Real-time bidding (RTB) for online video is poised to explode over the next 18 months. According to the Forrester Consulting study "Online Video RTB Primed for Dramatic Growth," U.S. online video RTB spending will reach $387 million in 2012 and $667 million in 2013.
But what is causing this rapid growth?
The surge is primarily due to the success RTB achieved already in display. Those using programmatic buying for display advertising have been among the early adopters of RTB in video. Their familiarity with the technology and audience-based buying has lowered barriers to entry, which will allow online video RTB to grow faster than its display counterpart.
Similar to display advertising, RTB for online video is being used as a mainstream pricing and delivery mechanism for a wide range of inventory types from premium to long-tail. There are two buying models for online video RTB, which affect different sides of the ecosystem – bid-based exchanges and direct deals. Let's explore both.
Bid-based exchange buying
Bid-based exchange buyers tend to have a mix of brand and direct response goals, and are generally less concerned with where their ads will appear as long as they are able to access the audience details before placing a bid. Some premium publishers are skeptical to adopt this model, as they are worried about price cannibalization and channel conflict. However, cutting-edge publishers are using this buying model to increase yield by letting the RTB demand compete with their direct sold deals for impressions. By facilitating a true auction, anytime direct sold is preempted by RTB buyers the placement clears at a higher rate, driving up eCPMS.
Direct deals allow a buyer and a seller to take advantage of operational efficiencies of RTB, and the ability to target audiences via data (age, gender, behavioral, keyword, etc.), without worrying about price fluctuation that can take place in a bid-based exchange. This buying model is primarily used for brand buyers most concerned with high quality, and who demand access to premium inventory from top publishers.
How does it work? A pre-negotiated rate is set between buyer and seller, and buyers get a "first look" at a publisher's entire inventory to map to desired audience segments. By committing to a certain level of sell through, buyers get to cherry pick their audiences to drive their campaign performance.
While these two buying methods are driving the extraordinary growth of online video RTB there are several factors that the industry needs to address in order for the market to reach its fullest potential.
Limited transparency and toolset immaturity
For both buyers and sellers, transparency is a major part of RTB's value in online video. As this portion of the online video market continues to grow, vendors in the space will need to work together to offer more transparency into the video impressions buyers are bidding on. Steps have already been taken to address this by providing buyers with more details about placements, site data and information regarding how much buyers lost a bid by, which enables vendors to price bids differently in the future.
Lack of measurement consistency
In order to bring more advertisers on board, the industry as a whole will need to focus on developing a consistent measurement standard across the board. With so many different solutions on the market that offer various forms of measurement, buyers are struggling with a way to measure the true value of RTB. To achieve measurement consistency, the industry needs to work with the IAB to adopt a unified measurement standard for RTB. Several companies have already started that process.
Inventory quality and premium publisher adoption
While premium publishers realize the value that RTB brings to advertisers, they are concerned about channel conflict and price cannibalization. However, publishers should not be concerned with these two factors, as they will overlook the operational efficiencies gained by RTB and the increased prices as RTB bidders and traditional buyers compete over impressions.
So, what does this all mean? There are two models that provide the flexibility required to drive dramatic growth in the online video RTB market. Leading publishers are already familiar with both models, and are achieving results because of them. However, there are several factors that the industry needs to address in order for the market to reach its fullest potential. Bottom line – RTB is growing in video because the ecosystem has already been through this with display, efficiencies are demanded, and publishers and advertisers now have more options to tailor to their individual unique needs.
Mike Shehan is founder and CEO of SpotXchange.
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