With so much industry hype about RTB, my company recently commissioned Forrester to determine how big it is and to explore where it's headed based on a broad set of interviews with ad agencies, publishers and demand-side platforms (DSPs). They then coupled this information with their Online Display Advertising Forecast, 2010-15 (U.S.) to arrive at the first definitive market sizing of RTB. You can download the full report at our website.
According to the study, in 2010 advertisers spent $353 million in the U.S. via RTB, and that figure will more than double in 2011 to $823 million -- roughly 8% of total display spending. By any measure, these are impressive numbers given that RTB was barely in existence in 2009, and they speak to it's enormous potential.
The report notes several trends fueling the adoption of this technology. First, because RTB enables advertisers to more efficiently and accurately bid on specific audiences, the large ad agency holding companies have been rapidly shifting their budgets toward it. Second, RTB gives publishers a much more transparent, controlled way of selling inventory than the traditional ad network model that dominated for the past decade. Third, none of this would have been possible without a spate of relatively recent technical innovations enabling large data sets to be processed in real time and at scale.
That said, the report also points to several roadblocks that stand in the way of RTB becoming the dominant mode of buying and selling advertising. First, there's been a general feeling among large brand advertisers that the quality of the ad inventory they can buy through RTB isn't as high as it could be, and they seem to be waiting for more premium publishers to allocate inventory to RTB before jumping in with significant spends.
One way this will happen is through the adoption of the "private exchange" model, which enables very large, premium publishers to aggregate and monetize their audiences via RTB in an exclusive and highly controlled environment. In addition, ad agencies have expressed their interest in building "bigger, deeper" relationships with large premium publishers, and private exchanges seem to accomplish this goal. Two companies that have already rolled out a private exchange are The Weather Channel and IDG's TechNetwork, and the report predicts that many more will launch in 2011.
The second roadblock to the expansion of RTB is technical complexity. In order for advertisers and publisher to participate in RTB, they have to navigate what can be an intimidating and complex stack of technologies -- some of which may not be compatible with their legacy systems. On the buy side, bigger agencies will have an easier time making the necessary investments to overcome this challenge, though it may keep smaller agencies and advertisers away from RTB temporarily. Publishers, on the other hand, will be able to limit this complexity by working with partners who have the expertise and technology to help them navigate the stack and build custom solutions that ease the burden on their internal operations teams.
In the end, Forrester concludes that RTB is way too large an opportunity for publishers to pass up. Though it will require them to adopt new technologies and evolve how they sell advertising, the benefits and controls it offers far outweigh the risks. Concerns that RTB will cannibalize publishers' direct sales, while valid, can be addressed with the intelligent application of price controls and blocks through a sell-side partner. In addition, publishers can use RTB to package and monetize the most valuable parts of their audience based on the bidding patterns of individual advertisers. In other words, RTB can actually help publishers' direct sales by arming them with information they can use to actually identify and close new business. You know, with other human beings.
This last point is particularly important. For all the talk in the industry about the transformative powers of technology and automation, it's important to remember why we're doing all this. RTB is a tool, like any other, and as it matures and becomes easier to work with, it will enable us to spend more time doing the things that really matter: focusing on the needs of our clients and partners. In other words, it will help make this industry about people again. As industry upheavals go, this one is a long time coming, and publishers, advertisers and consumers will ultimately be the better for it.
|ABOUT THE AUTHOR|
Michael Barrett is CEO of AdMeld.