The Arrival of Real-Time Bidding, hosted by IAB, Google, & Forrester

The Arrival of Real-TimeBiddingScott Spencer, Director of ProductManagement, GoogleJoanna O’Connell, Senior Analyst,Forrester Research Inc.Michael Greene, Analyst, ForresterResearch Inc.June 15, 2011

“Pipe” “Brain”A real-time bidding API A real-time bidder Real-time bidding requires two distinct layers of technology 2

… the “pipe” announces details about the ad space and audience to eligible real-time bidders: For every Ad slotimpression… Geo Content User 3

…the “pipe” is responsible for protecting publishers: To facilitate Malware Buyertransactions… protection blocking Data Anonymity protection Preferred Technology buyer access blocking 4

… the “brain” evaluates each individual impression to answer: In 100 Do you want to showmilliseconds… an ad here? At what price? With what message? 5

…the “brain” will base these decisions on:To find audience Data at scale… Targeting Optimization 6

Ad exchanges Ad networks Sell-side platforms Demand-side (SSPs) platforms (DSPs) Trading desks Other media buying intermediaries“Pipes” “Brains”Have a RTB API Have a real-time bidder Real-time bidding is supported by a vibrant ecosystem of companies 7

RTB enables transparency – in its many forms – increasingly a “must have” for buyers “We now have optics into all the variables entering into the equation. We know what’s working – there’s no more ‘black box’.” “Transparency is the whole reason why I am doing this. I wouldn’t feel comfortable telling a client – ‘oh yeah, we’re just putting your ads up’.”12 © 2011 Forrester Research, Inc. Reproduction Prohibited

Buyers want to be in the drivers seat – to be able to make deliberate, strategic, repeatable decisions. “‘We can do that’ has become the answer – whatever the client is trying to do, we now can do directly. I’m a control freak and so is my team – knowing we’re empowered with these tools is great. “Now we’ve got the controls of search and the bells and whistles of display.”14 © 2011 Forrester Research, Inc. Reproduction Prohibited

RTB enables buyers to segment much deeper than ‘traditional’ display buying has allowed “As our program is running, we’re thinking, ‘how do we break the buy into chunks to better toggle up and down what’s working and not?’” “I can see exactly what fueled the decision to buy any given impression at any point in time. I know that I bought that impression on that page because X, Y, Z was true.”16 © 2011 Forrester Research, Inc. Reproduction Prohibited

Quality concerns come up again and again “One of my biggest challenges is getting quality inventory. I’d spend more if the good inventory was there.” “We see a lot of poor quality inventory. Blogs, UGC, piracy. There’s a lot of crap out there.”20 © 2011 Forrester Research, Inc. Reproduction Prohibited

It’s still largely a flash banner opportunity “In terms of brand buying, RTB plays a small part. Most brand campaigns are large rich media placements. I find RTB to be used for the smaller units where you may want to target your specific audience.” “We do have a surprising amount of brand dollars flowing through our trading desk. But what’s lacking is the ability to deliver expanded creative.”21 © 2011 Forrester Research, Inc. Reproduction Prohibited

Some recommendations for buyers considering bid- based display buying  Educate yourself. The more strategic thinking you bring to the auction- based marketplace, the more you’ll get out of it. As one trading desk executive noted, “A marketplace allows fair value to come to bear for those with the most information.”  Treat this as a long term strategic opportunity. This is not just another line item on your plan and shouldn’t be treated as ‘just another ad network.’ It’s a fundamentally different model, which has very tangible benefits to buyers…if well executed.  However, it’s ok to test into it if you need to. Just do it strategically – isolate a cookie pool, isolate media sources from each other – so that you don’t set the test, or yourself, up to fail.23 © 2011 Forrester Research, Inc. Reproduction Prohibited

For publishers, there’s a perception problem with RTB and exchange-based buyingWhen advertisers hear good things…. Publishers hear frightening words 24 © 2011 Forrester Research, Inc. Reproduction Prohibited

Despite early fears, RTB hasn’t turned media into pork bellies In fact, Forrester finds that quality inventory is what RTB buyers want most today27 © 2011 Forrester Research, Inc. Reproduction Prohibited

Publisher experience shows that buyers are willing to pay for quality “CPMs have exceeded our expectations during our test phase. CPMs are 3x-4x higher than what we got from ad networks and moving in a positive direction.” “We haven’t seen any evidence of direct sales cannibalization. It’s certainly a risk but we think we can manage against it.”28 © 2011 Forrester Research, Inc. Reproduction Prohibited

Publishers now have the tools to protect against risks and make the most of the RTB opportunity  Price controls. Set variable price floors to protect the direct sales channel and maximize yield  Ad blocking. Protect the publisher brand and minimize channel conflict by blocking ads by source or by category  Private RTB functionality. The entry-point for many publishers. Maintain control by enabling RTB for only trusted advertiser partners.29 © 2011 Forrester Research, Inc. Reproduction Prohibited

Private RTB relationships have helped create a win- win for publishers and advertisers Publisher: “Private gives us control, but also allows us to deepen our advertiser relationships and tap into new budgets” Major advertiser: “We have one private RTB relationship set up. It’s working really well and we’re very happy about it. We’re looking to do more.”30 © 2011 Forrester Research, Inc. Reproduction Prohibited

Publishers have the tools, but inhibitors stand in the way of greater success  Lack of data-driven decision making. Data drives programmatic buying from advertisers. Meanwhile, publishers make arbitrary decisions on impression allocation to exchanges and price floors.  Operational inexperience. Ops teams must work not only with new platforms and toolsets, but must learn to make strategic decisions to optimize yield through RTB.  Poorly defined roles for sales staff. Publishers still want sales to maintain buyer relationships, but most lack personnel familiar with RTB and the RTB buying community. In the words of one marketer: “I don’t know who to contact if I want to set up a private RTB relationship.”32 © 2011 Forrester Research, Inc. Reproduction Prohibited

Three tips for publishers getting into RTB  Pick a single exchange/SSP vendor. In an auction environment, you want to aggregate demand. Pick an exchange vendor that meets your needs and focus on developing success in that one exchange environment.  If you go private, start with a trusted advertiser. If private exchanges are your entry point, start with a trusted advertiser who cares about maintaining a strong relationship with your direct sales team.  Invest in RTB expertise. Ensure you have the right in-house expertise to make informed strategic decisions on the role of RTB in your sales strategy and manage RTB efforts day-to-day.33 © 2011 Forrester Research, Inc. Reproduction Prohibited

Thank youMichael Greene Joanna O’Connell+1 212.857.0790 +1 212.857.0718mgreene@forrester.com joconnell@forrester.comwww.forrester.com www.forrester.com © 2009 Forrester Research, Inc. Reproduction Prohibited

Real-Time Bidding has Grown Rapidly % of DoubleClick Ad Exchange Spend via RTB 100% 80% 68% 64% 67% 66% 67% 60% 56% 58% 52% 46% 48% 37% 37% 39% 40% 26% 22% 20% 15% 8% 0% Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11Source: DoubleClick Ad Exchange, January 2010 to May 2011, figures do not include DoubleClick Ad Exchange inventory won by AdWords 35

RTB Trends: More Formats, More Deal TypesMultiple Formats Display Rich Media Video MobileFlexible Deal Types Auction Direct Deals Anonymous Branded Private Bidded Fixed Price, Pre-Auction 36

Role of RTB in Selling Display Inventory Non-Guaranteed Guaranteed Buyer Access RelationshipsOpen Auction “Traditional” Yield “Private” Auction Direct Exchange Direct Premium Management SalesRTB demand with Boost direct Leverage brand The power of the Total customization controls network yield + RTB handshake, the and service efficiency of RTB The Foundation: Brand, Data and User Protection 37

For Publishers RTB is a Perceived Risk,Requires Mitigating Controls Top RTB Requirements Malware Protection – 50% Data Protection – 48% Preferred Buyer Access – 37% 48 % Buyer Blocking – 37% Anonymity – 26% Of publishers will shift inventory to an RTB platform in 2011 Technology Blocking – 10%Source: Digiday and Google, Real-Time DisplayAdvertising State of the Industry, February 2011, total 38survey respondents n=371, digital publisherrespondents n=101, question respondents n=33

An exciting time forDisplay Advertising $200B“Display advertising can be a $200B industry in less than 10 years.”Eric Schmidt,Executive Chairman, GoogleAdWeek $15.9B in 2014 $10.2B in 2010 39Source: eMarketer, Nov. 2010

Thank You.google.com/watchthisspace 40

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The Arrival of Real-Time Bidding, hosted by IAB, Google, & Forrester

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