Given the accountability and rigour of digital marketing, it might seem odd that most display advertising relies on charm, influence and negotiation for bulk discount, as opposed to technology and algorithms for precision.
But over the past year, real-time bidding – buying through an ad exchange, using a technological interface called a demand side platform – has been heralded as the future of display, eliminating the wastage of bulk buying. What hyper-efficient algorithms have done for search, they now promise to do for display.
Ciaran O’Kane, industry analyst and editor of online ad trading website ExchangeWire, has predicted that real-time bidding will improve the transparency of display buys. “The idea of being able to price inventory in real time and buy at the single impression level is quite exciting, and will change the way the medium is bought and sold,” he said earlier this year.
Buying through technology, rather than people – using data, metrics and analysis – offers hope of unprecedented accountability and efficiency. But what exactly is real-time bidding? How does it relate to ad networks and media agencies? And why should marketers be interested?
An ad exchange is like an online auction, where single display impressions are bought and sold in real time. By setting data points based on a target audience using a demand side platform, advertisers can plug into several ad exchanges at once, bidding for the single impression that best fits their criteria. They can bid across a huge number of sites and for a range of campaigns within seconds. The process is similar on the sell side, with publishers using a supply side platform interface that plugs into multiple exchanges, letting them set price floors and controls on their inventory.
Marketers such as American Express head of digital acquisition Matthew Turner (now head of online marketing and sales at BSkyB) have been exploring buying display inventory through ad exchanges for about 18 months now. What’s important for AmEx, he says, is that impressions reach an audience that is not just likely to convert, but that has the right level of income and a good enough credit rating to make it through the application process. The correct use of data is critical.
“We’re now looking at digital display as an ’always on’ channel, rather than as [intermittent] campaign activity,” explains Turner. “We have historically run digital display on a campaign basis, but we’re now at a point where we’ve got such a level of high-quality inventory through exchanges that we’re able to think about display as a way of always building awareness or running direct response, similar to the way in which we treat search.”
Though, according to Turner, just 20% of the display budget is put through real-time bidding, the efficiencies AmEx is making are enough for the brand to keep developing it as a viable way of trading.
“Given that both display and real-time bidding are running the same process, it comes down to efficiency and cost-effectiveness. [Trading desk] Infectious Media gets the same budget as our media agency but is able to realise the efficiencies of its buying platform. It tends to be that its activities are over-performing,” Turner says.
Daniel Stephenson, head of digital and marketing at COI (Central Office of Information), runs more than 300 campaigns a year to reach niche audiences such as ethnic minorities, or to drive response around issues such as the prevention of knife crime.
“Though we’ve just had our budgets cut, which will impact on any experimentation in this area, exchanges are very appealing to our kind of activity, bringing in keyword targeting. Though, to be honest, we’re still not seeing the volume of inventory that we get with networks,” says Stephenson.
Ad networks, as inventory aggregators, have historically taken the drudgery out of buying across multiple sites, large and small, and can still offer scale and volume across the niche sites that Stephenson would look for. It’s likely that, having already established relationships like this, marketers will be doubly confused when presented with the proposition around real-time bidding.
According to director of the Association of Online Publishers Lee Baker, much of the confusion around real-time bidding stems from the interchangeable terminology and various layers of technology. “It’s very hard to get any clarity when definitions are changing all the time. It’s extremely confusing thinking about who’s trading with whom,” he explains.
There are currently five ad exchanges in the UK, operated by big digital players including Google, Microsoft, Yahoo! and Orange, with some leaning towards a particular vertical or type of inventory. The key differences are, however, technological – whether or not they are enabled with real-time bidding – and how this infrastructure impacts on communication with the supply and demand side platforms.
Confusingly, players that operate ad exchanges also have their own display networks, with advertisers able to buy display inventory in both traditional and automated ways.
Media buying and planning agencies – dealing directly with publishers or with ad networks – have traditionally been the main choice for marketers wanting display inventory. But now automated trading desks, such as Infectious Media and Efficient Frontier, with data and analytics skills sets, demand side platform buying capabilities, layers of brand safe verification technology, and campaign management and optimisation tools – are offering their services to marketers.
Media planning and buying agencies, meanwhile, have flocked to develop their own real-time bidding capabilities, decking themselves out with licensed or bespoke demand side platform technology. Group M introduced its trading proposition B3 in October last year, and Vivaki has its Audience On Demand; but these are just a handful of offerings within the space.
Former head of digital acquisition
American Express has been exploring real-time bidding to buy display inventory for the past 18 months through trading desk Infectious Media, which Turner’s predecessor met at a trade fair.
“There was a conversation about what ad exchanges were and would evolve into, and we got started with a series of trials to test out the proposition, and deliver on some pretty aggressive promises,” says Turner.
AmEx has relied on traditional means of buying display inventory, working with agencies, ad networks and directly with publishers and the various sales teams, negotiating on volume discounts, but expects to apportion a greater part of its display buying budget to real-time bidding over the course of the next year.
“It’s an 80/20 split at the moment. It’s starting to get into the general consciousness. What that means is we are starting to see higher quality inventory provided by ad exchanges, and we’d expect that it will continue to improve in the coming years. Quality of inventory and efficiencies are good enough for us to continue moving ahead in this space,” says Turner.
Head of digital and marketing, Central Office of Information
The COI runs more than 300 digital display campaigns every year, bringing in data specialists such as Experian to build a strong understanding of the niche audiences it needs to reach and create bespoke data sets.
Direct response campaigns encouraging youths to download information packs on how to avoid knifecrime, or awareness campaigns aimed at black and ethnic minority groups show just how targeted display ads need to be.
The COI was introduced to real-time bidding through its rostered media agency Group M, which has its own demand side platform technology.
“Real-time bidding is an area that we’re exploring, and we have dipped our toes in the water. Historically we’ve spent a lot in display as a portion of our budget (65%) so it’s an important area for us,” says Stephenson.
E-marketing manager Trader Media Group
Trader Media Group works with trading desk Infectious Media for campaigns that have less targeted segmentation needs but are only concerned with driving down cost per click and cost per acquisition. For its last campaign, 40% of display spend overall went on exchanges.
“Traditionally, we have bought display media on a cost per impression basis through an agency. Efficiencies attracted us to ad exchanges as well as the reduced wastage and ability to rule out duplication, as well as being able to understand and attribute conversions with more certainty than with a cost per impression buy.
“We haven’t had any pitfalls so far, although it can be a struggle to get good click-throughs even with optimisation – but to be fair this is a wider problem for display advertising. In the early days being able to achieve volume of impressions desired was a slight issue,” says MacDonald.
Federica Aperio, managing partner at digital auditor Billetts, urges advertisers to look at the investment – and commitment – that media agencies are putting into building their own display trading desks and demand side platforms. A survey by display advertising trade organisation IASH last year indicated that the lack of time and resources in building the skillset needed for automated display trading was one of the greatest obstacles to its wider adoption.
“These aren’t simple tools and they need substantial development capital and servicing resources,” Aperio warned last year. “If the big agency groups aren’t investing big bucks to support them then advertisers should be wary. Clients also need to be sure they’ll know which sites their brands will appear on and be confident the agency will still be able to offer a holistic view of campaign performance, including all buying points like search, affiliate, premium inventory and demand side platform inventory. Otherwise advertisers are merely swapping one set of transparency issues for another.”
Introductions to real-time bidding have come both from brands’ own media agencies and through trading desks’ efforts to promote themselves as media buyers, but the channel is still too nascent to have definitive advice on the best route for marketers. Those experimenting with real-time bidding have said a lot depends on existing relationships and agency infrastructure.
“In the long term, real-time bidding provides an opportunity for marketers to go more directly to publishers,” says Baker. “Those agencies that aren’t providing value, optimisation tools, targeting or analysis will start to consolidate, and networks with big volumes of blind inventory will start to disappear. As a result, the structure of agencies and networks is changing.”
The ultimate goal will be to bring not just display, but all digital marketing channels together under one dashboard, with data from search informing display buys, in turn informing social media and mobile spend. And as every marketer’s goal is to make the biggest impact with the most efficient budget, such cross-channel accountability would create the optimum digital marketing infrastructure.
“At the moment, it’s all a bit of utopian vision, but we’ve seen microcosms of success [in real-time bidding],” says Baker. “The big question will be how much will demand side platforms account for? There has been caution from all parties – but, given the growing appetite for experimentation that AOP is witness to, we’ll certainly see percentages swiftly grow.”
Julia Smith Head, IASH
Brands are still unfamiliar with automated display trading, having up until now left it to their media agencies. But with real-time bidding expected to grow over the next year, it’s time marketers equipped themselves with the knowledge to make better-informed decisions.
Marketers need to know about this because the landscape [of display advertising buying] is changing so rapidly. Real-time bidding is based on dynamic media buying optimisation that combines audience data and campaign performance history to assign value to inventory for various publisher sites.
It’s a much more efficient and effective way of buying inventory. You really understand your users and their buying habits. Because you have this knowledge and less wastage, CPM (cost per thousand impressions) can be higher – if you have the right user at the right time, it could double a CPM, but you’re going to get a much higher return.
The lack of confidence in using such technology, as well as the challenge of ensuring that brands appear in safe environments, are among the key concerns of advertisers when it comes to real-time bidding. IASH successfully introduced brand safety standards for those trading display advertising through traditional means a number of years ago. Now advertisers want the same assurance through automated means.
IASH’s existing brand misplacement prevention principally hinges on best practice, with ad houses accredited and endorsed by IASH following stringent six-monthly procedure-based audits. We are now extending this to technology-based buying, including content verification technology, which picks up tagging errors and other oversights that procedure-based best practice audits can’t prevent.
Jay Stevens, vice-president and general manager, international, Rubicon Project
In the early days of the web, editorial sites were used as a proxy for audience, the same as offline. Then, in 2001, search began to take off as people expressed interest in a subject and advertisers could use that explicit affinity to find their most valuable prospects. What we’re seeing now is data becoming the key driver to identify target audiences, not just for search, but for display. It means brands can deliver their message to much more precisely targeted audiences.
This ability to finely target based on data is leading to a significant channel shift. Six months ago, the percentage of publishers’ remnant revenue coming from real-time bidded ads was in single digits; now it is upward of 25%. In the next two to four quarters, we’ll see the rise of specialist data providers in this market, and that will drive more budget into real-time bidding. We could easily see it account for 30% of all performance-related spend in 2011.
In terms of value, campaigns from demand side platforms (DSPs) sit between ad networks and a guaranteed site-specific buy. They provide more transparency to the advertiser than a blind ad network does, but the advertiser pays higher rates, often two or three times higher than ad network prices. Real-time bidding is creating a new class of advertising inventory in the middle, highly targeted and semi-transparent.
What marketers should be aware of is that not all DSPs are created equal. They have varying capabilities, and are not all plugged into every source of inventory, although that is changing rapidly. So it is up to marketers and their agencies to work out the positives and negatives of moving budget into real-time bidded campaigns from existing performance initiatives, guaranteed display, or search.
Early concerns of inventory availability on DSPs may already be out of date – there’s enough inventory available to make real-time bidding viable for marketers, and publishers are also drawn by higher yields to expose more of their inventory to RTB.
There is less liquidity in the UK than there is in the US, but that is changing quickly as DSPs finish their integration with supply side platforms (SSPs), and SSPs work with publishers to educate them on the risks and rewards of these new demand sources. The £800m online display category is changing rapidly, as is the way this inventory is traded.