This document summarizes a Forrester Research report on real-time bidding (RTB) for digital ads. It discusses how RTB uses a "pipe" to announce ad opportunities to bidders and a "brain" for bidders to evaluate impressions and bid in milliseconds. It also outlines challenges for buyers like lack of standards and quality concerns, as well as challenges for publishers in utilizing RTB effectively. Overall, the report examines the growth of RTB and considerations for both buyers and publishers in using this programmatic approach to digital advertising.

1. The Arrival of Real-Time
Bidding
Scott Spencer, Director of Product
Management, Google
Joanna O’Connell, Senior Analyst,
Forrester Research Inc.
Michael Greene, Analyst, Forrester
Research Inc.
June 15, 2011

2. “Pipe” “Brain”
A real-time bidding API A real-time bidder
Real-time bidding requires two
distinct layers of technology
2

3. … the “pipe” announces
details about the ad
space and audience to
eligible real-time bidders:
For every Ad slot
impression…
Geo
Content
User
3

4. …the “pipe” is
responsible for
protecting publishers:
To facilitate Malware Buyer
transactions… protection blocking
Data
Anonymity
protection
Preferred Technology
buyer access blocking
4

5. … the “brain” evaluates
each individual
impression to answer:
In 100 Do you want to show
milliseconds… an ad here?
At what price?
With what message?
5

6. …the “brain” will
base these
decisions on:
To find audience Data
at scale…
Targeting
Optimization
6

7. Ad exchanges Ad networks
Sell-side platforms Demand-side
(SSPs) platforms (DSPs)
Trading desks
Other media buying
intermediaries
“Pipes” “Brains”
Have a RTB API Have a real-time bidder
Real-time bidding is supported by a
vibrant ecosystem of companies
7

8. 8 © 2011 Forrester Research, Inc. Reproduction Prohibited

9. Forrester forecast:
RTB is here to stay and the buying
community is largely embracing it.
9 © 2011 Forrester Research, Inc. Reproduction Prohibited

10. Marketers do want less waste, better targeting, and
more insight
10 © 2011 Forrester Research, Inc. Reproduction Prohibited

11. Transparency
11 © 2011 Forrester Research, Inc. Reproduction Prohibited

12. RTB enables transparency – in its many forms –
increasingly a “must have” for buyers
“We now have optics into all the
variables entering into the
equation. We know what’s working
– there’s no more ‘black box’.”
“Transparency is the whole reason
why I am doing this. I wouldn’t feel
comfortable telling a client – ‘oh yeah,
we’re just putting your ads up’.”
12 © 2011 Forrester Research, Inc. Reproduction Prohibited

13. Control
13 © 2011 Forrester Research, Inc. Reproduction Prohibited

14. Buyers want to be in the drivers seat – to be able to
make deliberate, strategic, repeatable decisions.
“‘We can do that’ has become the answer
– whatever the client is trying to do, we
now can do directly. I’m a control freak
and so is my team – knowing we’re
empowered with these tools is great.
“Now we’ve got the controls of search
and the bells and whistles of display.”
14 © 2011 Forrester Research, Inc. Reproduction Prohibited

15. Granularity
15 © 2011 Forrester Research, Inc. Reproduction Prohibited

16. RTB enables buyers to segment much deeper than
‘traditional’ display buying has allowed
“As our program is running, we’re
thinking, ‘how do we break the buy
into chunks to better toggle up and
down what’s working and not?’”
“I can see exactly what fueled the
decision to buy any given impression
at any point in time. I know that I
bought that impression on that page
because X, Y, Z was true.”
16 © 2011 Forrester Research, Inc. Reproduction Prohibited

17. Why do these things matter?
17 © 2011 Forrester Research, Inc. Reproduction Prohibited

18. But it’s still early days and there are
plenty of challenges hampering the
efforts of RTB buyers.
18 © 2011 Forrester Research, Inc. Reproduction Prohibited

19. Buyers bemoan the lack of standards
19 © 2011 Forrester Research, Inc. Reproduction Prohibited

20. Quality concerns come up again and again
“One of my biggest challenges
is getting quality inventory. I’d
spend more if the good
inventory was there.”
“We see a lot of poor quality
inventory. Blogs, UGC, piracy.
There’s a lot of crap out there.”
20 © 2011 Forrester Research, Inc. Reproduction Prohibited

21. It’s still largely a flash banner opportunity
“In terms of brand buying, RTB plays a
small part. Most brand campaigns are
large rich media placements. I find RTB to
be used for the smaller units where you
may want to target your specific audience.”
“We do have a surprising amount of
brand dollars flowing through our
trading desk. But what’s lacking is the
ability to deliver expanded creative.”
21 © 2011 Forrester Research, Inc. Reproduction Prohibited

22. Entrenchmentremains an issue
Entrenchment
22 © 2011 Forrester Research, Inc. Reproduction Prohibited

23. Some recommendations for buyers considering bid-
based display buying
 Educate yourself. The more strategic thinking you bring to the auction-
based marketplace, the more you’ll get out of it. As one trading desk
executive noted, “A marketplace allows fair value to come to bear for
those with the most information.”
 Treat this as a long term strategic opportunity. This is not just another
line item on your plan and shouldn’t be treated as ‘just another ad
network.’ It’s a fundamentally different model, which has very tangible
benefits to buyers…if well executed.
 However, it’s ok to test into it if you need to. Just do it strategically –
isolate a cookie pool, isolate media sources from each other – so that you
don’t set the test, or yourself, up to fail.
23 © 2011 Forrester Research, Inc. Reproduction Prohibited

24. For publishers, there’s a perception problem with
RTB and exchange-based buying
When advertisers hear good things…. Publishers hear frightening words
24 © 2011 Forrester Research, Inc. Reproduction Prohibited

25. The first instinct might be to dig
into the trenches
25 © 2011 Forrester Research, Inc. Reproduction Prohibited

26. But premium publishers CAN
succeed in the world of RTB.
The real question is how.
26 © 2011 Forrester Research, Inc. Reproduction Prohibited

27. Despite early fears, RTB hasn’t turned
media into pork bellies
In fact, Forrester finds that quality
inventory is what RTB buyers want
most today
27 © 2011 Forrester Research, Inc. Reproduction Prohibited

28. Publisher experience shows that buyers are willing to
pay for quality
“CPMs have exceeded our
expectations during our test phase.
CPMs are 3x-4x higher than what we
got from ad networks and moving in
a positive direction.”
“We haven’t seen any evidence of
direct sales cannibalization. It’s
certainly a risk but we think we can
manage against it.”
28 © 2011 Forrester Research, Inc. Reproduction Prohibited

29. Publishers now have the tools to protect against risks
and make the most of the RTB opportunity
 Price controls. Set variable price floors to protect the direct sales channel
and maximize yield
 Ad blocking. Protect the publisher brand and minimize channel conflict by
blocking ads by source or by category
 Private RTB functionality. The entry-point for many publishers. Maintain
control by enabling RTB for only trusted advertiser partners.
29 © 2011 Forrester Research, Inc. Reproduction Prohibited

30. Private RTB relationships have helped create a win-
win for publishers and advertisers
Publisher: “Private gives us
control, but also allows us to
deepen our advertiser
relationships and tap into new
budgets”
Major advertiser: “We have one
private RTB relationship set up.
It’s working really well and we’re
very happy about it. We’re looking
to do more.”
30 © 2011 Forrester Research, Inc. Reproduction Prohibited

31. But it’s not all roses.
Publishers have challenges
ahead.
31 © 2011 Forrester Research, Inc. Reproduction Prohibited

32. Publishers have the tools, but inhibitors stand in the
way of greater success
 Lack of data-driven decision making. Data drives programmatic buying
from advertisers. Meanwhile, publishers make arbitrary decisions on
impression allocation to exchanges and price floors.
 Operational inexperience. Ops teams must work not only with new
platforms and toolsets, but must learn to make strategic decisions to
optimize yield through RTB.
 Poorly defined roles for sales staff. Publishers still want sales to
maintain buyer relationships, but most lack personnel familiar with RTB
and the RTB buying community. In the words of one marketer: “I don’t
know who to contact if I want to set up a private RTB relationship.”
32 © 2011 Forrester Research, Inc. Reproduction Prohibited

33. Three tips for publishers getting into RTB
 Pick a single exchange/SSP vendor. In an auction environment, you
want to aggregate demand. Pick an exchange vendor that meets your
needs and focus on developing success in that one exchange
environment.
 If you go private, start with a trusted advertiser. If private exchanges
are your entry point, start with a trusted advertiser who cares about
maintaining a strong relationship with your direct sales team.
 Invest in RTB expertise. Ensure you have the right in-house expertise to
make informed strategic decisions on the role of RTB in your sales
strategy and manage RTB efforts day-to-day.
33 © 2011 Forrester Research, Inc. Reproduction Prohibited

34. Thank you
Michael Greene Joanna O’Connell
+1 212.857.0790 +1 212.857.0718
mgreene@forrester.com joconnell@forrester.com
www.forrester.com www.forrester.com
© 2009 Forrester Research, Inc. Reproduction Prohibited

35. Real-Time Bidding has Grown Rapidly
% of DoubleClick Ad Exchange Spend via RTB
100%
80%
68%
64% 67% 66% 67%
60% 56% 58%
52%
46% 48%
37% 37% 39%
40%
26%
22%
20% 15%
8%
0%
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11
Source: DoubleClick Ad Exchange, January 2010 to May 2011, figures do not include DoubleClick Ad Exchange inventory won by AdWords
35

36. RTB Trends: More Formats, More Deal Types
Multiple Formats
Display Rich Media Video Mobile
Flexible Deal Types
Auction Direct Deals
Anonymous Branded Private Bidded Fixed Price,
Pre-Auction
36

37. Role of RTB in Selling Display Inventory
Non-Guaranteed Guaranteed
Buyer Access Relationships
Open Auction “Traditional” Yield “Private” Auction Direct Exchange Direct Premium
Management Sales
RTB demand with Boost direct Leverage brand The power of the Total customization
controls network yield + RTB handshake, the and service
efficiency of RTB
The Foundation: Brand, Data and User Protection
37

38. For Publishers RTB is a Perceived Risk,
Requires Mitigating Controls
Top RTB Requirements
Malware Protection – 50%
Data Protection – 48%
Preferred Buyer Access – 37%
48 % Buyer Blocking – 37%
Anonymity – 26%
Of publishers will shift
inventory to an RTB
platform in 2011
Technology Blocking – 10%
Source: Digiday and Google, Real-Time Display
Advertising State of the Industry, February 2011, total 38
survey respondents n=371, digital publisher
respondents n=101, question respondents n=33

39. An exciting time for
Display Advertising $200B
“Display advertising can be a $200B
industry in less than 10 years.”
Eric Schmidt,
Executive Chairman, Google
AdWeek
$15.9B
in 2014
$10.2B
in 2010
39
Source: eMarketer, Nov. 2010

40. Thank You.
google.com/watchthisspace
40

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