A lot can happen in a year.
Twelve months ago, real-time bidding wasn’t exactly a hot topic in Canada and now it seems that RTB is all the media buyers and planners want to talk about.
And yet, just a small fraction of online inventory is being bought through RTB. To figure out why that is, Marketing put together a special sponsored roundtable moderated by new IAB president Chris Williams. Five of the industry’s most connected, most knowledgable RTB experts discussed the real-time landscape in Canada, separated the hype from the reality and made some predictions about where we go from here.
Chris Williams: What percentages of spend are you seeing moving into the RTB space?
Renee Hill: I would say that at the beginning of the year, 4% of the media spend was in RTB. I was talking to Casale and AppNexus and they both said they see probably 7% to 8% going into RTB spend. It’s going up slowly. It’s not as big as the States. The States is 47% of display inventory.
James Aitken: We’re starting to see the re-messaging [retargeting] scale here in Canada, which is sort of the most valuable component of RTB. That’s where we’re starting to see a bigger percentage of spend growth.
Aitken: Yeah, retargeting. You’ve seen Facebook announcing that they’ve opened up for RTB. It brings scale to re-messaging and that’s where advertisers start paying more for the display space. The whole acronym “Race To the Bottom” becomes null and void because advertisers can start seeing the value of purchasing that inventory. Just like we saw where search started to scale in terms of cost-per-click pricing. We’re going to see that happen with CPM pricing and display because advertisers are more wiling to buy that cookie, because it’s more valuable to them.
Williams: Are you seeing that happen? Higher pricing for CPC or CPM?
Aitken: We’re already doing it. We’re starting to outbid competitors to get that impression, get that cookie—dare I say—that user.
Hill: I just don’t think that retargeting is the value proposition behind real-time buying. I think that it’s database. It’s how you grow your database. It’s whether or not you’re organically growing your database for your client if you’re retargeting based on that database.
Williams: What do you mean by database?
Hill: A database of users. If you’re a car client, you’re going to have lots of different sections on your site that are going to have different cars. Someone interested in a minivan is not interested in a sports utility car, normally. What you’re going to do is create a customized database of people who’ve been to certain sections of your website, as well as a customized database of certain searches that they’ve done on Google or Bing. Then you’re going to retarget based on that.
Aitken: Well that’s advertisers first-party data that you’re talking about and that is retargeting. I think we’re saying that same thing.
Andrew Casale: I think, to date, the data driving RTB has been first party, generated from the marketer’s site directly. A trend I’m hearing out of the U.S. is syncing offline into online; the idea of using the entire customer database from a more traditional sale. Finding the access point of one of the users online, then tagging them through an offline-online sync. It’s kind of like retargeting, but with a traditional database.
BETTER QUALITY INVENTORY
Williams: What are we seeing in terms of improving the quality of inventory?
Aitken: We’ve got more local Canadian inventory that we can now bid on. That’s really where we’re going to see a lot more value.
Mladen Raickovic: What we’re seeing in Canada is publishers come in and say, “Okay. We want to play. We want to put our premium inventory in there. But we want to work with the premium advertisers.” I think that’s part of what’s happening. The premium side is coming to the table and saying, “Let’s do this.” If this space is going to exist, then let’s take a leadership position in it and let’s own it to the extent that we can.
Dana Toering: That’s a differentiation that needs to be made as well. You’re talking about a private exchange. For the most part, what we’ve been talking about is the open exchange. There’s a difference. If you’re talking about publishers coming in and pulling their inventory into these private [exchanges] CPAX being the perfect example of that. It’s much different than the inventory you’re buying across the exchanges, because we could all argue that’s the long-tail of inventory. When we’re talking about too much supply, that’s where the too much supply is.
Raickovic: I think that every single publisher has a different way that they’re working with RTB and exchanges. Being on, say, Huffington Post on one of those deep article pages arguably could be a better environment than being on some random long-tail site. There’s still I think, to me, a difference between HuffPo and some long-tail site that no one’s ever heard of, some anime site that has a ton of traffic that doesn’t convert.
Casale: And that’s where price comes in. It becomes the determining factor. What we see every day is transparency drives price. Publishers that participate on RTB blind get less demand. Less demand equates to lower CPMs. Publishers that participate transparently or go as far as to establish private exchanges that work directly with the buy side, they’re getting higher CPMs. We’re in an over supplied state. There’s no differentiation and the prices are very low. The publishers that are opting to make their impressions available in the channel but do so in a more private environment where they’re exposing transparency, they’re going to get the price that commensurate to that environment.
I’M AN ADVERTISER. CONVINCE ME TO RTB
Williams: Let’s say I’m an advertiser. I’ve got pixels taken from three exchanges, two networks and now I’ve got search marketing as well that’s tagged up. I’ve got all sorts of data coming at me. How do I know what’s actually working? Everybody’s got pixels firing all over the place.
Aitken: That I think is the people behind the machine. People get caught up that once automating trading begins it’s all about automation. But you need people to look at the data. You need the agencies to look and make real-time decisions and place more aggressive bid strategies if they see a user that’s been on a click-to-search link in the past hour, bid on display, bid on the advertiser’s site actually more aggressively.
Williams: But my problem is that three networks all claiming the same conversion.
Casale: The click gets a ton of credit to the scenario you described Chris. If you’ve got three networks on the plan, three publishers and three DSPs in today’s climate, in many cases, the last click still gets the credit. If all the other media vendors were delivering the message on time, on cue, on target and lifting consideration, lifting awareness to the point that the conversion happens. None of them are getting any credit.
Williams: From an advertiser perspective, they’re used to going out and choosing a number of publishers on a plan, but with RTB, is it getting to a point where you actually have to choose one?
Aitken: No, I totally disagree with that. Because, for instance we’re integrated with local Canadian publishers and we do that on the ground because you have to have local people on the ground to integrate. The reality is most agencies are doing ad-serving contracts out of New York and London.
Hill: This is one of the things I’ve always thought about trading desks. Trading desks are owned by the agencies, run by the agencies. They’re not run in Canada and are often run out of the States. If a Canadian buys a U.S.-based trading desk, why do they need to sit in Canada to do it?
Raickovic: You know what? That’s changing in time. There’s a lot of the U.S. trading desks starting to show up here. Let’s face it, this is early days. Right now a lot of it has been driven out of the U.S. because it had to. In Canada, we’re starting to repatriate some of this stuff back home and creating our own opportunities here in market.
Toering: If we’re looking at what happened in the U.S. and if we’re going to trend what’s going to happen in Canada, I’ll speak for Ad.com, there was a massive shift to RTB with some major key, core clients. Ad.com is the largest ad network in the U.S. Core clients shifted away. Within six months, they all came back.
Casale: We saw the same trend.
Toering: We have to be clear. RTB doesn’t work for all advertisers. One of the biggest things was on the service side. They weren’t able to handle the scale and drive the same performance. It’s not for everyone or every advertiser. It’s part of the media mix.
Aitken: I don’t buy that.
Toering: That’s fact.
Aitken: Look at other markets. When automated trading begins, everyone moves to it because it’s just more efficient. There needs to be correction of supply and demand. Like the NASDAQ. People started trading. As soon as automation begins, the best thing for the NASDAQ was the crash in ‘87, because there was no liquidity and nobody could trade. People all moved to it because they can actually trade in real-time. Not someone you pick up the phone and call. That’s what we’re doing now. You have to call a sales rep and make an IO. But when you have an interface you can place buys, it’s just more efficient. People can use it and that’s why Eric Schmidt in Ad Tech 2011 said, RTB is going to take offline above-the-line media over because of the efficiency it brings to the market.
Casale: RTB is incredibly efficient. It’s automated buying, but I don’t think the parallel to finance is perfect. That’s also where the service layer comes through. We’re not trading stocks. Every single impression is different.
RTB ON TV?
Williams: You could be trading television, right?
Casale: That is a good point.
Williams: Do you see that in the future?
Casale: Adjustable TV is already happening. IP-enabled devices like television set top boxes can now be redirected through some of the agency desks. They’re buying TV in very low quantities now in an automated way.
Toering: AOL as a content company, we have all our content through all the IP-enabled televisions and boxes. When you’re watching video and whatnot, we serve ads.
Hill: There’s going to be a lot of video online. Basically, video online is going to be skyrocketing and one of the things we could be talking about at this roundtable is pre-roll being available in RTB. There’s very little inventory because it’s always sold out. This is something we’re going to be spending $20 CPM on in the RTB landscape. Pre-roll almost validates the RTB business model.
Williams: Is this really the big burning issue? Moving TV dollars into RTB online video biddable space?
Casale: It’s a little blue sky.
Hill: It’s a value. Everyone’s going to make a lot more money when we have more video, more pre-roll.
Aitken: It’s accountable media and it’s going to cannibalize above-the-line media for sure.
Toering: I think the broadcasters will go kicking and screaming like a lot of publishers have. It’s taken a while in Canada because there has been reticence from publishers to let go off that class 3 of their inventory.
WHAT ABOUT MOBILE?
Hill: The broadcasters are going to fight it every single step of the way. Where I’m really surprised we’re not at, and I don’t know when we’re going to really get there, is mobile. When are we going to have real-time bidding on mobile devices? I keep on joking, it’s always the year of mobile. But mobile does not need to have an ad server. Mobile should just be real-time bid ads.
Toering: Most publishers are embracing an all-screen philosophy when they’re actually pushing their content. If you have a user who loves your content, you want to make sure they can access it whenever, wherever they are. The beautiful thing about mobile devices, where real-time bidding can be incredibly effective in that space is the location-based. If you’re able to tell that I’m walking past the Starbucks on the corner on Bloor and Church and you want to flip me a dollar off on a coffee, that’s priceless.
Casale: That’s a big transformation that has to happen though. Just to be clear, RTB is happening in mobile devices. It’s just not good. It’s automated buying with no audience. Display trains buyers to buy the audience and you can’t transfer that knowledge or buying model into mobile today because there’s no cookies, there’s not audience data, it’s just not happening. Today, from what I see in the U.S. market, it’s not happening to a huge degree yet. I think that as people start to realize the value of being in front of the consumer on this device you’ve got to conform the buying model to where the user is. That style of buying will probably become more and more common.
Williams: Do you think this is actually adding more money to the whole ecosystem for online display? Or is it just shifting online display dollars around?
Casale: I think all these digital formats are just consuming more and more mindshare. More people are engaging with their desktop, laptop, smartphone, the iPad… I think inevitably what’s going to happen is other mediums are going to lose out. We’re spending more time in digitally connected devices so we have to win more share. I do think a lot of what’s happened to date has been budget shifting. Display has lost some dollars to mobile campaign because the agencies are testing things out.
Toering: If you go way back to the beginning, the first marketers to embrace online advertising were performance driven marketers. The first advertisers to really and truly embrace RTB are performance driven advertisers. Brand advertisers, for the most part in Canada, are still sitting on the fence because they don’t necessarily trust the medium for their brand and that is why there’s always going to be a place for premium because brands want to be in a brand-safe environment.
Williams: Let’s put it this way, how about I’m LVMH. I’ve got the agency saying, “You should do some RTB.” What’s the argument?
Aitken: I think our pitch to them would be: Listen. RTB is all about service. Getting the re-messaging, the prospecting component right. You, big brand advertiser, should work with a local RTB specialist partner whose going to enable you to access some of the Canadian premium inventory—CPAX, all of Casale, these guys with these premium sites—and actually have opportunities to bid on that inventory. That, for you, is going to be very valuable because you’re going to take advantage of the correction of supply and demand that is happening in the digital media space. Wouldn’t you, big brand advertiser, like to access where everyone is at a low rate? And a much more inexpensive rate than what you’re paying for television.
Toering: Just so you know, big brand advertiser, 30% of the inventory across these premium properties are already sold on a paid-reserve basis. You’re likely going to be getting lesser-valued inventory at a more competitive price.
Casale: I would not respond to the brand by saying anything about price. I don’t like to associate the RTB model with low prices, and I don’t think that’s a good way to pitch it. I would tell Louis Vuitton: RTB is a way to put your data to work for you. If you have a huge customer database that’s spending all kinds of money on very expensive products, you ought to be using that to drive your spending so that you can get something from that data.
Beyond that, one tactic that I hear from the U.S. market that’s becoming more common, specifically with luxury marketers, is going a step beyond just their dataset. Actually looking at consumer purchase behavior and saying, this is a prospect likely to spend $5,000 on a purse. Let’s forget about all the product lines that you sell. This is a $5,000 purse prospect. You can afford a lot of money on that one user, because he’s going to shell out a lot of money. This goes beyond saying, “Let’s get you mass reach for pennies, because it’s cheap.” This is saying, “Let’s put your data to work. Pay a lot for that one user.” To a publisher, they’re going to get a fair price and you’re going to put your data to work. I don’t think it’s a race to the bottom.
Raickovic: I completely agree with you. I feel like in Canada, there was this whole methodology around buying as cheaply as possible, because I think a lot of advertisers didn’t understand it. I think we’re actually getting to the point where advertisers are starting to understand their analytics and numbers, and they can attribute or bid appropriately for users that are worth it. It’s okay to bid a $10, $100 CPM if it’s going to hit your back-end goal.
ANSWERING PRIVACY QUESTIONS
Williams: Originally you talked about some of the offline databases. When Canadians start understanding these relationships between offline databases and online behavioral targeting through RTB, do you think there’s going to a backlash there?
Casale: I get a lot of Harry Rosen cards in the mail. I never signed up for that, but I get them. We don’t seem to have an issue about it when it’s in an offline setting. Consumers have an acceptance for that. Frankly, I like those flyers. Sometimes I’ll go to the store on the back of them. There’s a way to do it right and way to do it wrong.
Aitken: I think the education also needs to be around why cookies are valuable to the general public. Take Amazon-created cookie technology, I go to Amazon and I get my 25% off and it says, “Welcome back, James.”
Hill: At the end of the day, when you’re a consumer online, you have a way better experience with cookies.
Toering: Ultimately, it’s all about that. It’s hitting the right person, at the right time, with the right ad.
Raickovic: There’s a whole education piece. I think we’re working through that. Different organizations are looking through that. The problem is, even if we implement those icons [to alert visitors when a site is using tracking-based advertising], there still needs to be a very big initiative or push towards education at the consumer level. Because we want them to feel as comfortable getting a Harry Rosen 20% off card in the mail as they do online. There is a disconnect there now and I think it’s largely because of the education piece.
Toering: Marketers need to be responsible, but users also need to be equally responsible.
Williams: Is there anything else anyone wants to bring up?
Toering: We talked a lot about the efficiencies that real-time buying does and I think a great, positive thing that RTB-enabled programmatic buying does is it’s going to enable more time for publishers to sit down with their agencies and get more strategic about what they’re doing outside of standard display advertising: integrations and using content more effectively in distributing the brand message. Larger and more integrated sponsorship opportunities, and if you’re saving that 20 to 30% of the day because you’re not just faxing back IOs and going through the rigamarole of how a lot of inventory is bought today, it’s going to create more innovative ad formats outside of standard ad formats. You’re going to have more strategic discussions. Agencies are going to be able to serve their advertisers better and publishers are going to be able to offer much more compelling user experiences.
Raickovic: There are strategies beyond what we know today and I think that’s what we’re all going to be working towards. Both from the premium, publisher side and advertiser side around—what are the other opportunities? Programmatic doesn’t just mean performance. Programmatic can take up a much bigger section of the media spend.
