Real-time bidding—think eBay for advertisements—has been a popular way to buy display ad inventory for quite a while. Mostly, that means banner ads across a huge range of sites, and the ad sellers are who you'd expect—Google, Yahoo, etc. Publishers looking to advertise would frequently go to online auctions as a last resort, looking to get back a fraction of their asking price—say, $4 on an ad that would originally have cost the buyer $15.
Now, a Forrester Consulting survey, commissioned by RTB market SpotXchange, says the market is on track to grow from $190 million to some $387 million this year, buoyed by the growing popularity of online video in general and the popularity of the video format among advertisers—it's harder to beat with an ad filter and harder to skip over or tune out than display ads. By 2013, Forrester said, the market should double again, to $667 million.
The popularity of the format gets more publishers interested, which drives up volume as well as CPMs; it's also more popular with ad sellers since it's centered around a few popular hubs and can be more directly audience-targeted than traditional my-God-they're-everywhere display ads.
The auction format, says SpotXchange CEO Mike Shehan, helps to naturally bring together publishers and ad sellers who want to reach the same audience—a problem with the fragmented world of online advertising and one that has slowed the industry's growth.
"There's just a lot of margin compression; it's high cost to run any online campaign. When you do a [traditional] TV buy, it's a fairly straightforward transaction," Shehan said. Online, though, there are a lot of employees associated with every transaction, since the most popular video publisher in, say, the gaming market might not be the same today as it was three months ago. "If you can take some of the cost out by automating it, the buy side is going to gravitate toward that," he said.
Shehan said that his publisher clients, who include Real Networks, MetaCafe and LiveStream, are getting first dibs on ad inventory, when in the recent past advertisers would come to him as a last resort. "Six months ago I would say 1 percent of our marketplace was first call," Shehan said. "Now I'd say 20 percent of our marketplace is first-call."