Bow Down to Exchanges and RTB as Display’s Rulers?

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bid_smallADOTAS – “Efficiency kills brands,” Evolve co-founder and Gorilla Nation President Brian Fitzgerald said to me a few weeks ago.

I nearly spat out my coffee when the words jumped from his lips — this was blasphemy considering my inbox’s constant barrage of news about real-time bidding and ad exchanges and revenue optimizers and the future of display being an instant, automated system.

Evolve — which is the exclusive seller for numerous affinity sites across the web. the owner of CraveOnline.com and others, and a purveyor of creative and video services — considers itself firmly on the publisher side. While Fitzgerald definitely sees a place for ad exchanges and RTB in the realm, the notion of the two ruling the display space seems a fantasy. Contextual advertising in which publishers and agencies working together to maximize campaigns will always be present, if not dominant.

“At the end of the day, buying a cookie on real-time bidding across eight media-buying platforms for the lowest possible CPM and really out of context… is not as effective as buying in context, on content sites with the right frequency around the creative,” he added.

However, a new report from DeSliva + Phillps Media Investment Bank challenges those notions and predicts a coming display ad marketplace that is primarily technology driven. Those that not only have the best tech but know how to use it effectively will prosper.

According to “Getting Real: Ad Exchanges, RTB and the Future of Online Advertising,” “A significant amount of ad trading will be automated, algorithmic trading, scanning across multiple exchanges and networks in search of optimal impression opportunities to meet campaigns goals and requirements.”

At this point in the game, many exchanges ain’t quite operating in real time. In practice there’s a 10 second delay, meaning that the buyer isn’t getting the total audience he or she paid for, possibly not any of it if that audience has moved on — attention spans in the Internet age are infamously microscopic.

But true RTB, where auctions are purchased and audiences accessed instantly while impressions can be bought one at a time instead of in bundles with varying values, is quickly being implemented.

This allows for cherry-picking impressions or establishing custom block bids and greatly increases buyer power as well as the ability to reach audiences they actually want. The early results, according to D+P, have been eye-opening, perhaps eye-popping.

At the same time, the “barbell effect” is becoming increasingly apparent, with players increasing polarizing to either the publisher or advertiser sides. We’ve got sellers vs. buyers, but hardly anyone in the middle.

Publishers more likely to keep their inventory under wraps for fear of being raped by data companies and DSPs. Blame ad networks — premium pubs (among others) are convinced that allowing ad networks to sell remnant premium inventory resulted in the great devaluing of CPMs for remnant and non-remnant inventory. (But wait, wait, wait — wasn’t offline advertising revenue also dropping like an anvil?)

As premium inventory CPMs crawl back up, pubs are understandably wary about placing their prized slots on those exchange thingies, which look a lot like networks. However, And as new inventory enters the market — including mobile and digital signage pubs may have to play with exchanges… but on pubs’ terms.

“Premium publishers will be more likely to offer their premium inventory on exchange platforms that make ironclad guarantees to protect their brand reputation and proprietary audience data,” according to D+P.

Supply-side platforms can provide guarantees for publishers’ hottest inventory; exchanges, DSPs, data companies and anyone else on the buyer side of town will have to do the same.

Where Oh Where Does Google Go?

Recently Eyeblaster released a report suggesting many conversions attributed to search were stimulated by display. Still, Eyeblaster’s report found that 72% of conversions came from the display channel.

D+P remark that RTB is the glue between display and search marketing, with advertisers guiding a user through search before awing them with a display ad. Through the implementation of RTB in the relaunched DoubleClick Ad Exchange, Google appears to set to make this promise a reality.

If the display ecosystem is polarizing between supply and demand sides and exchanges such as RightMedia — after dumping its non-premium exchange — are leaning toward buyers, ss there such thing as a neutral exchange? Possibly Google, D+P suggests, which likely dominate the non-premium inventory space. But in the long-term, D+P think its likely to move to the demand side.

However, agencies are suitably nervous about Google’s ambitions and question whether they should approach the giant as a collaborator or a competitor. Agency holding companies are building their own DSPs in the concern that, with the acquisition of a DSP, Google could try to bring its services directly to advertisers.

Google is integrating the dynamic display technologies of Teracent, which it acquired in January, into the DoubleClick Ad Exchange while the scope inherent in its AdMob purchase is so awing that the Federal Trade Commission is holding up the merger.

Google has been running a series of articles on its blog about the future of display, announcing that it is “working to provide an integrated solution that enables advertisers and agencies to plan, buy, create, serve and measure display ads across the web, in a single interface.”

Perhaps agencies should be biting their nails.

The Human Quotient

A supply-side platform executive mentioned to me that he couldn’t believe how large publisher sales teams were. As RTB and ad exchanges become more widely used, pubs would realize they could scrap most of their salespeople.

With the proliferation of RTB and the increased use of exchanges, D+P seem to think that algorithms and automation will rule the display space shortly, in some kind of system that makes me think of “The Matrix” or “Terminator.”

But I also keep pondering Fitzgerald’s comments. Advertising is an industry that revolves around connecting with people — something you can’t replace with algorithms. Sure, remnant inventory is on the path to complete automation, but the premium goods? I’m not buying it… yet.

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