5 Things You Should Know About the Future of Retargeting

Display advertising is changing rapidly and getting more and more confusing. And many people are looking to understand its landscape.

Here are five things you need to know that you may not have thought of when it comes to display:

1. There will be fewer ads per page. One of the problems with online advertising today is that there is no barrier to creating new inventory. Constructing a billboard alongside a highway costs capital. There are a limited number of :30 spots you can run during a top-rated TV show. But if you’re a publisher that wants to create new revenue, it is much easier to add more ads to a page than it is to get more users to the site, or to get the ads to perform better. I estimate that there is about five times more supply than there is CPM/CPC demand. The rest of the inventory is spent on CPA offers or site promotions. Smart publishers should be focused on their audience and properly pricing those ads, to make for a more efficient marketplace – rather than flooding the exchanges and networks with new inventory. As the market gets more mature, the market will get closer to a balance between supply and demand.
2. RTB will be the primary way to retarget and your DSP technology will be the difference between success and failure. For some, this goes without saying. Only a demand-side platform (DSP) accessing all of the major ad exchanges can provide enough reach to power retargeting at scale, particularly when there are any kinds of restraints, like targeting by geo. A good DSP is like a racecar or precision surgical tools – it allows the buyer using the DSP to distinguish between good inventory and bad, cheap and expensive, and premium and remnant.
3. People matter most. One of the most overlooked aspects of the DSP landscape today is people. Stockbrokers, surgeons, and racecar drivers all matter much more than the tools that they use. The same is true in the RTB space. Some of the “me-too” companies buying inventory on the ad exchanges take a spray-and-pray approach to retargeting. They bombard the site’s audience with as many impressions as they can, with little regard for performance or efficiency. That works for month one of a display retargeting campaign. But it won’t work long-term. As advertisers become more sophisticated about what DSPs can and should do, they will become more discerning about the people pushing the buttons. A great trader can make or break a campaign because they know how to use the tools. But make no mistake, it takes a good driver and a good car to win the race, and the trophy is always awarded to the driver. This should make forward-thinking agencies optimistic about the future. In exchange-traded display, great buyers are more necessary than ever. There is no easy button.
4. Training matters too. Buying display isn’t easy. Some DSPs in the marketplace today are taking a cynical viewpoint towards agencies, and are beginning to approach advertisers directly rather than taking the time to train agency buyers. Essentially, these DSPs are aiming to become the agency of the future, which should be setting off alarm bells for many of you. Others in the DSP space are totally committed to training agencies how to become excellent buyers, and put their analytical skills from other channels to great use in RTB display.
5. Putting first-party data to work is a competitive imperative. It’s not hard to throw down a tag on a landing page and retarget every customer who comes to the site. But as the display marketplace evolves and becomes more competitive, advertisers and agencies need to use more of their own first-party data to make decisions and optimally price each impression. For example, what products has the customer bought in the past, and how does that inform what complementary products should be shown in the creative? What’s the sales cycle for the advertiser’s product or service, and how should that inform the CPM price paid, or how many times a customer sees an ad each day? Most of our clients are sitting on top of a mountain of data about their own customers, but have only begun tapping the wealth of data that they have at hand. One of our clients recently said it best as we were brainstorming with them about all of the ways they could use their first-party information: “I can be my own data provider,” the online media director said. Exactly.

A year ago, the question that was most commonly asked of display technologists was, “Can you help me understand the RTB landscape?” The most common question asked in these meetings today is, “How do we hire and train more DSP experts?”

The next generation of agencies is training them today.

This column was originally published on Sept. 14, 2011 on ClickZ.