November 01, 2010

Real-time bidding, which heated up the display ad market in 2010, will continue to gain share in 2011 and become an increasingly significant force for advertisers, publishers and ad networks.

For this type of ad buy, marketers bid on impressions based on the site, the location of the ad, the number of impressions desired and any potential cookie data they can use for retargeting or other segmentation. Publishers “auction off” ad inventory in real time, automatically looking at the bids made by advertisers for various ad slots and which ad should be served based on the user currently visiting the page.

For advertisers, real-time bidding helps them buy audience instead of inventory. For publishers, the process of real-time bidding promises the greatest possible revenue on their remnant inventory, bringing it closer to premium pricing. This in turn means real-time bidding will also have an effect on the position of ad networks, which publishers often turn to in order to fill remnant inventory. Currently, according to Q3 2010 research from STRATA, more than four in five US ad agencies buy online ads through networks, while fewer than half buy direct from publishers.

“The display advertising market is showing continued intense growth, with a projected 14% increase in 2011,” said David Hallerman, eMarketer principal analyst. “That gain will be partially due to real-time bidding, which will make monetizing more pages easier for publishers. Furthermore, the growth of real-time bidding is also partially due to brand marketers’ increased interest in buying display advertising.”

In addition to choosing between buying from ad networks and publishers, advertisers will increasingly be faced with another choice. On one side is classic ad targeting based on a site’s content, or the characteristics of its visitors, and on the other side is the idea that audiences matter but sites don’t, that marketers should follow their target audience wherever they go.

The techniques marketers use for ad targeting can, depending on circumstances, be employed either to advertise on particular sites or reach audiences across multiple sites. For instance, demographic data—the targeting used by the largest share of respondents in a Collective survey—can be used to identify the best way to advertise in either method.

In many ways, the battle between targeting tactics is a battle between web publishers and advertising networks about who owns the data. And from the marketer perspective, the battle affects whether their ad targeting is more effective at particular sites with particular demographic groups, or whether it’s more effective when advertisers buy specific audiences found across multiple sites.

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