Online Advertising Goes Open Source

  |  March 7, 2011   |  Comments

A Q&A with Chris Davey, senior vice president and managing director of SapientNitro.

Programmatic buying of digital media across exchanges is going through an accelerated growth phase. Recognizing the enormous benefits for the entire industry, companies on the buy and sell sides have dropped their competitive biases to create the OpenRTB Consortium. The group's mission is to improve ad technology adoption and integration through the creation of open, flexible, and safe industry standards. The broad standards are designed to ignite further industry innovation and growth that, until now, has been held back by the lack of standards.

I recently had the opportunity to sit down with Chris Davey, senior vice president and managing director of SapientNitro. SapientNitro is a very unique company that offers not only agency services and IT consulting, but also financial trading systems. I was curious to hear Chris' perspective on OpenRTB and the changing digital landscape.

Mike Baker: Sapient is a really unique company, since you offer agency services, IT consulting, and even financial trading systems. Do you see analogies between developments in digital advertising, like real-time bidding (RTB), and the evolution of Wall Street?

Chris Davey: Absolutely. In the past, executing trades was more of a manual process, requiring lots of intermediaries (brokers) for advice, guidance, and ultimately the buying and selling of investments. Today, much of that process is automated. Many trades are executed programmatically based on a set of parameters triggered by pre-defined thresholds or conditions. I see the same transformation happening with digital advertising. The technological infrastructure is maturing rapidly to allow for more automated, real-time views into inventory sources.

To complete this evolution, I believe the marketplace needs to adopt a set of open standards that allow buyers and sellers of inventory to interact more efficiently. Creating an open set of rules for real-time bidding will eliminate friction. In turn, this openness will allow for healthy competition and increased differentiation.

MB: Sapient advises CMOs on creating deeply integrated marketing infrastructures. Do you think RTB will move beyond agencies and knit into the enterprise as a more efficient procurement system?

CD: Yes I do. With the proliferation of digital inventory and data, it's only logical that automated platforms will become the standard, providing advertisers with the most efficient means of buying and selling billions of impressions every day. But, I think advertisers will still rely on agencies for strategy and creative.

Our clients are making enormous investments to increase their access to target audiences at or near the point of selection - and to discover new customers where they chat, read, browse, shop, and buy (both on- and offline). The convergence of campaign, content, and media management, plus integration with commerce technology, is increasing and streamlining the flow of leads though the conversion funnel - from general awareness to the point of selection. The ability to pinpoint the right person with the right ad, at the right time, at the right price - quickly, easily, and dynamically - remains a very compelling proposition.

MB: What impact do you think OpenRTB and OpenRTB Mobile will have on the entire digital advertising industry?

CD: I think OpenRTB is a big and necessary step in the overall transformation of how media is bought and sold. Buyers and sellers are always looking for more efficient ways of transacting, and technology inevitably enables it. Consider the many parallels to other industries, like travel or financial services, where technological advancements drove a significant shift in how the overall market works. For years, people argued that technology could not replace the relationship between the consumer and their travel agent. Today, more than 80 percent of all travel transactions are executed online, enabled by standardized inventory systems (GDS platforms like Sabre, Amadeus, etc.) and online booking engines. These standardized systems offer consumers a more affordable, convenient, and personalized experience. Similarly, large brokerage firms never envisioned a world where the average investor would be able to manage their own investments through automated trading and investment management platforms. But E-Trade and other online investment platforms changed that for good.

Efficiency in the marketplace is born out of transparency and the ability to find the right inventory quickly. I believe the standardization of information is the driving force and the ultimate value of OpenRTB.

MB: Standardization has been core to growing global economies and driving capitalism. Do you see parallels in other industries where standardization has changed the course of history?

CD: Beyond travel and financial services, there are many other areas where standardization has dramatically improved speed and efficiency. For example, retail and manufacturing industries have adopted standards such as electronic data exchange (EDI) barcode technology, radio frequency identification (RFID) technology, and other advances that standardize communication of inventory information between counterparties. Even in healthcare, standardization of procedure codes has dramatically streamlined claims processing.

Digital advertising exhibits many of the same dynamics of a marketplace driven by large volumes of supply and demand - one that will benefit from industry standards. But to date, there has been little standardization in the advertising industry, particularly across traditional and emerging channels. The need for a more efficient and standardized way of buying and selling inventory will become even more acute as more of the channels that advertisers and sellers want to thrive in become digital. In turn, there will be more tools available with an increased return on investment. The next 18 to 24 months will be exciting to watch.

MB: With programmatic buying and selling of digital media on the rise and real-time decision-making becoming an important buying capability, do you see a time when traditional media research, planning, and buying will collapse and become codified in a run-time system?

CD: I think the companies that perform traditional media research, planning, and buying will become less relevant as the cost of media drops due to greater availability and transparency, the tools to automate media buys and delivery improve, and the platforms to better analyze and programmatically adjust spend based on user-defined parameters and machine-based learning emerge.

MB: How is data-driven decisioning changing the agency-client relationship? Do agencies need to develop new core competencies?

CD: I believe clients will increasingly look for agencies that understand both existing and emerging media, provide great creative ideas, and translate those ideas efficiently into the most appropriate media and formats.

To thrive, agencies will need to deliver the best media efficiently, in real time or near real time based on the contextual understanding of their targets. They will need to assess the market quickly, determine appropriate response (at the one and many levels), and then dynamically change the buy or the creative to respond effectively to ever-shifting conditions.

I think the most successful agencies will also have a deep understanding of dynamic markets and provide insights that help sellers package and manage their inventory for the best possible results. And, they will create new types of inventory to preserve some degree of differentiated value in the broader market.

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ABOUT THE AUTHOR

Mike Baker

Mike Baker is president and CEO of DataXu. He has been pioneering digital media platforms for 20 years and is a widely recognized thought leader in interactive advertising. Before cofounding DataXu, he was vice president at Nokia, where he created and ran Nokia Interactive. Baker came to Nokia through its acquisition of mobile advertising leader Enpocket in 2007, where he was the founding investor and CEO. Baker was previously a partner at venture capital firm GrandBanks Capital. He has also been executive vice president at CMGI and Engage Technologies, an innovator in online advertising and behavioral targeting. Baker holds degrees in law and telecommunications management.

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