Real-time bidding is now a commonly accepted monetization channel, but it also poses a whole new set of yield, brand, quality, and channel challenges.
Ramsey McGrory, who runs the Right Media Exchange, recently said, "In its current state, RTB is lopsided and problematic for publishers" and cited "Potential data leakage, sales channel conflict and general upending of the publisher sales model."
Ramsey is on to something. Real-time bidding (RTB) is an exciting new technology, but after two years, it's become clear that it has strengths and weaknesses. As one of the pioneers of the real-time bidding revolution, I'd like to dig into how far this emerging technology has come and where it needs to go.
2009 was the year of adoption. In January, we saw only a few million ads sold daily on an RTB basis. By the end of the year, we were already seeing a billion ads a day. The initial implementers were fairly primitive. Although some platforms supported premium features like brand block lists to protect publisher channel conflicts, most buyers and sellers were still trying to figure out how to turn on RTB - forget trying to actually understand the impact and how it would truly interact with their other sales channels.
2010 was a watershed year. I've never seen a new technology adopted faster than RTB. Over the course of a year, we went from seeing about a billion ads a day to over 8 billion by the holiday season. Companies started to realize that RTB wasn't just an experimental trend, but a viable channel through which publishers could make serious dollars, using newly available impression-level data. The distinction between "remnant" and "premium" inventory became less important in the face of an emerging category: user-based targeting.
At the commencement of 2011, real-time bidding is a commonly accepted monetization channel, but publishers now realize that RTB poses a whole new set of yield, brand, quality, and channel challenges. To allow advertisers to buy the users for which they have valuable data, a publisher has to expose its entire inventory through RTB, which introduces a set of challenges. In theory, an advertiser can now just "listen in" and collect pricing data, build behavioral profiles, and try to buy that precious premium inventory for significantly lower prices.
So, how do publishers address the main challenges of real-time bidding?
Overall, I believe that real-time bidding is here to stay and offers an incredible new solution for buyers and sellers alike. And in the same breath, I know that almost everyone in the business will tell you that an efficient real-time marketplace needs to factor in brand and channel safety in a manner that ensures there will be no cannibalization of their existing business. If RTB is to truly soar in 2011, addressing these publisher challenges will be critical.
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Brian O'Kelley is the CEO and co-founder of AppNexus, an advanced ad platform specializing in real-time advertising. Widely considered a visionary in the field of online media, Brian created the first successful ad exchange as CTO of Right Media (acquired by Yahoo for $850 million in July 2007). Prior to Right Media, Brian was CEO of Netamorphosis, an early social networking and e-commerce site for events and venues. Brian was also an early innovator in real-time personalization and real-time ad optimization at LogicSpan, a consulting and technology integration firm, and later co-founded Cetova, a Web-based reporting and analytics platform for enterprise financial systems.
While earning a computer science degree at Princeton University, Brian started a Web design firm, building an open-source e-commerce engine used by more than 100 companies. Brian is an active partner at Grape Arbor, an angel investor group. Since its founding in 2006, Grape Arbor LLC has made investments into more than a dozen technology companies.
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