The Risks of RTB

By Carla Rover • July 6, 2011 •

Ramsey McGrory, a 10-year veteran of the industry, leads Yahoo’s Right Media Exchange (RMX) and directs Yahoo’s strategic use of data and insights for Yahoo’s North American marketplaces, developing strategy for the company’s video, display and search products. McGrory spoke to Digiday about RMX and the role of audience-buying in the industry’s future.

Does real-time bidding represent a long-term shift in the market, and if so, does it add real value to the game? Real-time bidding is a long-term shift in the market, but whether or not it adds real value is a valid question. Clearly, it enables buyers, and it can drive yield for publishers. RTB has evolved for publishers and so has their understanding of RTB’s risks and rewards. RTB providers can offer publishers features like URL masking, floor-reserve pricing or the ability to visualize the bid landscape. However, the cost of providing RTB in its current form may be prohibitive since media dollars spent don’t necessarily support standalone RTB instances. For example, when a buyer has a low bid-win rate or when the buyer is purposely “lurking” to collect data and not bid, there’s a cost to the RTB infrastructure to provide this access. RTB providers have begun responding to this in four ways: one, instituting a minimum dollar-spend per month to cover the baseline costs; two, instituting a “cost per look,” meaning that you can participate in RTB but there’s a cost for every bid request the buyer receives; three, optimizing the stream of bid requests going to the buyer to improve the bid-win rate; and four, enforcing “bid bundling” whereby the RTB provider is pre-auctioning all the bids in their marketplace and then forwarding the highest bid back to the bid requestor.

What is the core benefit to protecting publishers’ relationships with advertisers and agencies via private marketplaces, beyond pricing?

A “private marketplace” -– for one too few media agreements –- is as much a marketing term as it is a description of real functionality. For example, the Right Media Exchange is a “private marketplace” in the sense that all relationships between buyers and sellers – for guaranteed delivery, first look, ability to pass back, use of data, discounts and targeting – are opt-in. This provides premium publishers, like Yahoo, with the ability to provide different levels of access and preference to agencies and advertisers. The functionality that it refers to and which we’re continuing to develop, however, provides greater control to buyers and sellers to activate these types of custom agreements.

What is on the horizon for RMX?

We’re growing rapidly and expect that the next year we will continue that pace with more innovation on the technology side and Yahoo is investing to enabling this premium publisher market. We are continuing to build, buy and partner to grow a rich, vibrant marketplace -– with premium publishers as well as top-branded advertisers by focusing on supply, demand, data and infrastructure.

Will there be more video and mobile inventory available on the RMX?

At Right Media, we’re already seeing a significant volume of mobile inventory and expect that to continue, especially globally, and we’re investing in it first. However, professionally curated, long and short-form video is very supply-constrained, so we tend not to see as much surfacing via exchanges. Of course, this could change. If you look at the recent TV network upfronts, for example, audiences were down and prices were up. This means that agencies have to begin looking at their options for shifting their TV budgets to online in the coming years. Should this happen, the spoils will go to the premium media companies which have invested in building audiences at scale in video.

Is the marketplace going into consolidation mode, or is it still expanding with all of the various players?

The marketplace has been in a net consolidation phase for several years, and I expect this to continue both because of the maturation of innovative companies and the efforts to consolidate the addressable advertising market across search, display, video, mobile and in local. It really began to increase in 2007 when media and technology companies bought ad-serving businesses and has continued with demand-side platforms, mobile ad networks, dynamic creative, data-management platforms, etc. Meanwhile, we’re also seeing agencies consolidate their audience and ad-network media buying capabilities, and thinking about how digital and non-digital come together.

The Risks of RTB

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