s bidders give advertisers the ability to scour 800+ exchange inventory sources and buy cheaply and deeply into remnant inventory like never before. But, when you look at the reporting coming back, the clicks and conversions tend to happen where quality content appears. I’ve seen it time and time again: An RTB advertiser lucks into a bit of Tier I or Tier II inventory and finds performance. Unless publishers start changing their habits and stop putting banner code on every single web page they publish, there will continue to be a dearth of quality placements available in real time, and average real-time CTRs will not eclipse their .03% average.
Cookies Don’t Scale: This is the dirty little secret of the display media industry, and something that Datran’s Aperture team is out actively pushing. Anyone who has used a DSP can tell you that even a little bit of segmentation data applied to a media buy drops impression availability by a large factor. Cookie-based targeting is enormously complicated, and getting all the gears to turn in the same direction is not easy. How many people are in the market for a BMW are there in any given 30 day period, anyway? Well, according to AppNexus, I can find about 81,689 unique users that fit that description, and access up to 1.3M impressions if I win every single bid I place. Let’s go crazy and say that I am prepared to pay $30 CPM for every single one of them (I can probably win them at $8, though). That means, this month there is the potential of $40,000 of inventory to be sold for “BMW intenders.” Add in “Connecticut” and “Men” as additional segments, and you might as well call each potential buyer on the phone, or rent a plane and drop pamphlets on their house. But wait—you could probably mail them something really nice and reach them that way. Now that sounds like a business!
Legislative Tsunami: Many fish don’t understand what “Do Not Track” and other legislation is going to do to real-time bidding. Even if you take the most conservative reckoning, you would have to admit that some sort of consumer protections need to be built into our industry. I can’t tell you how many people are fascinated—and sort of bummed out—when I introduce them to www.bluekai.com/registry Personally, I have no problem being targeted (except for the relentless onslaught of industry-specific ads I seem to be targeted with). No matter how our industry tries to spin it, the fact that I just looked at flights for North Carolina, and am being targeted by travel ads two seconds later as an “in market travel intender” makes almost everyone uncomfortable, and it’s not a winning long term strategy. We need to turn over choice to consumers, rather than convince them that we are “protecting” their data. Watch out for companies that don’t run without the fuel of 3rd party data. Conversely, bet big on companies that collect tons of 1st party (volunteered) data like Facebook…at least until the government has a problem with that too.
Premium on the Rise: Call me a Project Devil fan. With people visiting an average of 3 sites a day (one of them being Facebook), it’s kind of hard to argue with the fact that advertising needs to be engaging on the page. Whether it’s video, over-sized RM banners, in-app ads, or sponsored apps, advertisers are looking to engage users directly, rather than drive them to a site. These opportunities are the opposite of commodity-based exchange buying. You can’t standardize them…and you can’t buy these engaging units cheaply. Advertisers are starting to rebel against the low quality of exchange-based media, and publishers are really starting to rebel against the returns they are seeing on exchanges. They want technology that helps them understand and sell their own audiences, rather than technology that disintermediates them and sells their valuable audiences for them. Maybe we finally jumped the shark with the Admeld acquisition. Wouldn’t it be nice if technology helped advertisers find the right audiences where they wanted to be found, and publishers sell their audiences for more than $0.50? Was there ever an industry that sustained itself by crushing their main suppliers down on price?
Big Guys Have More Data than You: I don’t care how many cookies you have out there on the Web. Is it 150 million? 200 million? It doesn’t really matter. How many Facebook subscribers are there? How many Google Gmail users? We have given the biggest publishers absolutely every single piece of information about ourselves (including, for some Congressmen, too much information), and shared it with our friends, and shared our friends’ data with everyone too. Where cookie-based targeting doesn’t scale, first party data targeting on sites like Facebook scales plenty. You would think the ability to reach users with such specificity would be expensive, but no. Facebook ads are the best deal in town. I have never paid more than $0.50 CPM for my audience, no matter how many “segments” I want to apply. I can’t remember winning many display media bids in for that price. If you consider that Google is just starting to get into display—and Facebook is just starting to look at display, doesn’t that make you want to change your data strategy a little bit? If your business depends on the sheer amount of your data, you may need to get a longer ruler and think about just how much scale you really have.
There are a lot of ad technology fish swimming in the RTB sea right now, and every single one of them is wet. My advice to them is to break the surface of the water for a second, and see what else is around. RTB will be a part of advertising for a long time, but it will not displace premium, guaranteed advertising. It will also look nothing like today’s RTB in a few years. The advent of private marketplaces, higher value audiences exposed in real time environments, and the emergence of smarter branding metrics (via Vizu and others) is going to turn the conversation back to premium quickly. Jump in…the water is going to be fine.
Editor's Note: This post originally appeared on Chris O'Hara's blog.