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Real-Time Bidding

Here’s the scene: You click onto a website. In an incredible, instantaneous flash your browser alerts an ad server that you are an active potential advertisement viewer. An ad exchange is immediately alerted and multiple bid requests are submitted by buyers willing to pay the price to present their ad to you. The exchange selects the highest bid and in 100 milliseconds a targeted ad is presented for your viewing pleasure… or annoyance.

Many believe this new system for online advertisement purchasing will revolutionize the entire digital media ecosystem. And they’re not far from wrong in thinking that it will change the tactics of certain advertisers.  Through the power of tracking cookies (and sometimes even when tracking data is turned off,) advertisers have the ability to connect your demographic info and search history to an “ideal” advertisement – all without any perceived loading delay. The powerful system is a far cry from a Mad Men era of traditional advertising, one in which large-scale ad campaigns ruled and brand power was deeply connected with their level of media exposure.

With Real-Time Bidding (RTB) each impression is more valuable than ever before. In improving the traditional process behind purchasing display advertising, buyers get greater access to inventory across hundreds of networks. Instead of negotiating with publishers to purchase ad space that would guarantee visibility of a specific number of impressions, the system is flipped around, allowing advertisers to yield greater control over the impressions they chose to purchase. And the technology isn’t limited to simple display banners. Even video ad space is up for grabs through real-time bidding.

The power of real-time bidding is even more staggering when looking at the increasing popularity of mobile device usage. The data leveraged through mobile ad networks, including demographic info, behavioral factors, location data, and device features, all ideally result in higher click-through and conversion rates at significantly lower costs. RTB assists on both sides of the advertising process. In addition to being able to target ads like never before, marketers can also get a much deeper understanding of how their campaigns perform. These rich insights go beyond the simple metrics of time of day when users engaged to include details about the apps and content that perform most strongly and how device/carrier correlate to engagement. 

In the past several years, we’ve seen the doors open of many new companies that are running this real-time bidding technology.  These companies include:

  • Demand Side Platforms: the trading desks which provide a single interface to manage multiple ad and data exchanges
  • Supply Side Platforms: the tech platforms which enable publishers to manage their ad impression inventory and maximize revenue
  • The online real-time ad exchanges

This major shake-up to the advertising game is a potential goldmine for marketers and technologists, and already has changed the way traditional ad agencies have done business. More than ever before, power has been placed in the hands of the marketers with several large companies, including Proctor & Gamble and Kellogg, turning directly to ad tech companies to manage their digital advertising rather than broker through an ad agency. Detractors of RTB argue that programmatic buying/selling should only be one element of a larger strategy. For one commentator, RTB is simply an overhyped technology that will not truly disrupt the industry. Instead, he sees its value in small arenas, like monetizing secondary websites where extra inventory may not be easily sold otherwise.

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