RTB Part II: Supply supply supply!
September 19th, 2009
Please check out my last post on RTB first. Since this last post, a pretty big announcements has hit the wire. Namely, Google has announced Ad Exchange 2.0. Most significantly:
One of the platform’s key features is the ability for ad networks and agency buyers to bid on inventory in real-time, letting them zero in on impression attributes such as geographic location or the presence of advertiser cookies before placing a bid. Yahoo’s Right Media ad exchange does not currently offer bidding in real-time, though it is available through some smaller ad marketplaces.
That’s right folks — Google’s real time exchange is coming. In this post we’ll talk about who is jumping on the RTB band-wagon on the supply side, and some implications this is going to have on the industry.
Ok Who’s In
Ok, so Google is doing it? Who else? Over the past few months pretty much any aggregator of supply has launched, announced or started work on some sort of RTB capability. All major exchanges — Yahoo’s Right Media, Microsoft’s AdECN and Google’s AdEx have RTB integrations in the works. Of the pub aggregators, AdMeld & PubMatic are live and Rubicon is actively working on a solution. As mentioned, FAN has been live with Myspace inventory for a while and there are a number of other parties, such as ContextWeb, AdBrite and OpenX, entering the space. The short summary is, over the next 12 months we can expect billions of daily impressions hitting hundreds of millions of unique users to become available RTB.
Death of the Traditional Ad Network
This is going to have huge implications for the display advertising space — primarily, the traditional ad-network model is on it’s last legs. Most traditional ad-networks today thrive because they have large business development teams that have developed deep relationships with supply. Ad.com, Specific Media & ValueClick all have large publisher bases that they rep to agencies. This posed a large difficult hurdle for new networks to overcome and effectively created a catch-22 for any new network entering the space. To get media dollars a network needs reach, but to get publisher deals a network needs media dollars.
This all changes when there are billions of biddable impressions out there. In this new world, any new network has instant access to the reach that historically would take years to build up. Now anybody can walk into an agency and claim to have a reach of over 100 million unique users.
Now of course this isn’t totally new. Right Media opening up Yahoo inventory to the world back in 2007 started this process and a number of companies have managed to start very succesful network (or “exchange desk”) businesses on this platform. AdECN, AdEx, Admeld, PubMatic and Rubicon take this to a new level as this opens up MSN, the DFP publisher base and the majority of the Comscore 1000 list!
Can Technology Finally Win?
I’ve written in the past about the plight of the ad-technology startup. The short summary is this — technology is great, but the lions share of revenue today comes from media not tech.
As access to inventory becomes commodity marketers and brands will inevitably start focusing on results over the ability to simply spend the budget. With everyone on an even playing field it’ll be easy for a marketer to compare the results from one buying network to the next — which means technology will finally matter.
There are already a number of successful technology focused startups who focus on exchange buying — and a couple that are simply building cross-exchange buying tools. Expect this to become the next hot space for startups in the advertising world.
Behavior behavior behavior!
The traditional problem with behavioral buying, whether remarketing or using third party data provided by companies like IXI, Exelate or Blue Kai, has always been reach. We all know that remarketing works wonders and has amazing ROI, but unless you can actually find your users on the web it’s hard to spend a significant amount of money this way.
With billions of impressions that of course changes — the probability of finding a user across the many RTB platforms becomes easier and easier and hence the actual required reach of any given behavioral segment becomes smaller and smaller. This in itself is going to make data-focused businesses more feasible and also open up a world of possibilities of highly targeted and focused media-campaigns and very granular behaviors.
Next Up
Ok, enough RTB for the day. Next up –> demand demand demand! Who are the new players that are taking advantage of this new RTB revolution and innovating both from a business model & technology perspective.
Related Posts:
- Premium vs. Remnant — (Part I — Supply)
- Adotas Premium v. Remnant Series
- Premium vs. Remnant — (Part II — Demand)
- Premium vs. Remnant — (Part III — Remnant)
- RTB Part I: What is it?
September 19th, 2009 at 7:59 pm
Mike, as always, a great post. I especially agree to the ‘death of the ad network’ meme. We keep hitting agencies for their slow evolution and forget that most of the dumb reselling is done by ad networks. Couple of comments:
– There’s going to be a very interesting battle between server-based RTB and browser-based RTB. Obviously, Google and RM much prefer the server based model (more control, more bidders), however buyers who have their own proprietary user information in cookies will be able to utilize that info at decision time in a browser based model.
– As wall st. taught us in the last 20 years, the way to sustainably profit doing algorithmic trading is based on having better data (to price accurately) and trade faster. It will be of particular interest to see the data landscape develop, between open data exchanges (ala bluekai, exelate) and proprietary data based ‘hedge funds’.
– The analogy to wall st., however, breaks in several important ways that people excited about RTB don’t realize many times. First, unlike (most of) the objects sold in wall st., media is perishable. That changes fundamentally the value of demand. Second, what comes inside bought ad placements are ads. So, even if one can segment ad placements up to the 10th digit, if at the end there are only two creatives to choose from, the potential benefit is highly depressed. That’s why the advancement of real time bidding will also bring a corresponding exponential growth in the importance of dynamic ads, which I dare to predict will become mainstream, at least in the DR market in the next couple of years.
One final anecdote, I asked Tim Armstrong this week how he thinks the advancement of exchanges and RTB will impact the ad network business of AOL. His answer was, if exchanges are nasdaq, we at AOL want to be Goldman Sachs…
Keep it coming,
Eran
September 20th, 2009 at 6:35 am
[...] This post was mentioned on Twitter by Vishnu Balchand. Vishnu Balchand said: Mike Nolet looks at the supply side of Real Time Bidding – http://bit.ly/cm5Ck [...]
September 20th, 2009 at 12:41 pm
Eran,
Great comment.
- Not sure I agree about a battle between server based & browser-based. Yes, there’s a huge hurdle to doing server based RTB integrations today (server-side cookies), but I don’t think that’s going to last for long. Also, there are a variety of mechanisms to sync cookie IDs that address the proprietary user information piece. (worthy a blog post I guess!).
- I’m anxiously awaiting the day where better data and faster trading make a difference! Agree RTB is the beginning of this world actually happening.
I think there are going to be a lot of companies vying to be the Goldman & Sachs of online advertising. I think AOL is terrifically positioned with the technology and people from Ad.com to be in this position. Of course they could also turn into Lehman Brothers =).
-Mike
September 21st, 2009 at 3:03 am
Hi Mike,
I just wanted to say thanks for hosting such an insightful blog that goes so deep into the technical workings of the advertising ecosystem. It’s rare that you see anyone giving as much effort as you do to help others understand.
As for RTB, it sounds like a very promising technology that we all look forward to.
- Peter
September 21st, 2009 at 5:27 am
[...] On the Mike On Ads blog, AppNexus CTO Mike Nolet discusses the evolution of the supply side of the media business as it trends toward the efficiencies created by technology. Nolet writes, "With everyone on an even playing field it’ll be easy for a marketer to compare the results from one buying network to the next — which means technology will finally matter." Read more. [...]
September 21st, 2009 at 11:10 am
Waiting for the post on cookie ID syncing!
September 22nd, 2009 at 10:39 am
Eran,
One other difference between ads and Wall Street: each impression is worth a different amount to different advertisers. An impressions from a teenage girl is worth more to a fashion brand than an enterprise software company.
Equity traders might disagree on the proper valuation for a stock but they are all anticipating the same payout: future cashflows. There might be differing opinions on how to discount the future cash flows, just as there can be differing opinions on the value of the teen girl impression to the fashion company, but the true value of a stock doesn’t depend on the buyer’s identity. Different from stocks, the value of each impression does vary from brand to brand.
Mike — looking forward to the cookie ID syncing post
September 27th, 2009 at 2:31 pm
loving as always.