31 January 2012 in ExchangeWire EMEA 15 Comments

The Publisher Question: To RTB Or Not To RTB

George Odysseos is EU Director of Publisher Services at Tribal Fusion. Here he discusses instances when RTB can help publishers secure higher prices – and why it should not be used on all classes of inventory.

In 2011, real-time bidding (RTB) was the trend that – at the coalface of online display advertising – I have most come across. As what the market understands as an ad network, Tribal Fusion is in the thick of it when it comes to addressing this trend, particularly with our publisher partners, and now is the time for me to offer a view.

There’s no question that RTB as a mechanism for setting the price for display inventory has its place. Like all auction models it seems on the surface to offer the best way to guarantee the seller the highest possible price for a product or service and, mysteriously, the lowest possible price for the buyer. But, like all auction models – not least because both those things cannot possibly be true at the same time – it doesn’t work that way.

For some inventory – mainly the highly sought-after impressions from users suitable for retargeting – RTB secures a very high price. But, for all else, far from raising prices to their highest possible level, it commoditises inventory such that impressions that could be packaged up and sold for a justifiable premium, go for an absolute song. This is bad in the short, medium and long-term for publishers and advertisers. Here’s why that’s my view:

The shortcomings of an auction model

There are very few markets where an auction model favours the buyer and the seller at the same time. It favours the seller only when scarcity and competitive demand combine. And it favours the buyer whenever either of those things does not exist. Consider the antiques and arts world. Those lots that reach astronomical prices do so not just because of the scarcity of the object, but because there are one or more buyers competing for that very object at the very same time. On these occasions the selling price is usually far in excess of the justifiable value of the object sold. Great for seller, bad for buyer.

Then, wherever a lot is either quite common or there’s only one able and willing buyer, the lot price rarely reaches the same level as its justifiable value. It is by buying these very lots that antiques dealers – of which there are thousands – survive.

Now, let’s think what an antique owner might achieve were he or she instead to market the product via traditional techniques, that is, package the product up, advertise it to seek willing buyers and agree a price that works for both buyer and seller. Assuming they are matched for negotiation skills, both leave happy.

The price of RTB

We see the same occurring in the auction market for online display advertising. Inventory that one or more buyers want at the same time secures CPMs far in excess of their actual value. These impressions are almost exclusively where a user is suitable for retargeting by more than one retailer or more than one agency buying on behalf of a single retailer or even one agency bidding through more than one buying point. Great for seller, bad for buyer.
Meanwhile, for all other impressions, prices fall below what might be achieved were they packaged up and sold to advertisers as part of a campaign, whether directly through the publisher team or part of a content or audience-targeted network buy. Great for buyer, bad for seller.

The critical question

Given we know that, for some inventory, RTB will secure prices far in excess of their justifiable value and for others, far below, the only real question for publishers is whether the former will outweigh the latter.

The answer to this question depends almost entirely on the nature of the publisher and its inventory. What we see evolving is an ecosystem where in-house sales teams account for top, premium inventory, RTB platforms for the commoditised impressions – previously the domain of the ad networks – at the bottom of the funnel, and networks for the middle ground; inventory that the publisher finds hard to sell but that work well as part of a content or audience package.
We operate in an environment where publishers face an increasing number of choices in how to monetise their hard-earned inventory. I fully appreciate that there is a place for exchanges and RTB but do I think all ad inventory should or will be traded this way? Unequivocally no.

Ad Exchange, Ad Network, Ad Trading, Behavioral Targeting, Brand, Display, Private Exchange, Publisher, RTB

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  • http://twitter.com/lukefenney Luke Fenney

    George – does Tribal Fusion offer their publishers any form of Real Time Trading functionality? 

  • JNeilsen

    a binary view for a binary business.

  • Mediamidget99

    let me get this right, Tribal Fusion do not offer RTB and the best way they see of countering that is to say “whoa whoa, RTB is bad cause it makes the cost go up” without any reference to the data used to buy that impression. Sure the cost is loaded early in the user session but that’s the value end of said session to most buyers (your clients at Agencies Mr Fusion), this is principally because of the current “first look” fixation. To also suggest that some how ad networks are “above” RTB solutions is patently wrong and written purely as you clearly do not/can not offer this solution to a Publisher. There are better ways to PR your business without showing all the short-comings in the process…Tribal Fizzled.

  • Steve Dorey

    Ignore the flamers George …Shakespeare meets Digital advertising … truly beautiful

  • http://twitter.com/georgeodysseos George Odysseos

    Luke

    To answer that you have to appreciate our relationships with publishers, we have 1:1 relationships with the majority of our publishers and hence RTB functionality is not relevant to that part of our network as we would be the only ones bidding.

    We also work across different platforms buying the best possible inventory for our network/advertisers, in doing that we employ variable bidding strategies, so RTB has a relevance to our business but not necessarily in the way in applies to say Rubicon.

    End of the day publishers have choices as to how they monetize their inventory, importantly these are not mutually exclusive and where a publisher works with Tribal Fusion they will naturally compare us with others including the RTB platforms, given our growth over recent times sure its fair to assume that we are doing something right.

    My intention was to offer a view on RTB and have not said that its not relevant like some have suggested, far from it!

    I would like to see comprehensive evidence where a number of Publishers using only RTB to monetize their remnant inventory has increased their overall yield by x%, i fully acknowledge that re-targeting yields are high but at what impact to the rest of the inventory?

    I also appreciate that its relatively early days for RTB and how it all develops will be interesting

    G

  • http://twitter.com/georgeodysseos George Odysseos

    oh stop it Steve

  • http://www.facebook.com/jay.r.stevens Jay Stevens

    This isn’t whether publishers should open their inventory to RTB.  The real question is whether they can afford not to. 

    Of the more than 150 European publishers on Rubicon’s REVV platform today, they already see more than 45% of their revenue coming from real-time bidded sources of demand.  This is up from roughly 5% in December of 2010, and by the end of this year, these numbers will be north of 75%.

    The reality is that advertiser budgets are quickly moving to more efficient buying methods and will continue to do so as agencies, independents, and advertisers themselves, establish trading desks.  If publishers want to capture this spend, opening their inventory to this trading mechanic is a prerequisite.  This trend is accelerating, showing no signs of abatement.

    This being said, the role of the SSP is to ensure that publishers do this safely and maximise ALL sources of demand, be it from exchanges, networks with rotational tags or DSPs buying on an impression by impression basis.  RTB isn’t something for publishers to be afraid of, in fact it’s the very opposite.  Granular floor pricing and priority access controls, combined with greater transparency and a data-rich bid  landscape reporting, afford the publisher with many more levers than they ever previously enjoyed in the management of their indirect sales channels.

    Lastly, RTB and the second price auction is merely the trading mechanic and while its first point of adoption has been around accessing remnant for performance campaigns, the real opportunity at hand is around premium and direct sales.  Let’s face it, display advertising is fundamentally broken and must be made more efficient for the tide to rise for everyone.  We can’t bury our heads in the sand and keep doing more of the same because if you take Facebook and the Google display network out of the IAB figures, the amount of investment in display is static and the only way it will grow is if we make the planning, buying and trafficking process more efficient.  Programmatic trading is the only way for us to see the pie to get bigger.

  • Mediamidget99

    is it 40%, 45% or 50% Jay? You seem to be quoting %’s of proportional revenue that sites are getting through RTB depending on which country you’re in or audience you’re speaking to…would it be more prudent to say Rubicon Project missed the boat a couple of years ago on RTB and are now telling sites’ what they want to hear in order to develop market share in order to catch up to others and not look threatened in the market?

  • http://www.facebook.com/jay.r.stevens Jay Stevens

    Top be precise, 45% of EMEA publisher revenue in December of 2011 came from RTB-based demand, up from 5% in December of 2010.  And yes, I do quote percentages based on the territory as each market is at varying degrees of adoption and publishers themselves see wildly varied percentages of revenue coming through RTB based on their site’s reach and length of user session. 

    To say that Rubicon “missed the boat” two years ago is a ridiculous statement, most of the industry didn’t even know what RTB stood for in Jan of 2010, much less actually buying through this mechanic.  In fact, Invite was the only DSP with a presence in Europe then and Paul had only just started in the role.  

    I don’t need to tell publishers what they want to hear, they see it in their own numbers and how much revenue they are seeing through this channel.  And no, we’re not playing catch-up.  We’re easily the largest SSP in the market, globally optimising 4.5-5 Billion impressions day and sending more than 40 billion bid requests/day to 50+ DSPs/bidders around the world.  We added 230 new publishers last year, one for every business day, and 20% of the Comscore 500 are on the platform.   

    Lastly, if you’d like to go toe to toe, and have a proper debate, I welcome it anytime.

  • http://twitter.com/MartinMov Martin S. Larsen

    Interesting piece but everything that can be digitized will be digitized. Remember that denial is the first step to acceptance and it is so difficult to fight the future.

  • Toby Ross

    This is about efficiency. If a buyer can
    now more easily identify an impression as being valuable, and is willing to pay
    more for it, how can that be a step back from the status quo? The more buyers you have access to the more likely it is you’ll find someone willing to pay more for your stock, not the opposite. Net effect is positive for both given the ROI the buyer achieves off the more relevant impression.

    From a publisher perspective we have seen a huge increase in RTB driven revenues YoY across our non-domestic inventory. RTB CPMs have been many times non-RTB for the same period. If January figures are anything to go by that trend is set to continue in 2012.

    We look at this as an opportunity and not a threat. If controls are in place allowing publishers to dictate who gets to buy their inventory, when, how much and at what price then they have the tools they need in order to manage supply.

    We don’t sell domestic inventory to ad networks but, if we did, we’d ask them to compete for it.

  • Iouri

    Hi George

    “RTB will secure prices far in excess of their justifiable value”

    Why would anyone place a bid for an impression in excess of what it it worth to them?

    Many thanks

  • Stuart Colman

    To me, the issue lies in the fact that not all inventory will see a better return for publishers – only the stuff deemed ‘good’ will, and the rest often would get a lower return, making the net effect a negative one.  There is too much supply in the way we currently do business and as a result, not everyone can, or will, win.

    Until publishers start understanding the need to focus on generating fewer ‘one hit wonder’ impressions, trying and win the xx UUs and xx PIs war, and instead focus on generating more impressions from engaged users who they can then learn more about – and until advertisers realise there is so much more value in ‘who’ rather than ‘how many’ (which requires a massive change in how we measure and therefore ultimately value digital media), we’ll never reach agreement on these kind of subjects.

    In fact, I’d argue we need to stop talking about RTB, ARB, DSP, ABCDE ETC as its just the fluff around the edges – the real issues here lie in the deep, more fundamental questions around: how do sites best monetise the consumer value and insight they generate, and how do advertisers build a better, more holistic and strategic plan for digital marketing as the world evolves into one that is always on, multi screen, devise/platform neutrality.

    Right now, all we seem to be doing is discussing the colour choice for our uniform when there is a war going on outside…

  • Digitalmonkey

    I believe that RTB will initially drive higher RPMs as demand currently outstrips supply, but eventually when the supply increases and each impression becomes commoditised it could potentially mean that publishers end up with significantly less revenue overall. The argument about whether RTB is good for publishers really depend on their audience makeup. Do they have a loyal audience that consumes a large amount of impressions per day? If so, they will monetise the 1st couple of impressions per user in an exchange at a high rate, but the rest will be virtually worthless. However, if a publisher has a large audience with limited amount of impressions consumed, RTB could generate more revenue overall. 
    An SSP can use the argument that they will help each publisher get the right mix of all buying sources to maximise the revenue, but what happens when the only impressions worth anything are bought by trading desks through RTB and there are no other sources for the long tail impressions. I believe that is when the publisher loses out unless their premium sales are high. 

  • Observer

    Can publishers/ad-networks define a minimum bid price when they connect to DSP or exchanges?