Don’t Blame RTB

Ari is a smart guy and I honestly agree with some of what he writes, but I think he fails to mention that in real-time bidding there is a big upside for publishers that are now getting budget from direct-response marketers in the form of remarketing campaigns. These funds generally come from the search side of the marketer’s house, in large part from e-commerce brands who did not previously advertise via display. And if they did, they never would have paid the rates that premium pubs charge. It just wouldn’t have happened. RTB is opening up new budgets for smart publishers.

RTB allows it possible for marketers to buy a small set of impressions from each publisher to cobble together into a campaign at scale. From the publishers’ standpoint these run in very small concentrations that would not be sellable without the help of an automated system. Across many campaigns, these small fragments aggregate to a decent volume of high CPM ad space being sold. The important thing to remember here is that those dollars are purely incremental because they pull mostly from search media budgets.

This isn’t just about audience, either. Content still matters, of course. Across ad exchanges, an advertiser may have hundreds of opportunities to show their ads to specific segments of well-qualified consumers. However, if a buyer were to purchase all available impressions per user/segment, the cost of generating a conversion would far exceed the rate of profitability. There is far more efficiency to be gained from using a more selective approach. The better you can identify quality ad spaces for your audience, the more bang for your buck on those impressions, and the less you’ll spend on impressions that don’t work. A lot of times these better performing impressions are in premium brand contexts, underscoring the value of the publisher’s brand. The marketer is willing to pay whatever price for this ad space that supports its return on ad spend target. If the inventory performs well, this can be a very high number.

This all leads back to pricing. There’s a feeling among some on the publishing side that RTB means a race for the bottom. The idea of a price eroding dynamic may be true in some cases today, but I don’t think it will be for long. My prediction is that brand marketers will begin to set higher standards for campaign performance. Borrowing from the world of direct response, with clear data driven goals, programmatic systems will identify and pay more for higher performing impressions. As brand campaigns become more measurable and effective, more total dollars will shift into the display channel. The bottom line: new dollars are being won by publishers because of RTB.

Ezra Doty is president of Think Realtime, an automated ad-buying platform. Follow him on Twitter at @thinkrealtime.