Going Once, Going Twice

16-04-2014

Real-time bidding allows marketers to buy online ad placements via automatic auctions, finding and targeting key audiences as they go 

The online advertising landscape is changing. The average banner ad garners only a 0.1% click-through rate, according to Cambridge, Mass.-based marketing software provider HubSpot Inc., so online advertisers are looking for more ways to boost engagement. One way to do so is through programmatic buying, the process of executing media buys through digital platforms.

A subset of programmatic buying called real-time bidding is a popular topic in many marketing departments these days because it allows marketers to control their online advertising on a per-impression basis. Here’s how.

What it Is

Real-time bidding (RTB) is a programmed process by which online advertisers can assess and purchase online ad impressions individually. “Real-time bidding allows advertisers to have opportunities to decide, in real time, how much they are willing to pay for an ad to be served at the moment that someone is on a website or mobile app,” says Jarvis Mak, senior vice president of customer success at RocketFuel Inc., a Redwood City, Calif.-based programmatic media buying firm. These individual transactions to buy ad inventory happen in milliseconds and occur through exchange platforms such as Google’s DoubleClick Ad Exchange, Yahoo’s Right Media Exchange and OpenX, or through more specialized exchanges like the Facebook Exchange and Google’s AdMob for mobile inventory, Mak says.

RTB also helps marketers find more potential customers, says Richard Russey, vice president of sales managed solutions at Acuity Ads, a digital marketing and real-time bidding platform provider based in Toronto and New York. “When a person engages with an ad, we know, by those data points, what kind of person that is, both demographically and behaviorally. We can find other people like that with the same kind of data points to optimize the system in real time and find others to convert. It drives better efficiencies because you’re not just blindly shooting out an ad.”

Adds Ratko Vidakovic, senior director of product at SiteScout, a Toronto-based real-time advertising firm: “RTB is a perfect discovery ground for finding websites that perform well. Before, marketers would try to find sports enthusiasts by going to ESPN.com. They would use [websites] as a proxy to find audiences. Now, with RTB, marketers can target audiences no matter where they are on the Web. … For marketers, RTB has introduced a new level of efficiency in terms of pricing, in terms of targeting, in terms of work flow and in terms of performance.”

Sixty-two percent of advertisers cited improved overall performance and 53% cited lower cost per acquisition as benefits of using RTB, according to the “Online Advertising Survey 2013,” published by Econsultancy, a London-based research group that consults on real-time bidding and programmatic buying.

Total spending on ads via RTB reached $402 million in 2013, according to a study by Cambridge, Mass.-based Forrester Research Inc. that was commissioned by Denver-based online video ad platform SpotXChange.

How it’s Used

“If an auto company has a new campaign, they’re launching a new car or truck, [they’ll] set up a system so they can look for people who have gone to auto sites in the last 30 days or 60 days, who have shown an interest in buying trucks or who have searched for trucks, and serve ads to those people,” Russey says. “If I had looked at truck information in the last seven days, my IP address would be more valuable than someone else’s IP address who had looked at cars in the last 60 days because if someone looked at cars 60 days ago, they may have bought the car already. The system will bid based on that value. For seven days, the system will bid higher. Then it determines the data points based on that person—male, 25 to 54, lives in the Northeast, whatever—and based on the data points that made me convert, it will find other consumers like that to serve ads to.”

RTB often is used for retargeting, the process of targeting consumers who’ve previously expressed interest in a company’s brand or products by visiting the company’s website, Vidakovic says. “Some people call retargeting the filet mignon of display advertising. It’s one of the most effective forms of advertising and it’s really only possible because of RTB. You’re not wasting any impressions and you already have behavioral insight about that audience.”

RTB’s Impact

RTB is transforming the way that companies buy ads, says Michael Smith, vice president of revenue platforms and operations at New York-based Hearst Magazines Digital Media, which creates and implements the digital and RTB strategy for Hearst’s magazine brands. “The technology behind real-time bidding is remarkable because, as a user is waiting for a website to load or a screen to render on their iPhone, during that tiny space of time, auction participants are placing their bid on what that user’s attention is worth to them,” he says. “Whether they’re on Cosmopolitan.com or The Wall Street Journal, the context, the time of day, the geography, the location and demographic information of the user … is available to an advertiser to assign value in that very moment.

“You don’t have to plan a month or six months in advance what you’re willing to pay for a user who’s going to show up on The Wall Street Journal in May,” he says. “Machines are programmed with algorithms to continuously adjust the money that’s fed into the system. The people who see the ad and act on it, and the ones who don’t, all of that data is fed back to the computer systems of the advertisers, so bidding is further optimized going forward. That technology is so paradigm-shifting that, in time, [it will] be prevalent in every form of advertising. It’s an efficient way to buy media and an effective way to manage outcomes.”

Monica Savut, research manager at Econsultancy, says that no matter how automated advertising becomes, marketers shouldn’t forget the human element. “Programmatic [buying] is the exciting, new kid on the block, but we’re still in the early days, and examples of companies that are using real-time bidding effectively are few and far between,” she says. “You need to make sure your business goals are in line with what the platform is automating for you. So-called ‘intelligent’ automation and optimization aren’t enough. Human interfaces should complement the use of these platforms to stay competitive and improve your return on media spend.”

 ABHISHEK KUMAR
PGDM 1ST YR