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  1. 1. Real Time Bidding andPrivate Ad ExchangesWhat  works  (what  doesn’t)and  what’s  needed 1
  2. 2. Table of ContentsExecutive Summary 3Wide-Scale Awareness 4Private Exchanges Will Grow 5Buy-Side Concerns 6Sell-Side Concerns 8What Publishers Want 9NEEDED: More Understanding, Control 11Conclusions 13Methodology 14About 15 2
  3. 3. Executive Summary1. Wide-Scale Acceptance 5. ‘Human  Element’  Important More than half of buy-side (e.g. agency, One in four publishers who are concerned marketer, consultant) and with  RTB  eliminating  the  “human  element”  in   sell-side (e.g. digital publisher who sells ad selling feel that face- to-face negotiations advertising) respondents already actively and dedicated account management are participate in real time bidding (RTB); almost extremely important in their likelihood to use all expect the market for RTB and private ad RTB in the future. exchanges to grow significantly over the next 12 months. 6. What Publishers Want Sixty percent of publishers want RTB2. Private Exchanges Will Grow solutions that offer: Advertisers and their buy-side agents expect - and want - to spend more ad dollars  Advanced control options through private ad exchanges. One key  Exclusively premium demand reason for this is that they perceive private  Dedicated RTB budgets exchanges to offer more RTB control and  Real-time reporting and insights value than broader ad networks and  Dedicated account management exchanges.  An enterprise-level exchange platform to build their own RTB3. Buy-Side Concerns enabled private exchange Media buyers want to see greater emphasis on inventory quality, more guarantees for 7. More Education Needed brand safety, and greater transparency in A keener understanding of market mechanics reporting. Two-thirds of agency/marketers and more control over the processes will said such improvements would prompt them encourage greater participation by those on to spend more through RTB. the supply and demand side of the equation. Despite the growing activity in the automated4. Sell-Side Concerns online advertising markets and despite Four in five publishers are concerned that RTB relatively high professed technology literacy will devalue or commoditize their inventory, rates, it is clear that the details of market while approximately three-quarters fear sales operations and opportunities elude many channel conflicts and eroding relationships participants on both sides of the buy-sell with media buyers. More than half of equation. publishers  fear  RTB  will  eliminate  the  “human   element.” 3
  4. 4. Wide-Scale AwarenessMore than half of buy-side (e.g. agency, marketer, consultant) and sell-side (e.g. digital publisher who sellsadvertising) respondents already actively participate in real time bidding (RTB); almost all expect the marketfor RTB and private ad exchanges to grow significantly over the next 12 months. Overall awareness of RTB in the marketplace is high at 92 percent Awareness of RTB and and eight in ten have at least a basic understanding of theprivate ad exchanges is technology and its use in digital advertising. This awareness is higher among publishers, 94 percent of whom say they are aware high, but so is of the technology and 74 percent of whom have at least a basic confusion. This understanding of how it works. provides an opportunity for those Specifically, 84 percent of publishers are familiar with demand side platforms and private ad exchanges; 80 percent, willing to help media with agency trading desks; 76 percent, with open ad exchanges; buyers and sellers 74 percent, with supply-side platforms; and 64 percent, with data leverage the market. management platforms. Recognition was slightly less on the buy side, with 90 percent of agency/ marketers saying they’re  aware   and 81 percent with at least a basic understanding.Despite the growing activity in the automated online advertising markets and despite relatively highprofessed technology literacy rates, it is clear that the details of market operations and opportunities eludemany participants on both sides of the buy-sell  equation.  “I  have  many  colleagues  in  the  industry  who  are  woefully  ignorant  of  what  RTB  is,  and  what  it’s  doing  in  the  market,”  said one executive.A willingness to educate RTB participants on automating so-called mid- and long-tail inventory can serve asa differentiator for middlemen and help preserve the value of premium properties. Sell-Side Buy-Side (Publishers) (Agency/Marketers) Awareness of RTB Technology 94% 90% Have a Basic Understanding 74% 81% 4
  5. 5. Private ExchangesWill Grow What percentage of your online/digital advertising budget/inventory is/will be bought/sold through RTB? 25% 20% 21% 19% 15% 10% 13% 10% 5% 6% 6% 0% Publishers Agency/Marketers 12 months ago Now 12 months from nowThere are real growth opportunities for both RTB through real-time bidding, a leap of 9 percentageand private exchanges, as demand grows on the points from today.advertiser side. Advertisers and their buy-sideagents expect – and want – to spend more ad In addition, more than two in five publishers whodollars through private ad exchanges. One key don’t  currently  use  private  exchanges  say  they  are  reason for this is that they perceive private likely to start using them in the next year.exchanges to offer more RTB control and valuethan broader ad networks and exchanges. What  do  those  publishers  consider  as  “must-have”   features? The exchange must:“I  see  real time bidding as inevitable, and as partof the ecosystem,”  said  one  sell-side respondent. 1. Be verticalized by category“You  need  to  get  smart  and  play  in  it,  and  there’s   2. Have full-service account managementstill  room  for  differentiated  direct  sales.” 3. Have high enough fill rate to justify the bottom lineRTB budgets for both publishers and agency/ 4. Be part of a turnkey solutionmarketers are expected to rise over the next 12 5. Offer full pricing controlsmonths; publishers  said  they’ll  sell 19 percent of 6. Allow for human interaction within theonline/digital advertising inventory available exchange for buy-side questions/consult 5
  6. 6. Buy-Side ConcernsAs eager as they are about the future of RTB, buy-side respondents (agency/marketer) have somereservations about spending more through RTB platforms. Specifically, buyers want to see greater emphasison inventory quality, more guarantees for brand safety, and greater transparency in reporting. Two-thirds ofagency/marketers said such improvements would prompt them to spend more through RTB.More than three quarters said they would spend more if there was a greater emphasis on quality or viewableimpressions. “What’s  lacking  is  better,  more  premium  inventory  from  high-quality  publishers,” saidone buy-side respondent. Other concerns included: inadequate guarantees for brand safety (70 percent);inadequate transparency in the RTB process (65 percent), and vague value propositions of different supplysources (64 percent). Q: Indicate how strongly you agree/disagree with the following statements regarding RTB: I  would  spend  more  on  RTB  if…   77% There was greater emphasis on quality impressions 70% There were more guarantees for brand safety 65% There was greater transparency in the RTB process 64% It was easier to distinguish between supply sources 54% There were more creative options/formats 53% I understood the technical processes more 36% There were more DSPs to choose from 80% 60% 40% 20% 0% Buyers who responded 4/5 or 5/5 6
  7. 7. Q1: Rate how important each of the “There  is  still  nothing  as  controllable  as  site   following is when purchasing or specific buys where we have more control over considering the purchase of online/digital where  we  are  running,”  said  one  agency   respondent. advertising via RTB. Q2: Rate your level of satisfaction with Also, cited was a lack of creative formats and options, such as rich media (54 percent), and each of the following RTB characteristics. ignorance of the technical processes involved (53 percent). There is a strong disconnect between 88% what agencies and marketers feel is important and Performance/ROI 38% their satisfaction with those things. For example, 86% 88 percent of buy-side respondents citedTargeting options 32% “performance,  return  on  investment”  as  the  most 81% important RTB attribute, Yet, a mere 38 percent Inventory quality 25% said they were satisfied with their ROI. 78%Reporting/insights 32% Similar disparities were seen in other 77% attributes, as well. The availability of targeting Transparency options was cited by 86 percent, though only 32 32% percent said they were satisfied. Inventory quality 0% 20% 40% 60% 80% was cited again and again as a sore point among Importance Satisfaction buy-side respondents. 81 percent said it was important to them, but a meager 25 percent said they were satisfied. 7
  8. 8. Sell-Side Concerns “ the effectiveness of our brand relationship with the buyer & buying process; and therefore significantly diminishing the human impact with the non-quantitative aspects of the “ “Automated  processes  diminish  the  need  for speaking with direct sales reps, therefore diminishing buying/evaluation  process.”Four in five publishers are concerned that RTB will devalue or commoditize their inventory, whileapproximately three quarters fear sales channel conflicts and eroding relationships with media buyers. Morethan  half  of  publishers  fear  RTB  will  eliminate  the  “human  element.”  There  were other perceived downsides,as well. Forty-six percent of publishers fear that RTB use will limit their control of inventory transparency andrates; forty-two percent fear buyers will use URL level transparency to make purchasing decisions. “Programmatic  buying  is  allowing  CPMs  to  go  down  from  advertisers  we’re  used  to  getting  a  better  price  from,” said one sell-side  respondent.  “Agencies  have  used  their  trading  desks  to  compress    CPMs,  threatening to move more into RTB exchanges, driving prices down for direct  buys.”Displacing direct sales efforts brought a Q: Rate how concerned you are with each of therange of responses. Those with more following when selling via RTBexperience understood that a healthy digitaladvertising ecosystem supports both directand programmatic sales, and that humanintervention is an important element in Commoditizing 84% inventorymaintaining that balance. For those withless familiarity, the prospect seemed morelike an either/or proposition. Sales channel 76% conflict“The key here is getting smarter in eachchannel and maximizing those channels toachieve whatever market balance is Eroding directavailable to you,”  said  one  publisher.  “Top   72% relationshipsdigital properties in the country are goingto have a given advantage towards thedirect side; the smaller companies need to 0% 20% 40% 60% 80%find ways to scale up on the programmatic Pubs who responded 4/5 or 5/5side. 8
  9. 9. What Publishers WantFrom RTB & Private Exchanges “Sixty percent of publishers said they would beinterested in RTB solutions that offer:  Advanced control options (price floors, “ “Customer service and human sales contact is one of the key attributes in selling. You get better feedback through personal contact.” demand sources, selling transparency, blocks, etc.)  Exclusively premium demand with dedicated RTB budgets For those already operating a private exchange,  Real-time reporting and insights (bid four technological factors were highly valued: win/loss, average CPMs, demand verticals, etc.) 1. Ad server compatibility  Dedicated account management, support, 2. Cost structure/fees and intelligence 3. Ease of implementation  Enterprise-level exchange platform to 4. Technology plan/track record of build your own RTB enabled private effectiveness in implementing exchange improvements/enhancementsIn deciding on a vendor to power a private Seven of ten publishers who are concerned withexchange, full-service partnership was cited as an RTB  eliminating  the  “human  element”  in  ad  selling  important factor, particularly by those not yet feel that face-to-face negotiations and dedicatedoperating a private exchange. It is essential, they account  management  are  “important”  or  said, that solution providers take the time to help “extremely  important”  in  their  likelihood  to  use  their sales team use the technology to its full RTB in the future. If human interaction isadvantage. Above all, publishers want RTB eliminated altogether, critics say, customer servicetechnology partners to offer a fully managed and customer feedback are greatly diminished.solution, including everything from sales strategy “RTB  eliminates  opportunities to get or save ato coaching, to facilitating introductions to ’sell’  with  unique,  customizable  opportunities  or  to  demand sources. They also want to be able to sell top sell a client  that’s  ready  to  increase  spend  but  inventory through direct negotiations, and be able needs  hand  holding,”  said  one  publisher.to connect with agency trading desks. 9
  10. 10. Eighty-two percent of publishers cited the importance of dealing directly with buyers to negotiate uniqueterms. The ability to set price controls (for example, setting reserve bids, according to advertiser industry,demand source, brand) was cited by 73 percent of publishers who sell through private ad exchanges.Likewise, 73 percent of respondents emphasized the importance of being able to segment inventory, that is,to be able to decide which sections, placements, etc. are available for purchase. Q: How important are the following features when selling through a private exchange? Direct deals (Deal ID) (directly negotiate and set rules to accommodate specific/unique terms with buyers) 82% Price controls (setting reserve bids according to demand source, advertiser industry, brand, etc.) 73% Inventory segmentation (defining which sections/placements/etc. are made available for purchase) 73% Full-service technology partner (willing to comment on sales strategy, provide resources/intelligence, and 55% introduce demand sources) Real-time insights and reporting (comparison charts, bidding activity by rate and brand vertical, etc.) 55% 0% 20% 40% 60% 80% Pubs who responded "Very Important" 10
  11. 11. NEEDED: Better Understanding,More ControlA keener understanding of the market mechanics and more control over the processes will encouragegreater participation by those on the supply and demand side of the equation. Platform providers that canfacilitate this understanding have an opportunity awaiting them. When asked about areas of RTB they wouldlike to understand better, respondents were able to easily identify a number of points of confusion orignorance. They would like to know, for example, the differences between RTB, private ad exchanges, supply-side platforms, demand-side platforms, agency trading desks (ATDs), and data-management platforms(DMPs) – and how these differ from ad networks. They also want to know more about the mechanics ofaudience targeting, for example, how granular or accurate can audience targeting get and how are theparameters identified. Q: How familiar are you with each of the following? 100% Publishers Agency/Marketers (who responded very or somewhat familiar) 80% 84% 84% 80% 76% 74% 73% 72% 70% 60% 64% 62% 56% 51% 40% 20% 0% Demand Side Private Ad Agency Trading Open Ad Supply Side Data Platform (DSP) Exchange Desk (ATD) Exchange Platform (SSP) Management Platform (DMP) 11
  12. 12. Q1: Rate how important each of the following is when Meanwhile, there is a strong purchasing or considering the purchase of online/digital disconnect between what both advertising via RTB. publishers and agency/marketers feel are important RTB attributes Q2: Rate your level of satisfaction with each of the and their satisfaction with them. following RTB characteristics. Publishers say that maintaining control of their inventory is the most important attribute of any 96% RTB platform. However, only 28 Control 28% percent of respondents expressed satisfaction 92% with their ability to control Ad quality 36% inventory. Similarly, 92 percent said that ad quality was 88% Reporting/insights important to RTB. Yet, only 36 32% percent of publishers are satisfied 88% with  the  ads.  “Schlocky  ads are Transparency 36% appearing on my site,”  griped   one publisher. 84%Operational efficiency 44% 76% Performance 32% Human 72% interaction/input 24% 0% 20% 40% 60% 80% Importance Satisfaction 12
  13. 13. Conclusions 1. Real-time bidding and private ad exchanges have big opportunity for growth, fueled by rising demand on the advertiser side. 2. Buyers want to see greater emphasis on inventory quality, more guarantees for brand safety, and greater transparency in reporting. 3. Sellers want fully managed RTB solutions, the ability to sell inventory through direct negotiations, and the ability to connect with agency trading desks. 4. More than 7 in 10 publishers believe RTB will cause their inventory to be commoditized, their direct- sales efforts to be displaced, and their CPMs to erode. 5. A large gap remains between what buyers and sellers think is important and their satisfaction with current offerings. 6. A  large  gap  also  remains  between  buyers’  and  sellers’  understanding  of  RTB  technology  and  the   technology’s  true  potential. 7. Opportunity awaits for solution providers that can fill these two gaps. 13
  14. 14. MethodologySurvey Method Represents Leading U.S. Publishers by Content and Advertisers by Ad Category and  All data collected via online interviews by Media Type Advertiser Perceptions  Qualitative responses collected via phone  Automotive/Motorcycle/Off-Road/RV and interviews by Advertiser Perceptions Related (Domestic and Import)  Incentives included cash and sweepstakes  Baby, Child or Parenthood Related  Consumer Electronics (Non- Sample: US Publisher, Marketer and Agency Computer/Software) contacts from The Advertiser Perceptions  Consumer Packaged Goods Media Decision Maker Database and third-  Entertainment party databases as needed.  Financial Products/Services (including Qualification: Involved in Digital Insurance and Real Estate) Display/Video Media Decisions.  Home and Appliances Understanding of RTB Technologies.  Liquor, Beer and Wine (Domestic and Advertiser past 12 month minimum spend of Imported) $500k.  Mens Apparel (Including Accessories, Jewelry and Watches) Directional Data: Some findings in the  Mens Toiletries & Cosmetics presentation may reflect data with low bases,  Pharmaceuticals & Remedies (OTC and as noted. DTC)  Retail Profile Overall (%)  Technology (Hardware, Software or Services) VP & above 33%  Telecommunications (Cellular, Mobile, Wireless) Director/Supervisor 27%  Travel  Womens Apparel (Including Accessories, Jewelry and Watches) Manager/Planner/Buyer 40%  Womens Toiletries & Cosmetics  Energy (Gas, Oil, Electric, Environmentally Friendly/Green)  Quick Service Restaurants (QSR) 14
  15. 15. AboutINDEX Platform Advertiser PerceptionsINDEX Platform is a global digital advertising Today, Advertiser Perceptions is the world leadertechnology provider offering enterprise grade in providing the media industry with research-solutions, intelligence and support for publishers based advertiser insight and guidance necessaryto maximize advertiser demand for their cross for strengthening brands and increasingchannel media. Through the INDEX Platform advertising sales, market share and competitiveexchange  or  a  publisher’s  own private exchange, advantage. We specialize in determining,publishers receive fully transparent real-time analyzing and communicating what advertisersbidding (RTB) management technology and think—their plans, opinions and motivations.access to premium demand. Our proprietary database of media decisionIts parent company, Casale Media, continues to makers is one of the largest in the world. Theestablish a strong presence in digital advertising, advertiser survey and questionnaire developmentworking directly with premium media process that we employ ensures optimal response.organizations, while focusing on brand-safety and Focus and media industry expertise enables us tocontrol for advertisers and publishers. effectively analyze and accurately interpret the research that we conduct on behalf of our clientsHeadquartered in New York and Toronto, the who represent many of the largest internationalcompany is guided by its dedication to need- media companies.based development and a quality-focused culture. Advertiser Perceptions INDEX Platform 1120 Avenue of the Americas, 74 Wingold Avenue 4th Floor Toronto, ON M6B 1P5 New York, NY 10036 TEL: 416-785-5908 TEL: 212-626-6723 15