Forrester Report: There’s Money Just Lying Around in the Real-Time Bidding World

Obstacles to adoption include measurement problems, concerns over inventory quality

Digital video has helped one of advertising's fastest-growing sub-industries find a new foothold: a Forrester Research study commissioned by TubeMogul, an RTB buying platform, shows both the potential and the pitfalls of the RTB market, which Forrester suggests will reach some $687 million in gross sales as early as next year.

RTB allows advertisers to purchase inventory a la carte—directly from the company running the ads. These days, it's almost entirely a digital proposition, with purchasers going to eBay-style websites and buying up display, pre-roll and other video ads simply by entering in the desired metrics (audience type, price range, penetration) and clicking a button. It's a very simple system and one that RTB marketplaces and proponents believe will change the face of digital advertising by moving the entire industry away from a model mediated by ad agencies.

But that's not happening quite yet. Briefly, the obstacles to be overcome include problems with measurement, which continue to plague the digital marketplace in nearly all of its forms—Nielsen and comScore, among others, are still fighting it out for supremacy in the marketplace, but neither technology yet inspires total confidence. Still, TubeMogul CEO Brett Wilson contends that RTB's perks make its growing pains easier to bear.

"Everything's completely transparent that's enabled by real-time bidding," Wilson said. "The targeting is more precise and more discrete, and those are pretty significant advantages over ad network buying." Wilson sees clients exercising greater autonomy, and thinks that trend is likely to continue as those advertisers begin to see their margins increase. "These executives are moving from a world where they lean on vendors—'Here's what I need done, don't tell me how you did it'—to a world where they need control."

There are going to be problems, of course. Inventory bundling—in which a publisher requires a client to buy one property in order to buy another—doesn't just exist because it increases the size of each deal. It's also a way for a website or network owner to push its less popular products on advertisers who would ordinarily avoid them. "We need more publishers and websites to make their inventory real-time biddable," Wilson admits.

Still, there's almost always inventory that doesn't get sold, even on popular websites and videos, and while RTB has been a venue of last resort for many companies, some are finding that they get traction for even their less popular properties, providing the pricing is fair. And where there are good deals on premium advertising to be found, you'll likely find big-ticket advertisers, too. "Publishers originally viewed real-time bidding as where you go when all else fails," Wilson said. "That's changing."

As measurement standardizes, RTB is likely to become more popular with clients; the question is whether or not it will eventually become the way most business is done in online advertising. Wilson believes that it will. "Honest to god, if you and I worked at a publisher and looked at the cost of this, we'd eliminate our sales forces immediately," Wilson said.

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