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PG.01 INTRODUCTION PG.02 UNDERSTANDING RTB & DSP PG.02 PG.03 PG.04 PG.05 PG.06 PG.06 PG.07 PG.08
RTB Versus Traditional Media Planning and Buying Different Advertisers, Different Audience Values Why Publishers Use RTB Empowering the DSPIt Takes Data Automatic BiddingBillions of Times Per Day Learning and Dynamic Optimization RTB and DSP Benefits A Couple Things to Consider
PG.09 QUESTIONS TO ASK AS YOU CONSIDER RTB AND DSP VENDORS PG.09 PG.10 PG.12 PG.13 PG.14 PG.14
1. Is RTB Right for Your Brand? 2. Should You Choose A Self-Serve Platform of a Managed DSP Service? 3. Is the DSPs Primary Focus on First or Third Party Data? 4. Can the Solution Meet Your Brand Safety Standards? 5. Does the DSP Offer Access to ALL of the Leading Exchanges? 6. Does the Vendor Have a Commitment to Service After the Sale?
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INTRODUCTION
Marketer interest in real-time-bidding (RTB) and demand side platforms (DSPs) has exploded over the last several years. A recent Forrester report stated that 46% of US marketers are already investing or planning to invest in RTB. By 2017, Forrester predicts that 30% of US Display media will be purchased via RTB,i and I predict it will be over 50%. Today there are dozens of exchanges and DSPs vying for your business. Yet arguably the industry has done an inadequate job of truly educating strategic marketers about their value and situational relevance.
By 2017, Forrester
predicts that 30% of US Display media will be purchased via RTB,i and I predict it will be over 50%.
For marketers less familiar with RTB and DSPs, the space can feel a bit confusing. This whitepaper is designed to help bring clarity to the space and outline some questions to consider as you explore whether RTB and DSP-based buying are right for you and your brand, and which DSP approach and vendor might make the most sense for your brands unique situation. The whitepaper begins with an explanation of RTB and DSPs, their benefits, and their drawbacks. From there, we move into a discussion of questions to ask yourself as you consider the relevance of RTB and individual DSP vendors.
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hey enable global ad frequency capping across exchanges which improve campaign T efficiency and user experience. hey empower brands to leverage their own data for targeting. T hey make it easy to apply sophisticated algorithms for bid optimization. T
The exchanges allow DSPs to access the inventory directly through APIs. A DSP is a management and optimization platform that aggregates many RTB APIs (both from direct publishers and exchanges), uses data and optimization to make bid decisions, and then executes the bids. Bid prices depend on the characteristics of the impression being bid on. This includes site and context variables as well as, and perhaps more importantly, attributes of the viewer about to be exposed to the ad. By evaluating information about the
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impression the advertiser can determine how attractive it is before deciding whether to bid on it. The advertiser only bids what they think reaching that particular individual is worth, and if they are the highest bidder for the ad space, their ad is displayed. This all takes place as a site page is loading, hence the name real-time bidding. And unlike traditional media buying: here is no order commitment by the advertiser beyond the impressions bid price T here are no signed insertion orders with individual publishers, but rather one master T agreement executed with an ad exchange.
Now, lets consider the appeal of this web visitor to three different brands: Cosmetics Brand Diaper Brand Car Brand
By examining the known information about this web visitor, we can make some guesses about how much each brand might bid to reach her. Lets start with the cosmetics company. For the cosmetics firm, the relevant facts that we know about the would-be viewer are that she is young, female, and high income. Clearly, young and rich are good qualities for a cosmetics customer generally. However, we dont know if she buys a lot of makeup, or buys her makeup in a store where that cosmetics
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companys products are available. The advertiser does not know for certain whether she is a likely buyer of their products, but does know she has some desirable qualities. As a result the cosmetics firm might bid relatively low for the impression, because they are unsure if shes a great prospect. Moving on to the diaper brand, its clear from the profile above that she may be a great prospect. Shes a new Mom, so there is an opportunity to sell her a lot of diapers in the years to come. Therefore, they would likely bid higher than the cosmetics company, because her possible value to their business is much higher. Finally, the car brand might view this in-market car buyer as an excellent prospect. And because the profit margin is high on cars, getting her to buy THEIR brand would be worth a lot of money. This would likely lead the car brand to bid more for the impression than either the diaper or cosmetic company. If these three organizations were the only three bidders on our female web visitor, the car company would likely win the auction and have their banner display when the web page loads.
Please understand that this is a drastic oversimplification of RTB. Here our example looks at 6 attributes and their likely correlation to a retail sale. In reality, brands might measure hundreds of user-specific attributes against multiple different conversion types to predict the value of an impression in real-time. For example, a brand may optimize towards multiple measurable metrics like site visits, CRM email joins and/or actual product purchases, and may incorporate hundreds of demographic, contextual, and behavioral variables to identify ideal prospects and determine their optimal bid price. But the basic principle that an impression delivered to a particular individual has different values to different brands is the most important idea to come away with here.
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ther sites find that the quality of audience segments O can drive bid prices that are higher than they can get for their general audience. For example, a publisher with an Auto section may find that it can sell its Auto enthusiast site visitors for a high price on the exchanges. till other publishers find it impossible to sell their S entire inventory through the traditional buying model. They use RTB as well as ad networks to monetize unsold inventory.
In short, RTB gives publishers another avenue to make money, the opportunity to increase their yield and the flexibility to try new approaches. Many ad networks have responded by accessing some or all of their inventory through the exchanges versus via direct negotiations with sites. I also believe that publishers are beginning to recognize that some media buyers simply dont want to interact with salespeople they prefer a buying method that is automated. Just as some consumers prefer to buy airline tickets without the help of a travel agent, so too do some media buyers just prefer to get on with it and skip the salesperson interaction. RTB helps publishers sell inventory to this growing group.
A DSP determines the users a brand should bid on and identifies media impressions that will reach these types of users. Obviously the goal is to message people who are most likely to become customers. In order for a DSP to do this successfully it requires direction in the form of data. First, you need to develop a desirable audience profile. Your brand may have a great deal of research as to who its customers are. Such a profile might include measures like gender, age, family status, income, etc.
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Then you need information to determine whether the impressions you might bid on will reach your target audience. To do this you need real-time data about the particular viewer who would be seeing your ad. That data can come from two kinds of places: it can be your own customer data (first party data,) or it can be purchased (third party data.) The advantages of using first party customer data for your campaign are that it is free, but more importantly that it is proprietary and specific to your brand. Exclusive access to this data gives you a competitive advantage against other bidders because it reflects insights that only you have. The challenge is that many brands lack the underlying end-to-end data infrastructure necessary to make that data available to the DSP. The other option is third party data, purchasable from a variety of data resellers. Third party data is purchased on a CPM basis, similar to most digital media. The data is readily available for purchase, but the challenges are that it can be costly and that everyone else has access to it and may be incorporating it into their models.
the relative effectiveness of different user characteristics in order to optimize your bidding strategy.
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the weighting they place on each audience characteristic in order to drive maximum performance. That means that over time, a DSP is getting better and better at setting appropriate bidding prices for your best prospects. Because different DSPs have different algorithms and different access to data, some might perform better or learn faster for your brand than others.
DSPs also offer many forms of transparency. Using a DSP you can quickly identify the best performing targeting data, of transparency. contextual environments, and the like. Further, because the platforms often offer algorithmic optimization, you may learn about effective targeting characteristics youve never considered before. DSPs also offer you visibility into what sites and user attributes performed best. Note, though, that a relatively small number of pubs do not reveal their brands out of fear that they might cause channel conflict with their traditional sales channel.
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Unlike traditional buying models, with RTB you can change your buying parameters in real-time to optimize more quickly and leverage learnings across a greater proportion of your spend.
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Generally, RTB is more relevant for medium-sized or large brands. The more sophisticated your approach to advanced targeting methodologies, the better the fit with RTB. Similarly, companies with a comprehensive data strategy tend to benefit more from RTB because of the value of using first party data in targeting. RTB is less appropriate for when a brand: Buys very little digital display or video media Buys solely on a few sites ocuses on custom units and experiences versus standard units and sizes F Prefers indexing-versus user-based targeting
If more than one of those characteristics apply to you, it may be prudent to forego RTB until your programs change. If you work on the agency-versus the brand side, RTB may make sense as a way of serving
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clients that wish to deploy an audience-based buying strategy. A full service or managed DSP offering enables an agency to reap the benefits of RTB for its clients without hiring a team or altering its accounting and billing processes. Also, the largest agency holding companies have created their own in-house trading desks to manage RTB buying across many clients.
Once youve decided RTB is right for your brand, your first decision is how you want to access DSP capabilities. Here you have two choices: hoose a Self-Service DSP platform. In this use case, you would buy access to C a platform and then hire a staff of people to use it. While some DSPs have sleek dashboards that make it appear easy to manage a DSP program, the reality is that DSPs are NOT easy to use well. There is a high degree of sophistication necessary to create the targeting and business rules that will truly optimize your programs. The person (or people) who runs the DSP will need to be trained in the particular DSP you choose. It is recommended that brands and agencies that choose to operate their own trading desk staff the appropriate statisticians and analysts required to develop sophisticated bid optimization and attribution models in order to be competitive in the RTB marketplace. Keep in mind that these are real media dollars being spent every minute, so you want experts making optimization decisions. se a Full-Service or Managed DSP. Some companies (including Mediaplex) offer U DSP-based buying without the need for you to staff and manage the tool yourself. Under the managed model, the media partner staffs and operates the DSP on your behalf. You can purchase media using an IO rather than making a long term commitment to a particular platform. All buying, serving, reporting, and optimization are executed by the vendor, freeing your team to focus on more mission-critical strategic challenges. While not all managed DSP vendors provide the same level of consultation, customization and service, many advertisers choose a managed service because the vendor is capable of executing more advanced RTB strategies. The most sophisticated vendors will be able to assist a brand in developing a custom data strategy, will have
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the technology and services to support data tracking and management, and will help develop brand specific data models for more accurate bid optimization and attribution. Before selecting a managed DSP vendor be sure to determine if they have one-sizefits-all models baked into their software and if they can truly provide consultative data management support. The decision on whether to do-it-yourself or choose a managed solution is an important one. Many of the DSP companies strongly prefer that customers buy the technology and staff it themselves while providing minimal support. This is in large part because these companies are funded via venture capital. VC firms favor technology over service business models because they are valued higher and offer greater potential profit if/when the company is acquired or goes public. A technology company increases margin with every added installation of their product with very little increase in costs. Technology businesses can be valued at 10+X revenue for example, while media/services companies can be valued at 10+X profit. With service businesses there is a more direct relationship between the size of the business and its operating costs. More accounts mean more people and more expense. While providing a managed service runs counter to VC goals, service businesses often make more sense for brands and agencies.
When you speak to various DSP providers you may find that some have a strong desire to sell you a self-serve platform. The reality of the marketplace is that relatively few brands are actually leveraging a self-serve solution to any degree of scale. Most have chosen a managed DSP offering. A big reason for this is the complexity involved in collecting and managing data, as well as in effectively applying this data towards bid optimization and measurement. All these things are essential to effective use of a DSP. Self-serve platform providers can be a good option for companies that have: A core competency in media buying already dded new resources recently with advanced skills in statistics A commitment to maintaining an internal media buying organization over the long haul. A
For example, a number of very large companies buy all of their media in house for such businesses a self-serve DSP warrants consideration. In addition, several of the large agency holding companies have created DSP divisions to manage RTB advertising buys across their agency brands. These organizations have committed to staffing experienced media traders that
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are capable of fully maximizing the benefit of a DSP. The decision to hire these expert media traders depends heavily on an organizations level of digital sophistication and investment. For most companies, a managed solution is probably preferable. First, there is no need to hire DSP experts or incur training costs to get them competent on a particular DSP platform. Even a relatively modest DSP deployment will require at least one full time employee to staff it. Larger programs will necessitate an entire team to manage efforts. Some companies have tried to staff DSP installations with existing media planners and buyers but the skill sets are actually rather different. It can require significant time and expense to get them trained adequately. Companies with a managed DSP offering have the staff and expertise already. Further, a managed DSP typically works on an insertion order basis, much like in a traditional media buy. The brand and DSP provider develop a campaign buy outlining estimated impressions and targeting strategies. Then the DSP team executes on the brands behalf. In this model, a brands existing accounting and reporting structures require little or no modification. Whichever way you go, its important that you minimize the number of DSPs you work with. The reason is that if you use more than one DSP you may actually be bidding against yourself for inventory, which artificially inflates its cost.
In order for a DSP to work it needs access to lots of audience data. Some data is provided by the RTB source; however, you ideally need to use either your own data or purchase third party data. First party data comes from your existing marketing infrastructure ad tracking of multiple marketing channels, site visitation, CRM data, etc. Companies with a sound data foundation can combine these important data sources and leverage this large customer data set for DSP targeting. If all of your data sources are united in a single platform already, this is a great basis on which to build a DSP advertising program. DSPs can also use partial sets of first party data for targeting. There are many advantages of using first party data in a DSP-based targeting effort: The data are specific to your brand. Its the ultimate form of customized targeting.
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Using first party data for DSP targeting is free. They enable you to assign different values to different levels of current commitment to your brand. By using first party data in your DSP, insights you learn from the RTB buying effort will actually enrich your customer understanding.
RTB is an auction market, and auction pricing (like the stock market) is a function of asymmetries of information. To be successful then in RTB means to have differentiated quality data. Certainly having more than the exchange minimum, but also having the right information and means to process it. For brands that dont yet have a comprehensive data strategy or platform, there are a variety of vendors that will sell you audience data on a CPM basis through exchanges. You define the customer characteristics that interest you, and sources for the data can be quickly identified and implemented. The challenge is that third party data costs money. The more specific or esoteric the characteristic, the more expensive the data is. And if you need to buy multiple data points, each additional data point can add to the total cost of delivering your advertising. Third party data can add significantly to you total media costs. That doesnt mean that using third party data will lead to inefficient targeting it simply points out that third party data are not a panacea because it can add significantly to costs and affect your overall CPM. Some brands also combine first and third party data to enrich audience profiles while keeping data costs under control. As you consider DSP alternatives, concentrate on options that focus primarily on first party data targeting versus third party. Even if your company doesnt yet have a comprehensive data platform and strategy, there are companies (including Mediaplex) that can help you improve your data collection and management efforts.
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Political in nature Unflattering to the category or brand Strongly negative in tone Inappropriate for some other brand- or audience-related reason
The level of protection necessary for your brand is up to you and your company. Some companies have relatively loose standards so they can avail themselves of rock-bottom CPMs. But most brands have stricter standards. Make sure that the DSP you choose offers truly robust brand protection tools. These tools should be proven effective and offer you a variety of brand protection options beyond no porn. DSPs sometimes have partnerships with third party brand protection tools, and may also offer proprietary quality assurance features.
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A big part of the issue is that many of these solutions are created by tech startups funded by venture capital firms. As we discussed earlier, VCs dont like to invest in companies that offer extensive service because the potential return for such businesses is lower than if they sell instances of a tech platform with minimal human involvement. Thats because the marginal cost of creating another instance of a self-serve platform is near zero, while having staff to assist clients costs real money. The tech-centric VC model works well in many categories. But the more complicated the challenge, the more service is critical in realizing its true potential for your brand. Stay away from companies that dont deliver real, ongoing service. The term SaaS, software as a service, is really a misnomer. You want software WITH service, not just a point product with little to no expert help after the sale.
If you do choose to deploy a self-serve platform, make sure the company offers strong training and has a dedicated team available to assist with targeting and optimization and ready to serve when you have problems. For those organizations that are not ready to invest in in-house teams, service-centric partners can make DSP buying as turnkey as making a publisher-direct or network buy.
CONCLUSIONS
I hope that this whitepaper has helped provide some clarity and texture to RTB and DSPs. These are both hot and potentially confusing topics, but the basic principles behind them are actually relatively simple. The idea of valuing every impression based upon the relevance of its viewer is an amazing leap forward for digital media and targeting. It represents a giant step toward the concept of personalized marketing that is clearly where our industry is ultimately headed. While RTB is not for every brand, its clear that more and more brands are seeing a fit between their objectives and this approach to media buying. The keys to making the right decision are: Ensuring the right fit Choosing the methodology of access that is right for your organization Finding the best vendor for your particular situation
Id welcome your thoughts and comments on this paper. Please feel free to email me your thoughts and comments at davidyovanno@mediaplex.com.
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ABOUT MEDIAPLEX
Mediaplex, a division of ValueClick, Inc. (NASDAQ: VCLK), is the technology-empowered analytics and optimization provider that scientifically identifies the best way for brands to invest marketing resources and then executes against those insights with a suite of advanced campaign management tools. Its unique software with service model delivers industry-leading technology coupled with the deep analytics expertise necessary to answer Marketings most mission-critical question: how to maximize ROI from marketing investments. With all the essential software and services needed to correctly collect, manage, interpret, and action data, Mediaplexs end-to-end solution is the first to make genuine data-driven marketing a reality. For more information visit Mediaplex.com or contact us at 1.877.402.PLEX (7539).
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