Real Time Buzz

"Real Time" - the web 2.0 buzz phrase of the minute. Here is how it applies to display advertising:

Ad Exchanges – like Yahoo’s Right Media - are technology platforms for buying and selling impressions. Instead of selling its inventory via 1000 impression blocks through upfront-negotiated CPMs, the publisher can offer its inventory in an exchange and sell each impression to the highest bidder. These auction-based systems choose the highest paying campaign based on the buyer’s pre-defined CPM bid. In some instances, the buyer provides a click or action target, and the exchange’s internal optimization system develops a predicted eCPM bid. However, the use of a pre-registered CPM bid is starting to give way to what is referred to as "Real Time Bidding (RTB)."

With RTB, the publisher’s ad server enters an ad exchange and asks buyers whether they want the impression request, and if so, how much they are willing to pay. The launch of Doubleclick's AdEx last month is the first exchange capable of accepting bids in real time, but many others - including Yahoo's Right Media and Microsoft's AdECN are said to be working on accepting bids in real time as well.

The most significant impact of this is with the Ad agencies (the guys who've typically had a hard time making any margin off the display advertising work they do for clients). This is why the world's major agency networks are creating "Demand Side Networks" - with exchanges, ad Agencies can now bypass the traditional ad network for access to massive amounts of inventory. And with the application of real-time bidding technology, the agency can optimize thier clients ad placements - just like the Ad networks have been doing for years.

This is why the traditional ad network model is dying. If you're a smaller ad network, your business doesn't have much time left. The ad agencies are going to start relying less and less on network inventory, in favor of the inventory available through the exchange. This inventory offers more control, transparency, and eventually, results.

Next Generation

Online display advertising has become a very crowded and complex business.  The arrival of advertising exchanges ushered in a number of new ad networks, data providers and technologies.  The display advertising business is experiencing a major transformation and I've created this blog to collect all my thoughts as I watch it unfold.