Are you aware of real time bidding? From the time you are directed to a URL and before that web page loads (typically less than a quarter of a second) an advertiser receives ad impressions that have been specifically targeted by the user about to access the URL. Based upon demographic, geographic and behavioral information (including past and current browsing), the advertiser analyzes it in context of placement and user experience; then decides what to bid on it; and decides which ad to show. All this takes place before the page loads...
One might call the emerging trend of Real Time Bidding (RTB) the next generation of online advertising optimization technologies. RTB is expected, at least by some in the digital advertising world, to fundamentally alter the process of online advertising as we know it. Real Time Bidding is instant advertising. Advertisers actually bid on a specific ad impression to an individually targeted user.
While it is estimated that approximately 1 percent of Internet advertising used this approach in 2009, RTB is expected to increase by 3 to 5 percent in 2010. Such an increase would create a lot of buzz and attract the attention of many more advertisers.
For the most part, most online advertising is purchased based on assumptions about certain audience segments. Ad networks and ad exchanges sell advertising based on a targeted market segment. The impressions are grouped and sold at a pre-negotiated price based on cost per thousand impressions (eCPM). While certain parameters are set, e.g., number of impressions per user, etc., the ad buy is essentially a bulk buy geared to a certain user segment. That segment is targeted based upon statistical averages across the market segment.
As for RTB, it targets a specific user with a specific ad. No longer are statistical averages applied, but specific demographic, behavioral and geographic information about an individual user is created to allow advertisers to bid on that user's information in real time based on how well they believe how qualified the user is for their advertising.
Advertisers may decide to skip the ad or bid on it based on the real time information available to them. For instance, they may decide not to bid on an ad for a highly qualified user based on the fact that the user was exposed to a large number of online ads in the minutes previous to the impression up for auction.
It takes impressive technology to make this all happen in less than a quarter of a second. This advanced technology is becoming more and more available. Google, Yahoo, Microsoft, AppNexus and others offer it as part of their advertising options.
The result is highly targeted ads to very qualified people. To the user, the ads he or she sees appear to be more relevant to their interests. Those touting the technology have data that demonstrate RTB impression-based ads are more effective than segment based advertising. They result in significant increases in both eCPM and advertising ROI. Ad networks see it as a win-win situation for all concerned, plus get more qualified users exposed to the ad and publishers receive a higher price for the advertising impression. All the while, users see more relevant ads.
Many others are concerned about the privacy issues involved. I have written on the concerns of the FTC, U.S. Congress and consumer groups on the use of behavioral targeting. You can read the following posts for additional information on this issue by clicking one of the below links:
- Do You Know How Americans Feel About Behavioral Advertising?
- Online Tracking Regulations to take Effect Next Year.
- Online Advertising: New Consumer Icon for Behavioral Advertising.
You can also read a recent article in the New York Times on real time ads: Instant Ads Set the Pace on the Web.
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