In Defense of Marketing Scientists

It’s rational to be concerned about quantitative “trading” of ad impressions and to wonder if it exposes the advertising industry to the troubles that plague Wall Street. Ironically, real-time bidding seems to have triggered these concerns.

The reality is quite the opposite. Real-time bidding promotes the kind of openness and transparency that would have made the financial shenanigans and obfuscation of the mortgage mess impossible. The collapse of the subprime mortgage market was all about sellers re-packaging mortgages until buyers could no longer understand what was inside and the risks they were taking. Real-time bidding is about selling impressions one at a time, with a lot of information available about every single impression and purchase.

This will benefit all sides. For every Wall Street trade, there’s a winner and a loser. With real-time bidding of ad space, you get the “one person’s trash is another person’s treasure” effect, and everybody can be a winner.

A “trade” of media through real-time bidding starts when somebody opens a Web browser and visits a page that has an ad slot managed by an exchange. The exchange pokes a number of buyers (DSPs, ad networks, holding company trading desks, etc.) saying, “Hey, who wants to buy this single impression? I’ve got a 728 x 90 slot on bbqrecipes.net/burgers-n-pickles.htm being viewed by anonymous user 32918 who likes coupons. Write back to me in 50 milliseconds with your bid and the ad you want to show.” If one of the ad networks is currently running a pickles-coupon campaign, it’s likely more valuable to that network and its advertiser to own this impression. If the network is smart, it will bid high and win, and the exchange will show the advertiser’s pickles-coupon ad.

In this “trade,” nobody is walking away with a thing they can sell again and again just to mark it up for no reason. Once the ad is delivered, the ad space that was being auctioned is consumed. And the matchmaking that occurred between the coupon-using, pickle recipe-reader and the pickle-coupon ad was one that created value for the publisher, the advertiser and the consumer.

There’s no need to be afraid of real-time bidding. It’s a tremendous innovation that allows a degree of effectiveness in campaign execution that has historically only been possible through direct channels like mail, email and on-site personalization. When our kids grow up and claw their way into middle management at ad agencies, they’ll be amazed we ever bought ad space any other way.

George John is CEO of Rocket Fuel, an ad-serving platform for targeted ad campaigns.

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