A Second Helping of Online Media's Alphabet Soup

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In Part 1 of this column, we covered the basics: the definitions of all of these three-letter acronyms and who the main players in the space are. Let's pick up where I left off – recapping the Adam Cahill-led ad:tech New York session, "Ad Networks, Exchanges & DSPs - Next-Gen Audiences and Media Strategy: Understanding the Opportunity."

A Really Big Deal

Cahill describes the whole situation as "a really big deal," with approximately $850 million already flowing through DSPs today. Given that J.P. Morgan is estimating the size of the online advertising market to be $8 billion, this means that DSPs already represent 10 percent of that market! Zach Coelius, CEO of Triggit, told Cahill that, "There are 5 billion RTB impressions available across the key exchanges every day. Cahill extrapolates this to mean that, based on comScore data of 417 billion U.S. ad impressions, 35 percent of total impressions in the market today are RTB-delivered. And yet, points out Cahill, none of this stuff is even registering on most CMOs' agendas!

A Complete Change to the Media Buying Culture

Now for the profound part: Cahill portrays the space not about new technology but about a cultural shift, because this kind of ad buying completely changes the job, and therefore it's really about the people doing the job. Prior to the introduction of this kind of technology, value came from the media planners and buyers, as in prior to a campaign launch. In this brave new world, the value comes post-launch and the skills required don't involve research or negotiation – instead they're more about data and analysis, understanding auction dynamics, managing campaigns through an interface, and delivering constant optimization. Either a lot of people will need to be retrained or agencies will be looking for new people altogether.

What the Future Will Bring

Looking into the immediate future, Cahill sees two important short-term developments:

1. The composition of exchange trade and media is changing, e.g., video and mobile inventory is coming on board.
2. The quality of inventory will continue to improve as more publishers come on board (they can no longer ignore the better economic value to them of exchange-selling than ad network-selling) and have more control over how their inventory gets sold, e.g., setting price floors or choosing who can (or can't) buy their ad inventory.

Cahill also gathered market growth predictions from industry insiders, which ranged from "RTBs will represent 20 percent of display market in a couple of years" to "It will double next year" to "50 percent of display will be purchased through platforms in the next two years" to finally "All display, other than custom buys, will be exchange-based." (Cahill himself tends to lean towards the "50 percent of display will be purchased through platforms in the next two years" opinion.)

Other Predictions and Opinions

In the time since ad:tech, I've done some additional reading and polling of my own. The resource authority on the ad exchange space right now is AdExchanger.com, and its managing editor, John Ebbert, provided me with his prediction: "The media spend in the world of the data-driven digital advertising will increase at least three-fold in 2011 as buyers and sellers understand that real-time bidding is game-changing and enables huge efficiency gains for marketers and publishers (who have valuable audiences) alike."

Mike Baker, CEO of DSP DataXu, sees 2011 as the year that "real DSPs clearly differentiate and break away from the pack to attract 30 percent or more of all online buys." He also explained that brands entering the DSP space have had trouble scaling their audience-based buys and have become more "direct response-like" in their digital thinking.

Meanwhile, Ken Nicholas of MindOnMedia[Sales] takes a different view: "DSPs are just one more tool in an arsenal, albeit one that is hot at the moment. While they will serve their purpose in automating and driving costs out of one part of the media process, they are not going to supplant every aspect of the media buying (or selling) world. At some point, either the parsing of audience data will become so granular as to be way past the point of diminishing returns, the prices on ad inventory bid so high via RTB auctions most DSP firms now offer that buyers will go running back to individual properties to 'lock in' inventory deals, or some other disruptor will come along, that the 'hype' over DSPs will decrease to a more measured level."

At the very least, maybe you'll want to take Baker's advice: "If you haven't tested programmatic buying through a DSP, you're officially behind the curve and need to get moving."