Is an RTB supply crisis looming? Ad buyers and sellers debate

As programmatic has become the buying method of choice for online display advertising — overtaking manual digital ad buying last year, according to eMarketer — Neil Sweeney, president and CEO of programmatic mobile ad platform JUICE Mobile, argues that the industry is  too wholeheartedly embracing RTB (real-time bidding) and not considering the ramifications of ignoring direct buying channels like programmatic direct, or considering both sources together.

“We can’t solve everything with the real-time pipe. It’s great when there is ample inventory, but people haven’t taken into account that there is limited inventory, especially in mobile. There is a herd mentality in which people are blindly following RTB but not realizing the signs are all there that the inventory isn’t elastic, and bids will go up,” Sweeney told Marketing Land by phone. “The way the industry transacts doesn’t allow for flexible budgets [between programmatic direct and RTB] and there are going to be a lot of people left out [in] the cold.”

Asked if we aren’t already seeing a shift from an over-reliance on RTB with the growth in programmatic direct buying, Sweeney said, “Not really,” but he does expect that to change as more brands and agencies make much bigger upfront impression buys. Instead of reserving 350,000 impressions from a major media publisher or an ad network, for example, Sweeney expects a buyer might reserve 350 million impressions from that source. “People are going to take larger bets on inventory.” And that will leave those depending on RTB alone with fewer inventory options and paying higher CPMs — in part, he says, because they don’t have visibility into direct-side pricing.

“There is a huge pile of inventory on direct, but people are making huge bets on the RTB side without realizing they’re only looking at half or so of the market. It’s an inefficient market,” Sweeney says.

The solution? “Those two methodologies will be available in one console and you’ll be able to dynamically navigate between them,” Sweeney predicts. Advertisers would be able to evaluate the RTB and programmatic direct markets (available to them) side-by-side and buy accordingly. Asked when and how this might happen, Sweeney expects the shift to be led by brands and agencies — “[I]t will take a few people to get burned before they start moving [in that direction].”

Sweeney makes an interesting argument. And what buyer wouldn’t want to be able to evaluate direct (the futures market) and RTB (the spot market) side-by-side to determine, in real time, whether to act on reserved inventory or RTB, depending on which was cheaper at the moment?

But is the supply crisis that Sweeney predicts coming? Will buyers get shut out (priced out) of big moments like Black Friday on the RTB market if they didn’t reserve on the direct side ahead of time? After speaking with Sweeney, I asked several industry leaders for their thoughts on whether there is indeed a looming supply crisis in which RTB buyers will be caught off-guard, unable to get the impressions they want at prices that make sense for their businesses.

Maria Coletta, Director of the Acquisio Trading Desk, which uses The Trade Desk for programmatic, sees continuing elasticity in the market.

“The nature of real-time bidding allows us to adjust spend and buys incredibly frequently, and prevents us from committing to inventory like many direct publisher relationships or ad networks do. In terms of rising RTB CPMs, the reason there are dynamic prices offered [is] due to the level of inventory you can now purchase that wasn’t available before. Supply is growing rapidly, especially premium supply, since the wide majority of direct publishers are now offering themselves through 1) the open market, 2) the private market, and 3) direct tag/header bidding solutions, which subsequently raise your position in the waterfall.

“The level of choice you have in your target (time of day, mobile device, radius around a store, in-market for Toyota Camrys, all layered and intersected amongst each other to refine the buy) is available. You find your ideal audience as they scour the internet with their activity and you are not limited to one sole publisher who your customer could visit infrequently, or rather you are not limited to traditional inventory buys where you have no transparency into what you’re getting, such as 3 a.m. on CNN’s subsection that focuses on the opposite demographic when most of your audience may not be engaging.”

Coletta added that with the availability of the Private Marketplace and Publisher Direct buys in The Trade Desk, there is a major commitment to futures buying. “We have already slated product plans for this initiative and have been discussing its current demand in the market, especially on an appropriate rollout.”

David Cooperstein, CMO of programmatic direct mail firm PebblePost, says, “The important reason why programmatic is growing is that it is better at matching inventory to audience demand with third-party data. It’s proving to be effective both on the buying and selling side.”

However, Cooperstein sees transparency and quality as bigger issues for buyers than rising RTB CPMs. In a recent ANA survey conducted by Forrester Research (where Cooperstein was a VP and practice lead for nearly five years), 42 percent of marketers said they have purchased inventory through private marketplaces that media companies have created, in part due to transparency concerns. I asked him about Sweeney’s idea of having a way to view and transact on programmatic direct and RTB from the same console. Cooperstein said he could see value on both sides if such a console were publisher-managed and buyers were given visibility only to their own programmatic direct deals.

From the publisher perspective, Rob Rasko, CEO and founder of The 614 Group, a consultancy for leading digital media companies, said at this point, the major sellers aren’t making strategic decisions based on what pipe their inventory is sold through.

“When talking about the larger media companies — such as those with foundations in TV, print and news — the digital sides of their businesses are significantly smaller than the traditional ones — even though the growth rates may differ. In some cases it’s negative growth, and the programmatic portions of the digital businesses are an even a smaller fraction. So, strategic decisions are simply not driven by programmatic, whether it’s programmatic direct or RTB.

“Having said that, the automation of selling media as it fits into a publisher’s long-term plan is a very strategic decision, since advances in reporting and big data analytics will both lead to better pricing intelligence. Those will, in turn, feed overall rate cards and inventory allocations.”

As the technology to operate private marketplaces becomes more available and commonplace for smaller and digital-only publishers, we’re likely to continue to see that private direct sales continue to grow.

Sweeney believes that with major events like the US presidential election and the Olympics, this will be the year that buyers relying too heavily on RTB will feel the squeeze as publishers hold more inventory from the exchanges, and buyers will start to demand more visibility and efficiency across direct and RTB inventory sources.