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What Programmatic Real-Time Bidding (RTB) Means Today

September 24, 2015

Despite it rocketing to the top of the ecosystem, I notice that there seem to be different understandings and even misconceptions about the concept and process of programmatic RTB. In a recent study, 44 percent of advertising professionals surveyed said they have little or no understanding about how programmatic works; So I thought that a post about it could be helpful. 

Programmatic Real-Time Bidding has become an integral part of how everyone runs their business in the advertising industry, from the advertiser to the publisher and all the middle men in between (agencies, trading desks, DSPs, SSPs, etc.) 

 

According to the latest IAB report, programmatic revenues totaled $10.1 billion in 2014, comprising approximately 20% of total internet advertising revenues ($49.5 billion). Adoption rates for programmatic use continue to climb year by year, with IDC predicting that worldwide programmatic spend will reach US $20.8 billion in the year 2017, increasing its share of online and mobile display advertising spend to 26%. In addition, publishers plan to increase their investment in programmatic selling in the coming twelve months and expect higher growth rates than are currently being seen (from AdExchanger’s "The State of Programmatic Selling, 2015" Report).


What is Programmatic Real-Time Bidding Exactly?
Publishers auction off selected parts of their inventory while advertisers, or their middle man, bid on an impression of interest based on target markets (I explain what this is in the paragraph below). If the bid is successful, the ad is instantly visible on the publisher’s site. 


Typically, real-time bidding is initiated when a user visits a website. The visit prompts a request – the “ad call”, and with it goes snippets of data about the visitor, such as location, demographic information, type of browser, among others. Then, the information is processed and submitted to the system. Based on that information, typically, the ad with the highest bid that is ‘looking’ for that type of an impression (visitor) is served – and the ad is displayed on the visitor’s web page. The same process is repeated through a loop system until all ad slots are filled. The transactional process is fast and is completed within a hundred milliseconds. This includes from the time the ad call was submitted until it was served.


Real-Time Bidding Within Programmatic 
Sometimes the industry just talks about programmatic. Sometimes, it talks about programmatic RTB. Is there a difference? YES. 


Real-time bidding is a programmatic tool with a limited scope and function. Programmatic is the large scale automation system that handles all the parts to selling and buying. 


Now That’s Cleared Up, Why is Programmatic RTB so Popular?
There are many compelling benefits to utilizing programmatic RTB, for buyers and sellers alike. Advertiser demand is high because it allows them to cherry pick the impressions that are most likely to meet their campaign goals. 


For sellers, programmatic RTB can deliver a 100% fill rate for their inventory. In addition, programmatic selling methods allow publishers to use computers to automate and bring real-time intelligence, to what is otherwise a very complicated, lacking in data, and requiring manual effort process.


And Yet, There is a Downside to Programmatic RTB
But programmatic selling is not without its risks. A large chunk of product inventory available today through current programmatic methods is often questionable. The quality is often not up to par, and publishers end up displaying ads on their site that are poor quality.  


In addition, the possibility that the ad served is not compliant with the publisher’s company policies is high. This is often the result of third party placements, because the publisher has no control over what ad is served and from where. Here are a few other reasons why programmatic RTB isn’t the whole package:

  • Malware Malvertising is characterized by hackers looking for exploits to insert their malware – and they find them. Even robust programmatic systems can still have issues with malware. A publisher who works with certain ad servers or exchanges may think they are protected, as typically ad servers have anti-malware systems built in. However there is a fatal flaw in the methodology of programmatic, as inventory is still sold via a third party and so bypasses the ad server/exchange anti-malware system altogether. (For more information about malvertising, check out The Secrets to Malware Detection in Online Advertising post.)
     

  • Unsupported Ad FormatsIt’s all too easy, through the input of incorrect data, for an unsupported file format to appear on a publisher’s site. When this happens, visitors are kept waiting as the page attempts to load the faulty ad. Or they may receive an error message. In either case, it’s a less than ideal brand experience for users. 
     

  • Content classification isn’t standard - Content verification and classification is extremely difficult to standardize. What’s ‘racy’ to one publisher may be rather tame to another. For example, a publisher can set a policy to block certain categories they cite as brand inappropriate, e.g. female mud wrestling, which they classify it as adult content. However, if the advertiser classifies the creative for women’s mud wrestling as ‘sports,’ then the female mud wrestling ads could still be served on the publisher’s pages.  

Looking Ahead
To deal with the risks and pitfalls of programmatic RTB, there needs to be a guardian to verify all the third parties involved – this guardian can give the control back to the publisher. 


If you allow me to toot the GeoEdge horn, GeoEdge monitors the ads that appear on a publisher’s site, detecting when something is amiss and sending real-time alerts that help the publisher prevent security issues before they become serious breaches. We even advise on remediation measures to take if malware is identified. 


Programmatic RTB is a boon to the advertising ecosystem, yet still has its flaws. That’s why GeoEdge developed (and continues to develop) the needed cutting-edge solutions to solve these problems. 


Look out for our next programmatic post which will discuss The Future for Programmatic RTB.

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