Real-time bidding sounds painful

by greg on September 4, 2009

So, ad exchanges are implementing real-time impression-level bidding, as opposed to traditional impression-level auctions based on predefined rules. Mike explains the distinctions, Cogblog discusses implications.

This sounds pretty expensive to implement vs. auctioning based on predefined rules. First, you’ve got to make a decision about every impression. If you’re using real-time bidding, and you’re buying one impression out of a hundred, it’s got to pay the cost of the ninety-nine other decisions not to buy.

Next – someone correct me if I’m wrong, but I think you’ve got to have as close to real-time reporting as possible. There’s not much point making decisions in real time if the info you base them on only gets updated every few hours. Real-time reporting at scale is neither easy nor cheap.

Finally, your models have got to account for the data that can’t arrive in real-time, or you’re going to put your efficiency gains at risk. For instance, click and impression fraud is generally filtered out by the exchange after the fact, but before your reporting’s updated. CPA offer conversions take time to trickle in- forms can’t be filled out instantaneously.

Add all of the above up, and you may be wishing you stuck with your predefined rule sets.

{ 4 comments… read them below or add one }

Brian O'Kelley September 5, 2009 at 4:55 am

Greg – great points, and you’re right on all of them. I would expand the conversion lag challenge to include attribution in general. If your attribution model doesn’t work, you’re screwed in either a traditional or RTB world.

John Ebbert September 5, 2009 at 7:56 am

I agree but…. How about this – I think conversion reporting does not necessarily need to be real-time to take advantage of the benefit of real-time, impression-level bidding.

If, in real-time, you can bring your own data and analyze what the impression is worth to you using predictive models on conversion metrics – well then, this is a lot better than what’s going on today where plenty of waste occurs when buckets of impressions are bought in hopes of finding a couple that might work.

Jerry September 5, 2009 at 8:49 am

In the spirit of creating products to serve your customers, I’ve been scratching my head over which buy-side customers really want RTB (aside from the lead generators and other bargain hunters.) Can you imagine any of the big media buying shops having expertise bidding in real-time? Maybe the VMMs and CPMa’s of the world, but the guys who learned media three-martini-lunching the upfront?

On the publisher side, not nearly enough liquidity for there to be an efficient market in real-time. Usually, no liquidity means a huge bid-ask spread, but with perishable inventory low-bids clear. Publishers who sign up for this are going to compound the problems they’ve already sold themselves into: selling inventory to bargain hunters at bargain prices (and then getting snubbed by media buyers who know they can find inventory at cut-rates.)

The idea that our five year old, few billion dollar online media marketplace needs the same type of infrastructure as our centuries old, multi-trillion dollar financial markets seems a bit fantastic. What they really need is tools that better maximize the ‘R’ of the advertiser’s ROI (rather than the ‘I’) and the ‘C’ of the media’s CPM (rather than the ‘M’.)

All IMHO, natch.

Brent September 6, 2009 at 2:09 pm

RTB is huge for people because it disintermediates big networks, if one were so inclined. The cost of decisioning hundreds of impressions to find the one you want is a lot less than the cost of buying hundreds of impressions to find the one you want. The result is that, to cherry-pick a lot of inventory today, you have to be a big network. That is why, when people looked at the ad network market prior to RTB, it was a natural monopoly. The guy with the most advertisers paid the most for impressions, the guy who paid the most got the most inventory, the guy with the most inventory gets the most advertisers, etc..

With the advent of RTB, people can pay to cherry-pick impressions in front of the network. That is enormous!

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