Real-Time Bidding: Ploy or Panacea?

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Demand for video advertising continues to be very strong, but both advertisers and networks alike are still searching for the best model for fill inventory, particularly for mobile devices.

The latest effort is real-time bidding (RTB) - essentially exchanges that allow advertisers to bid auction-style on available ad inventory in real time. Conceptually, this allows advertisers to better target the exact audience they're seeking, and allows networks to derive better value from their inventory.

Forrester Research recently issued a report - commissioned by ad exchange network SpotXchange - that says RTB is the "fastest growing segment of the online video advertising market," having grown more than 100 percent in the last year. The firm expects RTB will grow another 70 percent this year, and that by 2014, it will be responsible for nearly 25 percent of all online video spending.

The trend is continuing to mobile as well. Also, mobile app analytics and advertising platform Flurry unveiled a RTB marketplace service exclusively for mobile phones, saying that today's mobile ad inventory is "undervalued" due to fragmentation and lack of user data.

Video advertising monetization is certainly an issue. This recent Wall Street Journal article states that the cost of ads on even the higher-trafficked sites fell between 10 percent to 15 percent last year (according to video ad firm BrightRoll). The reasons are twofold:

• Ad inventory is exploding, with more and more content providers eager for a cut of the growing online video advertising market getting into the space. The number of online videos with ads against them nearly doubled last year, from 14 percent to 23 percent.
• While the overall spend on video ads is expected to grow 41 percent this year, the competition for a cut of that spend is equally increasing. As such, the average CPMs have fallen from $17-$25 in 2011 to $15-$20 in 2012.

So it's encouraging to see efforts that attempt to reverse this downward slide. But there won't be one "winner" here.

One of the other efforts is the concept of "digital upfronts" (or "Newfronts"), which ask advertisers to commit to buying ad space months in advance, and are expected to generate deal-flow in excess of $1 billion this year.

Another is a focus on native ads - premium-placed content developed exclusively for a particular site that looks as if it was created by and for that site.

But it's far too early to tell how any of these efforts will play out. Real-time bidding is not a panacea. It's just one effort among many.

Time image on home page via Shutterstock.