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Real Time Bidding and Private Ad Exchanges What  works  (what  doesn’t) and  what’s  needed

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Table of Contents

Executive Summary 3

Wide-Scale Awareness 4

Private Exchanges Will Grow 5

Buy-Side Concerns 6

Sell-Side Concerns 8

What Publishers Want 9

NEEDED: More Understanding, Control 11

Conclusions 13

Methodology 14

About 15

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Executive Summary

1. Wide-Scale Acceptance More than half of buy-side (e.g. agency, marketer, consultant) and sell-side (e.g. digital publisher who sells advertising) respondents already actively participate in real time bidding (RTB); almost all expect the market for RTB and private ad exchanges to grow significantly over the next 12 months.

2. Private Exchanges Will Grow

Advertisers and their buy-side agents expect - and want - to spend more ad dollars through private ad exchanges. One key reason for this is that they perceive private exchanges to offer more RTB control and value than broader ad networks and exchanges.

3. Buy-Side Concerns

Media buyers want to see greater emphasis on inventory quality, more guarantees for brand safety, and greater transparency in reporting. Two-thirds of agency/marketers said such improvements would prompt them to spend more through RTB.

4. Sell-Side Concerns

Four in five publishers are concerned that RTB will devalue or commoditize their inventory, while approximately three-quarters fear sales channel conflicts and eroding relationships with media buyers. More than half of publishers  fear  RTB  will  eliminate  the  “human  element.”

5. ‘Human  Element’  Important One in four publishers who are concerned with  RTB  eliminating  the  “human  element”  in  ad selling feel that face- to-face negotiations and dedicated account management are extremely important in their likelihood to use RTB in the future.

6. What Publishers Want

Sixty percent of publishers want RTB solutions that offer:

Advanced control options Exclusively premium demand Dedicated RTB budgets Real-time reporting and insights Dedicated account management An enterprise-level exchange

platform to build their own RTB enabled private exchange

7. More Education Needed

A keener understanding of market mechanics and more control over the processes will encourage greater participation by those on the supply and demand side of the equation. Despite the growing activity in the automated online advertising markets and despite relatively high professed technology literacy rates, it is clear that the details of market operations and opportunities elude many participants on both sides of the buy-sell equation.

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Wide-Scale Awareness

More than half of buy-side (e.g. agency, marketer, consultant) and sell-side (e.g. digital publisher who sells advertising) respondents already actively participate in real time bidding (RTB); almost all expect the market for RTB and private ad exchanges to grow significantly over the next 12 months.

Overall awareness of RTB in the marketplace is high at 92 percent and eight in ten have at least a basic understanding of the technology and its use in digital advertising. This awareness is higher among publishers, 94 percent of whom say they are aware

of the technology and 74 percent of whom have at least a basic understanding of how it works.

Specifically, 84 percent of publishers are familiar with

demand side platforms and private ad exchanges; 80 percent, with agency trading desks; 76 percent, with open ad exchanges; 74 percent, with supply-side platforms; and 64 percent, with data management platforms. Recognition was slightly less on the buy side, with 90 percent of agency/ marketers saying they’re  aware  and 81 percent with at least a basic understanding.

Despite the growing activity in the automated online advertising markets and despite relatively high professed technology literacy rates, it is clear that the details of market operations and opportunities elude many participants on both sides of the buy-sell  equation.  “I  have  many  colleagues  in  the  industry  who  are  woefully  ignorant  of  what  RTB  is,  and  what  it’s  doing  in  the  market,”  said one executive.

A willingness to educate RTB participants on automating so-called mid- and long-tail inventory can serve as a differentiator for middlemen and help preserve the value of premium properties.

Sell-Side (Publishers)

Buy-Side (Agency/Marketers)

Awareness of RTB Technology 94% 90%

Have a Basic Understanding 74% 81%

Awareness of RTB and private ad exchanges is

high, but so is confusion. This

provides an opportunity for those willing to help media

buyers and sellers leverage the market.

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Private Exchanges Will Grow

What percentage of your online/digital advertising

budget/inventory is/will be bought/sold through RTB?

There are real growth opportunities for both RTB and private exchanges, as demand grows on the advertiser side. Advertisers and their buy-side agents expect – and want – to spend more ad dollars through private ad exchanges. One key reason for this is that they perceive private exchanges to offer more RTB control and value than broader ad networks and exchanges. “I  see  real time bidding as inevitable, and as part of the ecosystem,”  said  one  sell-side respondent. “You  need  to  get  smart  and  play  in  it,  and  there’s  still  room  for  differentiated  direct  sales.” RTB budgets for both publishers and agency/ marketers are expected to rise over the next 12 months; publishers  said  they’ll  sell 19 percent of online/digital advertising inventory available

through real-time bidding, a leap of 9 percentage points from today. In addition, more than two in five publishers who don’t  currently  use  private  exchanges  say  they  are  likely to start using them in the next year. What  do  those  publishers  consider  as  “must-have”  features? The exchange must:

1. Be verticalized by category 2. Have full-service account management 3. Have high enough fill rate to justify the

bottom line 4. Be part of a turnkey solution 5. Offer full pricing controls 6. Allow for human interaction within the

exchange for buy-side questions/consult

6% 6%

10% 13%

19% 21%

0%

5%

10%

15%

20%

25%

Publishers Agency/Marketers

12 months ago Now 12 months from now

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Buy-Side Concerns

As eager as they are about the future of RTB, buy-side respondents (agency/marketer) have some reservations about spending more through RTB platforms. Specifically, buyers want to see greater emphasis on inventory quality, more guarantees for brand safety, and greater transparency in reporting. Two-thirds of agency/marketers said such improvements would prompt them to spend more through RTB.

More than three quarters said they would spend more if there was a greater emphasis on quality or viewable impressions. “What’s  lacking  is  better,  more  premium  inventory  from  high-quality  publishers,” said one buy-side respondent. Other concerns included: inadequate guarantees for brand safety (70 percent); inadequate transparency in the RTB process (65 percent), and vague value propositions of different supply sources (64 percent).

Q: Indicate how strongly you agree/disagree with the following statements regarding RTB:

I  would  spend  more  on  RTB  if…  

36%

53%

54%

64%

65%

70%

77%

0%20%40%60%80%

There were more DSPs to choose from

I understood the technical processes more

There were more creative options/formats

It was easier to distinguish between supply sources

There was greater transparency in the RTB process

There were more guarantees for brand safety

There was greater emphasis on quality impressions

Buyers who responded 4/5 or 5/5

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“There  is  still  nothing  as  controllable  as  site  specific buys where we have more control over where  we  are  running,”  said  one  agency  respondent. Also, cited was a lack of creative formats and options, such as rich media (54 percent), and ignorance of the technical processes involved (53 percent). There is a strong disconnect between what agencies and marketers feel is important and their satisfaction with those things. For example, 88 percent of buy-side respondents cited “performance,  return  on  investment”  as  the  most

important RTB attribute, Yet, a mere 38 percent said they were satisfied with their ROI.

Similar disparities were seen in other

attributes, as well. The availability of targeting options was cited by 86 percent, though only 32 percent said they were satisfied. Inventory quality was cited again and again as a sore point among buy-side respondents. 81 percent said it was important to them, but a meager 25 percent said they were satisfied.

32%

32%

25%

32%

38%

77%

78%

81%

86%

88%

0% 20% 40% 60% 80%

Transparency

Reporting/insights

Inventory quality

Targeting options

Performance/ROI

Importance Satisfaction

Q1: Rate how important each of the following is when purchasing or

considering the purchase of online/digital advertising via RTB.

Q2: Rate your level of satisfaction with each of the following RTB characteristics.

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“ “ Sell-Side Concerns

“Automated  processes  diminish  the  need  for speaking with direct sales reps, therefore diminishing the effectiveness of our brand relationship with the buyer & buying process; and therefore

significantly diminishing the human impact with the non-quantitative aspects of the buying/evaluation  process.”

Four in five publishers are concerned that RTB will devalue or commoditize their inventory, while approximately three quarters fear sales channel conflicts and eroding relationships with media buyers. More than  half  of  publishers  fear  RTB  will  eliminate  the  “human  element.”  There  were other perceived downsides, as well. Forty-six percent of publishers fear that RTB use will limit their control of inventory transparency and rates; forty-two percent fear buyers will use URL level transparency to make purchasing decisions.

“Programmatic  buying  is  allowing  CPMs  to  go  down  from  advertisers  we’re  used  to  getting  a  better  price  from,” said one sell-side  respondent.  “Agencies  have  used  their  trading  desks  to  compress    CPMs,  threatening to move more into RTB exchanges, driving prices down for direct  buys.”

Displacing direct sales efforts brought a range of responses. Those with more experience understood that a healthy digital advertising ecosystem supports both direct and programmatic sales, and that human intervention is an important element in maintaining that balance. For those with less familiarity, the prospect seemed more like an either/or proposition. “The key here is getting smarter in each channel and maximizing those channels to achieve whatever market balance is available to you,”  said  one  publisher.  “Top  digital properties in the country are going to have a given advantage towards the direct side; the smaller companies need to find ways to scale up on the programmatic side.

72%

76%

84%

0% 20% 40% 60% 80%

Eroding directrelationships

Sales channelconflict

Commoditizinginventory

Pubs who responded 4/5 or 5/5

Q: Rate how concerned you are with each of the following when selling via RTB

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“ “ What Publishers Want From RTB & Private Exchanges

Sixty percent of publishers said they would be interested in RTB solutions that offer:

Advanced control options (price floors, demand sources, selling transparency, blocks, etc.)

Exclusively premium demand with dedicated RTB budgets

Real-time reporting and insights (bid win/loss, average CPMs, demand verticals, etc.)

Dedicated account management, support, and intelligence

Enterprise-level exchange platform to build your own RTB enabled private exchange

In deciding on a vendor to power a private exchange, full-service partnership was cited as an important factor, particularly by those not yet operating a private exchange. It is essential, they said, that solution providers take the time to help their sales team use the technology to its full advantage. Above all, publishers want RTB technology partners to offer a fully managed solution, including everything from sales strategy to coaching, to facilitating introductions to demand sources. They also want to be able to sell inventory through direct negotiations, and be able to connect with agency trading desks.

“Customer service and human sales contact is one of the key attributes in selling. You

get better feedback through personal contact.”

For those already operating a private exchange, four technological factors were highly valued:

1. Ad server compatibility 2. Cost structure/fees 3. Ease of implementation 4. Technology plan/track record of

effectiveness in implementing improvements/enhancements

Seven of ten publishers who are concerned with RTB  eliminating  the  “human  element”  in  ad  selling  feel that face-to-face negotiations and dedicated account  management  are  “important”  or  “extremely  important”  in  their  likelihood  to  use  RTB in the future. If human interaction is eliminated altogether, critics say, customer service and customer feedback are greatly diminished. “RTB  eliminates  opportunities to get or save a ’sell’  with  unique,  customizable  opportunities  or  to  top sell a client  that’s  ready  to  increase  spend  but  needs  hand  holding,”  said  one  publisher.

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Eighty-two percent of publishers cited the importance of dealing directly with buyers to negotiate unique terms. The ability to set price controls (for example, setting reserve bids, according to advertiser industry, demand source, brand) was cited by 73 percent of publishers who sell through private ad exchanges. Likewise, 73 percent of respondents emphasized the importance of being able to segment inventory, that is, to be able to decide which sections, placements, etc. are available for purchase.

Q: How important are the following features when selling through a private exchange?

55%

55%

73%

73%

82%

0% 20% 40% 60% 80%

Real-time insights and reporting (comparison charts,bidding activity by rate and brand vertical, etc.)

Full-service technology partner (willing to comment onsales strategy, provide resources/intelligence, and

introduce demand sources)

Inventory segmentation (defining whichsections/placements/etc. are made available for purchase)

Price controls (setting reserve bids according to demandsource, advertiser industry, brand, etc.)

Direct deals (Deal ID) (directly negotiate and set rules toaccommodate specific/unique terms with buyers)

Pubs who responded "Very Important"

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NEEDED: Better Understanding, More Control

A keener understanding of the market mechanics and more control over the processes will encourage greater participation by those on the supply and demand side of the equation. Platform providers that can facilitate this understanding have an opportunity awaiting them. When asked about areas of RTB they would like to understand better, respondents were able to easily identify a number of points of confusion or ignorance. They would like to know, for example, the differences between RTB, private ad exchanges, supply-side platforms, demand-side platforms, agency trading desks (ATDs), and data-management platforms (DMPs) – and how these differ from ad networks. They also want to know more about the mechanics of audience targeting, for example, how granular or accurate can audience targeting get and how are the parameters identified.

Q: How familiar are you with each of the following?

84% 84% 80%

76% 72%

64% 73%

62% 70%

74%

51% 56%

0%

20%

40%

60%

80%

100%

Demand SidePlatform (DSP)

Private AdExchange

Agency TradingDesk (ATD)

Open AdExchange

Supply SidePlatform (SSP)

DataManagement

Platform (DMP)

Publishers Agency/Marketers(who responded very or somewhat familiar)

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Meanwhile, there is a strong disconnect between what both

publishers and agency/marketers feel are important RTB attributes and their satisfaction with them. Publishers say that maintaining control of their inventory is the

most important attribute of any RTB platform. However, only 28

percent of respondents expressed satisfaction

with their ability to control inventory. Similarly, 92 percent

said that ad quality was important to RTB. Yet, only 36

percent of publishers are satisfied with  the  ads.  “Schlocky  ads are appearing on my site,”  griped  

one publisher.

24%

32%

44%

36%

32%

36%

28%

72%

76%

84%

88%

88%

92%

96%

0% 20% 40% 60% 80%

Humaninteraction/input

Performance

Operational efficiency

Transparency

Reporting/insights

Ad quality

Control

Importance Satisfaction

Q1: Rate how important each of the following is when purchasing or considering the purchase of online/digital

advertising via RTB.

Q2: Rate your level of satisfaction with each of the following RTB characteristics.

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Conclusions

1. Real-time bidding and private ad exchanges have big opportunity for growth, fueled by rising demand on the advertiser side.

2. Buyers want to see greater emphasis on inventory quality, more guarantees for brand safety, and greater transparency in reporting.

3. Sellers want fully managed RTB solutions, the ability to sell inventory through direct negotiations, and the ability to connect with agency trading desks.

4. More than 7 in 10 publishers believe RTB will cause their inventory to be commoditized, their direct-sales efforts to be displaced, and their CPMs to erode.

5. A large gap remains between what buyers and sellers think is important and their satisfaction with current offerings.

6. A  large  gap  also  remains  between  buyers’  and  sellers’  understanding  of  RTB  technology  and  the  technology’s  true  potential.

7. Opportunity awaits for solution providers that can fill these two gaps.

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Methodology

Survey Method

All data collected via online interviews by Advertiser Perceptions

Qualitative responses collected via phone interviews by Advertiser Perceptions

Incentives included cash and sweepstakes

Sample: US Publisher, Marketer and Agency contacts from The Advertiser Perceptions Media Decision Maker Database and third-party databases as needed.

Qualification: Involved in Digital Display/Video Media Decisions. Understanding of RTB Technologies. Advertiser past 12 month minimum spend of $500k.

Directional Data: Some findings in the presentation may reflect data with low bases, as noted.

Profile Overall (%)

VP & above 33%

Director/Supervisor 27%

Manager/Planner/Buyer 40%

Represents Leading U.S. Publishers by Content and Advertisers by Ad Category and Media Type

Automotive/Motorcycle/Off-Road/RV and Related (Domestic and Import)

Baby, Child or Parenthood Related Consumer Electronics (Non-

Computer/Software) Consumer Packaged Goods Entertainment Financial Products/Services (including

Insurance and Real Estate) Home and Appliances Liquor, Beer and Wine (Domestic and

Imported) Men's Apparel (Including Accessories,

Jewelry and Watches) Men's Toiletries & Cosmetics Pharmaceuticals & Remedies (OTC and

DTC) Retail Technology (Hardware, Software or

Services) Telecommunications (Cellular, Mobile,

Wireless) Travel Women's Apparel (Including Accessories,

Jewelry and Watches) Women's Toiletries & Cosmetics Energy (Gas, Oil, Electric, Environmentally

Friendly/Green) Quick Service Restaurants (QSR)

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About

INDEX Platform INDEX Platform is a global digital advertising technology provider offering enterprise grade solutions, intelligence and support for publishers to maximize advertiser demand for their cross channel media. Through the INDEX Platform exchange  or  a  publisher’s  own private exchange, publishers receive fully transparent real-time bidding (RTB) management technology and access to premium demand. Its parent company, Casale Media, continues to establish a strong presence in digital advertising, working directly with premium media organizations, while focusing on brand-safety and control for advertisers and publishers. Headquartered in New York and Toronto, the company is guided by its dedication to need-based development and a quality-focused culture.

INDEX Platform 74 Wingold Avenue Toronto, ON M6B 1P5 TEL: 416-785-5908

Advertiser Perceptions Today, Advertiser Perceptions is the world leader in providing the media industry with research-based advertiser insight and guidance necessary for strengthening brands and increasing advertising sales, market share and competitive advantage. We specialize in determining, analyzing and communicating what advertisers think—their plans, opinions and motivations. Our proprietary database of media decision makers is one of the largest in the world. The advertiser survey and questionnaire development process that we employ ensures optimal response. Focus and media industry expertise enables us to effectively analyze and accurately interpret the research that we conduct on behalf of our clients who represent many of the largest international media companies.

Advertiser Perceptions 1120 Avenue of the Americas, 4th Floor New York, NY 10036 TEL: 212-626-6723