(Excerpted from the Rubicon Project 2009 Online Advertising Market Report: Q3 Emerging Trends & Outlook)

One trend that started making significant waves in the third quarter was real-time bidding (RTB), with proponents arguing it would help to make audience-based buys more of a reality for media agencies. “The agencies see RTB as an opportunity to compete with ad networks and keep margins – because over the last five years, ad networks have provided more media buying technology and service than agencies have,” said Raleigh Harbour, the Rubicon Project’s VP Business Development.

French holding company, Havas, for example, is partnering with DataXu to manage its participation in Google’s revamped DoubleClick Ad Exchange. DataXu gives Havas’ media buyers the ability to automatically set specific pricing and performance goals for impressions that show up on the exchanges in real-time. “By breaking the ad process down on an impression-by-impression basis, the exchange provides an opportunity for better targeting at lower costs,” wrote Adweek’s Brian Morrissey. “The end goal is to move display advertising toward the efficiency of search ad systems.”

The agencies’ forays into RTB also serve as a way for them to tap into the large amounts of impressions that ad networks offer, without having to go through those ad networks. The platforms they’re integrating from third-parties like DataXu, Turn and MediaMath, will give them access to inventory from thousands of publishers’ sites, while diminishing the amount of revenue they need to share with the ad networks. And who better than a media agency to know which audiences are best for reaching their clients’ goals?

“The RTB ecosystem has been characterized by a lot of technology investment in buy-side optimization tools that attempt to buy high-quality inventory for the lowest possible price,” notes Tom Shields, CEO of Yieldex, which provides publishers with yield optimization and analytics tools for premium inventory. “Publishers would be wise to be wary of exchanges until they can deploy equivalent tools that maximize their revenues, rather than minimize their inventory value.”

It’s still early in the game for these agency-backed RTB platforms, but the past two years have shown that once inventory gets pumped into an exchange or demand-side platform that’s designed for advertisers, and not designed to boost a publisher’s yield, it’s likely to have a negative impact on a site’s brand value – the value of its audience falls by the wayside in a bidded race to the bottom.

“As with any new technology or capability like RTB, I think it is extremely important to invest the time up front to best understand the potential impact(s) to your business and create a well thought out short- and longer-term strategy about how to best leverage for increased revenue with proper pricing controls and insight,” said Jason Kelly, Vice President of Strategy & Revenue Management, Digital at Time Inc. “There are a lot of lessons learned about how we as a publisher community managed the rapid proliferation of ad networks early on, without a significant amount of investment up front to clearly identify the longer term impacts on our overall channel management strategy. We are now working our way forward as an industry through investment in strategy, people and technology like the Rubicon Project and others to more actively manage these channels – and RTB falls into that category.”

“Many of these platforms ultimately value all inventory equally, from the New York Times or Sports Illustrated, to a niche WordPress sports blog,” noted JT Batson, EVP Revenue & Global Development at the Rubicon Project. “And for certain ads, that is OK. But publishers correctly argue that a reader that sees an ad against the trusted brand of a well-known site is more valuable than a reader seeing the ad on a site they don’t fully trust.”

At the Rubicon Project, our priority is to help publishers gain access to the most possible sources of demand, and offer industry-leading technology to automate that access – but only with careful consideration of the impact on pricing control for publishers.

“Many of the current ad-servers and demand platforms that exist are just a vehicle to get a job done – buy low and sell high,” said Craig Roah, COO & Founder of the Rubicon Project. “But by layering audience data on top of the impressions funneled in from more than 600 sources of sales channel demand, our technology has become a vehicle that doesn’t just deliver ads, but serves as platform through which a media company can run an entire sales organization.”

Download the full Q309 report, as well as past reports, here.

Tags: advertisers, market report, monetize ad space, premium publisher, real-time bidding

This entry was posted on Wednesday, November 18th, 2009 at 1:30 am and is filed under Industry Commentary, Interviews, company news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.