The Arrival of Real-Time Bidding, hosted by IAB, Google, & Forrester

Scott Spencer, Director of Product Management, Google

Joanna O’Connell, Senior Analyst, Forrester Research Inc.

Michael Greene, Analyst, Forrester Research Inc.

June 15, 2011

The Arrival of Real-Time Bidding

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Real-time bidding requires twodistinct layers of technology

“Pipe”A real-time bidding API

“Brain”A real-time bidder

… the “pipe” announces details about the ad space and audience to eligible real-time bidders:

Ad slot

Geo

Content

For everyimpression…

3

User

…the “pipe” is responsible for protecting publishers:

Malware protection

Data protection

Preferredbuyer access

To facilitate transactions…

4

Buyerblocking

Anonymity

Technologyblocking

… the “brain” evaluates each individual impression to answer:

Do you want to show an ad here?

At what price?

With what message?

In 100 milliseconds…

5

…the “brain” will base thesedecisions on:

Data

Targeting

Optimization

To find audience at scale…

6

7

Real-time bidding is supported by avibrant ecosystem of companies

“Pipes”Have a RTB API

“Brains”Have a real-time bidder

Ad exchanges

Sell-side platforms (SSPs)

Ad networks

Demand-side platforms (DSPs)

Trading desks

Other media buyingintermediaries

© 2011 Forrester Research, Inc. Reproduction Prohibited8


RTB is here to stay and the buying community is largely embracing it.

Forrester forecast:


Marketers do want less waste, better targeting, and more insight


Transparency


RTB enables transparency – in its many forms –increasingly a “must have” for buyers

“We now have optics into all the variables entering into the

equation. We know what’s working – there’s no more ‘black box’.”

“Transparency is the whole reason why I am doing this. I wouldn’t feel

comfortable telling a client – ‘oh yeah, we’re just putting your ads up’.”


Control


Buyers want to be in the drivers seat – to be able to make deliberate, strategic, repeatable decisions.

“‘We can do that’ has become the answer – whatever the client is trying to do, we now can do directly. I’m a control freak

and so is my team – knowing we’re empowered with these tools is great.

“Now we’ve got the controls of search and the bells and whistles of display.”


Granularity


RTB enables buyers to segment much deeper than ‘traditional’ display buying has allowed

“As our program is running, we’re thinking, ‘how do we break the buy into chunks to better toggle up and

down what’s working and not?’”

“I can see exactly what fueled the decision to buy any given impression

at any point in time. I know that I bought that impression on that page

because X, Y, Z was true.”


Why do these things matter?


But it’s still early days and there are plenty of challenges hampering the

efforts of RTB buyers.


Buyers bemoan the lack of standards


Quality concerns come up again and again

“One of my biggest challenges is getting quality inventory. I’d

spend more if the good inventory was there.”

“We see a lot of poor quality inventory. Blogs, UGC, piracy. There’s a lot of crap out there.”


It’s still largely a flash banner opportunity

“In terms of brand buying, RTB plays a small part. Most brand campaigns are

large rich media placements. I find RTB to be used for the smaller units where you

may want to target your specific audience.”

“We do have a surprising amount of brand dollars flowing through our trading desk. But what’s lacking is the ability to deliver expanded creative.”


Entrenchment remains an issueEntrenchment


Some recommendations for buyers considering bid-based display buying

Educate yourself. The more strategic thinking you bring to the auction-based marketplace, the more you’ll get out of it. As one trading desk executive noted, “A marketplace allows fair value to come to bear for those with the most information.”

Treat this as a long term strategic opportunity. This is not just another line item on your plan and shouldn’t be treated as ‘just another ad network.’ It’s a fundamentally different model, which has very tangible benefits to buyers…if well executed.

However, it’s ok to test into it if you need to. Just do it strategically –isolate a cookie pool, isolate media sources from each other – so that you don’t set the test, or yourself, up to fail.


For publishers, there’s a perception problem with RTB and exchange-based buying

When advertisers hear good things…. Publishers hear frightening words


The first instinct might be to dig into the trenches


But premium publishers CAN succeed in the world of RTB.The real question is how.


Despite early fears, RTB hasn’t turned media into pork bellies

In fact, Forrester finds that quality inventory is what RTB buyers want most today


Publisher experience shows that buyers are willing to pay for quality

“CPMs have exceeded our expectations during our test phase.

CPMs are 3x-4x higher than what we got from ad networks and moving in

a positive direction.”

“We haven’t seen any evidence of direct sales cannibalization. It’s

certainly a risk but we think we can manage against it.”


Publishers now have the tools to protect against risks and make the most of the RTB opportunity

Price controls. Set variable price floors to protect the direct sales channel and maximize yield

Ad blocking. Protect the publisher brand and minimize channel conflict by blocking ads by source or by category

Private RTB functionality. The entry-point for many publishers. Maintain control by enabling RTB for only trusted advertiser partners.


Private RTB relationships have helped create a win-win for publishers and advertisers

Major advertiser: “We have one private RTB relationship set up. It’s working really well and we’re

very happy about it. We’re looking to do more.”

Publisher: “Private gives us control, but also allows us to

deepen our advertiser relationships and tap into new

budgets”


But it’s not all roses. Publishers have challenges

ahead.


Publishers have the tools, but inhibitors stand in the way of greater success

Lack of data-driven decision making. Data drives programmatic buying from advertisers. Meanwhile, publishers make arbitrary decisions on impression allocation to exchanges and price floors.

Operational inexperience. Ops teams must work not only with new platforms and toolsets, but must learn to make strategic decisions to optimize yield through RTB.

Poorly defined roles for sales staff. Publishers still want sales to maintain buyer relationships, but most lack personnel familiar with RTB and the RTB buying community. In the words of one marketer: “I don’t know who to contact if I want to set up a private RTB relationship.”


Three tips for publishers getting into RTB

Pick a single exchange/SSP vendor. In an auction environment, you want to aggregate demand. Pick an exchange vendor that meets your needs and focus on developing success in that one exchange environment.

If you go private, start with a trusted advertiser. If private exchanges are your entry point, start with a trusted advertiser who cares about maintaining a strong relationship with your direct sales team.

Invest in RTB expertise. Ensure you have the right in-house expertise to make informed strategic decisions on the role of RTB in your sales strategy and manage RTB efforts day-to-day.

© 2009 Forrester Research, Inc. Reproduction Prohibited

Thank you

Michael Greene+1 [email protected]

Joanna O’Connell+1 [email protected]

Real-Time Bidding has Grown Rapidly

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Source: DoubleClick Ad Exchange, January 2010 to May 2011, figures do not include DoubleClick Ad Exchange inventory won by AdWords

8%15%

22%26%

37% 37% 39%46% 48%

52%56% 58%

64% 67% 66% 67% 68%

0%

20%

40%

60%

80%

100%

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11

% of DoubleClick Ad Exchange Spend via RTB

RTB Trends: More Formats, More Deal Types

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Flexible Deal Types

Fixed Price,Pre-AuctionPrivate BiddedBrandedAnonymous

Auction Direct Deals

Multiple Formats

Rich MediaDisplay Video Mobile

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Open Auction

RTB demand with controls

“Traditional” Yield Management

Boost direct network yield

“Private” Auction

Leverage brand + RTB

Direct PremiumSales

Total customization and service

Buyer Access Relationships

Non-Guaranteed Guaranteed

Direct Exchange

The power of the handshake, the

efficiency of RTB

The Foundation: Brand, Data and User Protection

Role of RTB in Selling Display Inventory

For Publishers RTB is a Perceived Risk, Requires Mitigating Controls

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48%Of publishers will shift inventory to an RTB

platform in 2011

Top RTB Requirements

Data Protection – 48%

Preferred Buyer Access – 37%

Buyer Blocking – 37%

Malware Protection – 50%

Anonymity – 26%

Technology Blocking – 10%

Source: Digiday and Google, Real-Time Display Advertising State of the Industry, February 2011, total survey respondents n=371, digital publisher respondents n=101, question respondents n=33

“Display advertising can be a $200B industry in less than 10 years.”Eric Schmidt,Executive Chairman, GoogleAdWeek

An exciting time for Display Advertising

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$15.9B in 2014

$200B

$10.2B in 2010

Source: eMarketer, Nov. 2010

Thank You.google.com/watchthisspace

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The Arrival of Real-Time Bidding, hosted by IAB, Google, & Forrester