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What impact will real-time bidding have on online display ad pricing?

Posted by Scott Severson on October 29th, 2010 at 8:09 pm

We’ve been hearing about Real-Time Bidding (RTB) for some time now, but we have yet to see it widely available. All indicators point to 2011 being the year that we start to see RTB commercially available for advertisers. According to PubMatic, Real-Time Bidding will account for 20% of all non-guaranteed advertising by the end of 2011. I’m personally going to be interested to see the impact on inventory pricing.

The basic premise of RTB is online ad inventory will be auctioned off at the impression level. Advertisers will be able to place a bid on an impression opportunity based on the site, ad location, user impression count, and potentially any cookie data that the user passes for retargeting or other segmentation. It sounds easy until you try and do it several billion times a day in real-time.  I think that RTB makes a ton of sense for publishers and advertisers, and provides the technologically nimble ad network and advertiser a competitive advantage.

The platforms are bullish on RTB being a boon to publishers. The value proposition being that it will help publishers raise their CPMs. PubMatic is one of the pioneers in the space and Co-Founder and CEO, Rajeev Goel, says of RTB’s potential “Online advertising is on the brink of becoming a seller’s market for the first time in a decade.”  Of that, I’m not sure.

To be clear, I am a huge fan of RTB; and at Adfusion we’re doing our own work in the space. However, as opposed to creating a seller’s market, I tend to think that RTB creates a marketplace where online inventory, which in case you didn’t know is a commodity, seeks its appropriate price levels. Some inventory today is clearly undervalued and RTB will take care of that. However, the premise that it’s going to be a game changer for non-guaranteed inventory pricing remains to be seen.

One Response to “What impact will real-time bidding have on online display ad pricing?”

  1. Jeff Pesek says:

    Interesting thoughts Scott, thanks for sharing.

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