The Limits of RTB

The trouble with this is the entire online ad system won’t go in that direction, by all counts. Real-time bidding — matching each impression immediately to an advertiser based on the best fit for that particular user at that particular time — isn’t great for the kind of long-term planning that underpins most ad campaigns. Former Eyeblaster exec Yoav Arnstein sees an opportunity to push audience buying into pre-planned buys with his new company Legolas Media.

“We felt it was such a great thing there needs to be something else happening to attract more and more dollars to it,” he said.

The idea behind Legolas accepts the ad world is moving to more of a Wall Street-like system. Real-time bidding in such a system is like spot buying. Legolas hopes to carve a niche in future buying, which currently is mostly the preserve of agency buyers and sales teams negotiating rates by phone and placing insertion orders by fax. Legolas is a marketplace to bring together buyers and sellers to execute audience buys. That means the ability to forecast creative capabilities currently unavailable via exchanges and theoretically better ad quality.

Legolas recently closed a $5 million Series B round, drawing backing from Valhalla Partners, Greylock Partners and Blumberg Capital.

It’s the last point where Legolas might be onto something. Many publishers complain that, despite tools from ad exchanges, they can still wind up with poor ads. Brands still for the most part stay far away from the world of exchanges, which mainly deals in direct response ads running on remnant inventory.

Arnstein points out that it would be crazy for a publisher to have an offer from Coke for an audience and a slight higher one from a direct response advertiser, but an exchange would value the latter as the better fit. Sometimes numbers aren’t everything. There’s the long term to consider with a blue-chip brand like Coke.

“The reality today is the direct premium dollars are separate from the audience dollars,” Arnstein said.

Legolas has about 30 publishers on its platform. Arnstein said they’re top tier, although he won’t name them yet. It is working with both agencies and a few trading desks, too. It has transacted campaigns, according to Arnstein, for advertisers in financial services, consumer electronics and auto.

One could see such a system serving a critical role in a future where there are smaller teams on both the buy and sell side. Computers alone won’t be able to transact all digital advertising, but the growing role of technology in making the transactions easier and more effective is inevitable.