As an advertiser first, transparency is king. My buying decisions are made in a group at a table in the marketing conference room. Before I even make a proposal to the group I need to know as much as possible - targeting, sites, prices, etc...

Even getting content out of daisy chains I don't think is an advertisers concern. Its these daisy chains that create a innovate market with new ways to reach customers. Its its the different targeting technologies, grooming algorithms, etc that are birthed from the way this market is tailored.

excellent article. I'm curious where you see the Open X spot market on the continuum between RTB and presold campaigns.

Also, you write "Because if your bid range was really narrow then it begs the question – why bother to do real-time bidding at all?"

I can see 2 reasons. One is, as you mention - price discovery : you must probe the spot market to know if you are paying a reasonable amount for presold campaigns, and the other is geotargeting - if I want mobile browser impressions within 100m of a Starbucks location, is a presold campaign really going to work for me right now ?

-For most large scale ad servers, variable serve cost is less then $.01/CPM.

-The largest variable in this cost is normally bandwidth (of which there is essentially none for bidded impressions not purchased).

-The second largest variable cost is normally related to reporting (of which there is none or essentially none for bidded impressions not purchased).

-I believe pre-serve decisioning / bidding is a minority component of the sub-$.01/CPM variable serve cost for most ad servers (so think $.001/CPM range as a ballpark for a RTB function - and that's without optimizing for a RTB environment, simply using more legacy ad server processes and their associated costs).

-This cost will be included into the smarter players algorithms, so that when it becomes cost-prohibitive, these undifferentiated / low success rate / less valuable impressions are filtered out beforehand instead of real-time decisioned on. A smart algorithm could handle automatically bucketing impressions into larger groups, and understanding which of these it is cost-effective to RTB on, and which are not cost-effective to RTB on and therefore should be excluded or fall under more broad non-real-time bid strategies.

- Hardware and software costs go down over time. Yes ad serving was 15 cents at one point but today it's almost free. RTB allows for a lot of efficiencies on the human side where costs only go up. There's no need for ad tags to be emailed as attachments and phone calls to be made to adjust CPMs. The ability to dial up and down spend on the fly and on a per impression basis can save a lot of money elsewhere. These costs are harder to quantify but they are material.

- The model of assuming serving costs for impressions that are unfilled is not new. Any tag that uses passbacks follows the same cost structure. With some major ad networks filling at 20% on average, these costs have existed for a long time and are not unique to RTB.

- Another misconception about RTB is that the way it's implemented is by the buyer plugging in to a huge pipe and seeing all impressions. I don't know of a supply platform that is working in this way. The reality is that there is pre-filtering with RTB too.

- The largest contributor to RTB hype is the assumption that it's a silver bullet. The reality is that we're all solving an enormous problem and RTB is another arrow in the quiver and we need all the arrows we can get. It is going to fill a large need for both buyers and sellers but will not be the entire solution. For publishers, mixing RTB with tag buys and audience data is going to be key for monetization in the coming years.

Looking forward to seeing the RTB solution from CPM Advisors come to life!

The tradeoff between "pre-bidding" (static statement/filter of what you want) and actually bidding for something is very important, crucial. If you win few bids by bidding across a lot of inventory, your costs are high. If you pre-filter aggressively, then one may ask what the point of bidding at all is - except in cases where people are bidding against each other for data provided by specific data providers (less so retargeting, if that is mostly where an advertiser hands that to a single vendor) - so a bunch of folks will bid aggressively on the auto-bmw intender data etc.

The other thing to keep in perspective that I mention with my comment about 15% of inventory, is that not only is the % of inventory going to RTB going to be small for a while, it's also going to be non-premium. Today that's typically all about the 6 to the nth impressions on a site. (That fact itself is not well priced in current systems BTW)

Getting premium inventory out of daisy chains and to be universally addressable and biddable is really the goal (for me and our advertisers), whether that requires RTB, or something else entirely.

Real time bidding matters when you have individual cookie level data and want to buy on that unique impression event. But I can think of many cases where you would be willing to reserve impressions in blocks for common data such as DMA/location, URL, site, etc. Perhaps a hybrid approach where most of the auction functions in set prices for clear segments (like keywords are to search) with special over-rides to bid for that exact impression itself based on unique data (re-targeting, 3rd party sources) would reduce the technological implementation cost and bring us closer to the end goal.