There has been a flurry of excitement from the luminaries of the exchange world about the advent of real-time bidding. News of Microsoft’s decision to add RTB functionality to its AdECN platform has the marketplace salivating at the prospect. It will add a real-time element to buying ad impressions – and no doubt improve the performance of online campaigns. But having sat through a recent event and listened to top publisher Executives baulk at the idea of their ad inventory being sold on an impression basis only, FM feels a proper business case for RTB needs to be put forward to both the media buyer and the publisher. In this instance we will try to give an overview of the methodology of real-time bidding for the uninitiated:

What is Real-Time Bidding and how does it work?

RTB allows ad networks, advertisers, media agencies to buy ad impressions in real-time. The prospective buyer can analyse the impression in a millisecond and bid accordingly. The value of the impression is derived from the context of the site and the user data made available. The real-time bidding functionality on Contextweb for instance offers pre-filtered ad impressions to the buyer with HTTP parameters and a referrer URL or Publisher ID, the User's IP address, anonymized cookie ID of the user and any ad unit restrictions (restricted advertisers, creative types, product verticals). This ultimately gives the buyer a value of how much that impression is worth. The process will be mostly automated, with the demand-side using sophisticated bidding tools to buy real-time impressions. There will be a lot of “advertising quants” working on algorithms to maximise performance. Clearly, other exchange players will improve on the current offerings, and add more elements to improve the buying process.

How does the media buyer benefit?

Performance! Performance! Performance! Real-time bidding allows the buyer to improve and optimize campaigns. The technology can be pre-programmed with the maximum amount the buyer wants to bid per impression. Impressions are bought on the basis of this set amount, and the technology buys ad inventory accordingly. If the inventory doesn’t perform against pre-defined campaign targets, it can be optimised. This new automated process will replace a lot of the manual optimisation, safeguarding performance against potential human error and maximising the impact of the display campaign.

How will RTB make the publisher more money?

It might be crude to say that it’s all about the money, but the humble publisher is always looking to squeeze more monetary value out of ad inventory. Many industry experts believe that RTB will allow the market to determine the true value of a publisher’s ad impressions. The oversupply in the market has ultimately driven the price of non-premium ad inventory down. Lack of buyers and a lack transparent exchange buying has also contributed to this decline in value.

By allowing publishers to layer ad impressions with data about their site and their users, buyers can determine the true value of an impression. This might sound like a risky move for the publisher, given that an advertiser might value their inventory well below their expectations. But it stands to reason that market demand for publishers’ inventory, such as the FT (desirable demographic, top-tier brand site, and excellent content), would push up the price of an ad impression and let it settle at its true market value. Platforms like ContextWeb and AdECN will help to facilitate this market valuation, and help publishers achieve better returns.

Is the European market ready for RTB? We’ll have to see. But judging from the opinions at last week’s AOP event, my guess is that the exchange platforms will have to educate the market a little better about real-time bidding before it’s taken up en masse.