Bidding Wars in Advertising

Earlier in the week, Emarketer released an updated spending forecast for 2013 RTB advertising in the U.S.  Hold on…is everyone clear on what RTB advertising is? I’m not going to lie; I had to do some additional research to be clear of it myself.  Let me explain it to you the best I can.

The process of real-time bidding starts when a user opens a page on a website, causing it to start loading.  At that time, the website sends out a “bid request” to thousands of potential advertisers describing all of the information they have gathered from cookies about the user (such as age, gender, location, recent searches, etc.).  Based on the information provided from the publisher (website), advertisers evaluate if this is someone they want to target with their advertising and if yes, within about 100 milliseconds the advertiser places a bid.  The publisher then determines the highest bidder and allows them to place its ad on the page.  Astonishingly, the entire series of to-and-from communication between publisher and advertisers takes place in 300-500 milliseconds, causing no visible delay to the user.

So are we all clear on the process of real-time bidding?  Great – now let’s get back to the article I found on adage.com.  In the article titled “Real-Time Ad Spending Growing Faster Than Expected”, Alex Kantrowitz shares the findings of a recent Emarketer report and comments on the effects it could have on the advertising industry.

To sum it up:

–          Total U.S. RTB spending in 2013 at $3.34 billion, up from the $3.32 billion eMarketer predicted in June

–          Expectations that RTB spending in the U.S. will increase by 73.9% over last year

“The growth of ads bought using real-time bidding comes as more advertisers familiarize themselves with complex automated buying ecosystem, and seek to reach audiences through a more targeted, and — in some cases — cost-effective process,” said eMarketer in a statement accompanying the revised forecast.  To visually accompany this statement, I have found an infographic on Business Insider that shows the mobile real-time bidding ad ecosystem.

Quite complex, eh? But advertisers are learning the ropes and have been investing more in technologies that drive efficiency over premium ad placements.  More money is now going to tech middlemen rather than publisher pockets; a warmly welcomed development for the ad tech industry but not likely for content creators.  So it’s great for digital publishers, but what do all of you think?  Is the money landing where it should?

Jaclyn Bickerton, Social Media, Raven5 Ltd, Oakville & Toronto Ontario, August 2013

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