5 Common Myths About Real-Time Bidding

As with any emerging technology, there are always bound to be myths that circulate, often due to misunderstandings. Even if they do happen to have a hint of truth to them, they can often misrepresent reality by taking exceptions and presenting them as rules.

Other times, people might take a vendor’s approach to a certain technology and draw general conclusions about that technology. In this article, I plan to touch on five common myths that I come across in discussions about real-time bidding (RTB).

Myth #1: The RTB Market Contains Only Low Quality Inventory

There have been cases where suspect “publishers” have supplied the RTB ecosystem with highly questionable inventory. This inventory oftentimes lacks transparency (i.e., you don’t know where the ads are actually showing up) or is riddled with automated bots that produce false clicks, which skew performance statistics for advertisers.

However, most supply-side platforms (SSPs) and demand-side platforms (DSPs) actively work to remove such inventory from the marketplace. Low quality inventory benefits nobody in the long run, which is why most vendors make an active effort to remove it altogether. Such inventory is definitely the exception and not the rule.

Fact: Inventory from some of the largest publishers in the world is sold via RTB.

For the most part, inventory in the RTB ecosystem is the same inventory you find directly from the most well-known publishers on the web (e.g., msnbc.com, weather.com, foxnews.com, ebay.com, etc.), albeit at higher session depths. And while low session depth does carry some inherent value, performance can be found at any session depth, which is why claims that RTB inventory is generally low quality are a myth.

Myth #2: You Don’t Know Where Your Ads Are Running

Knowing where your ads are running is a large component of transparency. How much transparency you get depends on two things: your DSP and the inventory sources.

Fact: RTB is one of the most transparent ways to buy media.

As far as DSPs go, reporting varies by vendor. Some platforms may only report campaign-level statistics, with very little insight as to where your ads are actually showing up. Such lack of transparency cannot be attributed to RTB in general, but to the specific vendor.

Platforms that pride themselves on providing maximum transparency will report on multiple levels of granularity, including: campaign level, domain level, placement level, creative level, and so on. At the end of the day, DSPs can only report what is made available to them by SSPs and the publishers they bring to the marketplace.

On the topic of inventory sources, there are bad actors (as mentioned in the previous myth) that supply the RTB ecosystem with opaque inventory. But, to reiterate, this is a small percentage of inventory, and to claim that the entire RTB marketplace lacks transparency is a dishonest generalization.

Myth #3: RTB Only Works When You Apply Cookie Data

As we’ve discussed before, the fundamental innovation of RTB is that every ad impression is auctioned off and evaluated by advertisers in milliseconds before being delivered. This has allowed advertisers to focus on buying audiences, using cookie data, as opposed to simply buying inventory from specific publishers.

Fact: Running campaigns using cookie data for targeting is only one way to approach RTB.

Some people (tech vendors included) have assumed that RTB is only made for buying audiences using cookie data, which is a limiting perspective of RTB capabilities. While I definitely agree that having good first-party data for retargeting purposes is extremely powerful and performs very well in general, there are many other targeting tactics that don’t rely on cookie data, but rather on other metadata associated with impressions.

This may sound like blasphemy, but many advertisers achieve success with RTB the old-fashioned way — by targeting specific publishers. One of the challenges with using data is getting scale. By targeting specific publishers, you can effectively reach a target audience at scale, in a contextually relevant environment. So, to say that RTB only performs with the use of cookie data is another myth that shouldn’t be propagated.

As a corollary, many people also believe that targeting specific publishers (or websites) isn’t possible with RTB. Perhaps this is a problem with how initial DSP vendors chose to design their platforms, but it’s more than possible to approach RTB campaigns in a way that is publisher-centric, rather than audience-centric.

Some DSPs focus solely on audience-based campaigns that require cookie data to function, while others offer advertisers the choice of either targeting audiences or specific websites. In any case, publisher and domain information (for the most part) is passed along to DSPs by the supply side. So, it really depends on the DSP whether or not they choose to make that information targetable by advertisers.

Myth #4: Getting Started With RTB Requires A Large Budget

Speaking as someone who works for a self-serve DSP, it pains me to read comments from marketers that believe RTB is only available to large advertisers with big budgets. That may have been the case in the early days of RTB, but in 2013, it’s simply untrue.

Fact: The budget required to get started with RTB depends on the chosen vendor.

RTB technology has without a doubt revolutionized the way a large chunk of display advertising is bought and sold. From a marketer’s perspective, display advertising can now produce results like never before. However, the power and efficiency of RTB was initially only available to big brands and agencies.

As the industry has evolved, DSP vendors have evolved along with it, giving access to this world-class technology to advertisers of all sizes. Several vendors now offer buying platforms with very few barriers to entry. So from now on, when you think about RTB, know that it’s accessible to advertisers of practically any budget.

Myth #5: RTB Is The Future Of Online Display Advertising

One often sees bold statements proclaiming that RTB is the future of online display advertising. My theory is that this myth stems from the fact that people often conflate RTB with the idea of “programmatic,” believing them to be synonymous.

While RTB is indeed a programmatic technology, not all programmatic technologies involve RTB, which is where the confusion sets in. And while RTB may indeed be the future of indirectly sold display ad inventory, to position RTB as the future of all display advertising is unrealistic. (Unless we are talking strictly about mobile advertising, in which case RTB may actually be its saving grace.)

Fact: The future of online display advertising will be largely programmatic.

RTB plays a particular role in the display ad ecosystem. It’s a very efficient way to optimize the yield of unsold inventory, from the perspective of publishers. From an advertiser’s perspective, it’s a vastly more efficient way to reach target audiences and meet certain campaign objectives.

For some advertisers though, RTB inherently lacks the ability to reach certain goals, like context, customization, and guaranteed delivery. In such cases, direct buys are required to meet those objectives. As a result, publishers can dictate higher pricing, which is why most of their revenue comes from direct sales. Keeping that in mind, it’s no surprise that the majority of display advertising dollars (~80%) currently come from direct transactions.

Ultimately, the adoption of RTB rests with publishers, and from a revenue perspective, there is no incentive to plumb their entire inventory through RTB when most of their revenue still comes from custom direct sales.

However, the programmatic “plumbing” that makes RTB possible is very valuable infrastructure. Even though direct sales don’t show any signs of dying off, leveraging programmatic infrastructure to make them more efficient is still a possibility. In fact, the industry is slowly moving towards such a reality.

If that happens, and publishers flock to fully programmatic solutions to sell the entire spectrum of their inventory, the “bidding” element of RTB may become too limiting. We would need to redefine RTB from “real-time bidding” to “real-time buying.” But whether that occurs remains to be seen.

Overall, it would be more appropriate to say that “programmatic” is the future of online display advertising, which would encompass RTB as a vital component. And at this moment in time, RTB remains a growing technology, gaining traction from advertisers that are experiencing the numerous efficiencies first hand — and that’s no myth.