The Future is Happening: Real-Time Ad Buying

“The Sell-Sider” is a column written by the sell-side of the digital media community.

Today’s column is written by Frank Addante is founder and CEO of The Rubicon Project, a digital advertising infrastructure company.

The hot topic in digital advertising today is real-time ad buying. Even for a fast-evolving industry, it felt like real-time ad sales swept through the industry quickly last year, with lots of companies activating real-time exchanges that enabled advertisers to plug in, find their desired audiences, and buy ads within fractions of a second.

Even with all the attention, today’s real-time market remains inefficient and disproportionate, because of the exclusion of two major role players in digital advertising: ad networks and self-serve advertisers. For automation to take hold – and deliver a market with greater liquidity and lower costs – real-time advertising needs to be open to everyone. It needs to be about real-time trading, not just real-time bidding.

The majority of display advertising spend goes to Google, Facebook, and the other top five sites in the comScore 500. The rest of the 500 divvies up a small sliver of what’s left.

For all the innovation they have brought to the display marketing segment, ad networks still rely on manually executed buys. Self-serve advertisers, the small- and medium-sized businesses that do a huge chunk of the buying on Google and Facebook, are largely shut out of real-time ad buying, because they don’t spend enough to earn a seat with the demand side-platforms (DSPs), agency trading desks, or private publisher exchanges.

But you can expect these two segments to expand aggressively into real-time ad buying this year. Ad networks, despite all the naysayers, are still here, and they continue to evolve and improve. Ad networks have been the driver of much of the technical and business innovation in the market to date. In 2011, billions were invested into ad networks. At this point, ad networks have the name recognition, customer relationships, mature unique technology platforms, and the capital to make a huge impact on the real-time buying space. Ad networks are like chameleons, they’re agile and innovative and we should expect the same from them going forward.

Small and medium businesses, meanwhile, still account for 20 percent of the traditional advertising spend. That’s a huge reason why search still holds a bigger share of the market than display does. Search is accessible to these self-serve advertisers. In order to grow, display needs to become accessible, too.

It’s important to remember throughout this discussion that RTB is a protocol, not a business. Self-serve advertising is still a relatively untapped strategy for most of the comScore 500. The exceptions, Google and Facebook, are the ones who have opened their doors to self-serve advertisers. Roughly 35 percent of Google’s money from AdSense goes to its content network. This isn’t really search at all; it’s buying sites because doing so is easy and non-intent based.

This is the power of real-time ad buying, and the only way to make it truly take hold is to make it open and accessible. RTB is only open to the buyers who spend enough to earn a seat at the table. Trading, rather than bidding, opens up the inventory pool to a number of buyers. Essentially, everyone is a bidder, and the spending is no longer confined to the brands with big budgets. The networks get to be bidders as well, as do self-serve advertising buyers.

When you lower the barrier of entry and make great inventory available to all parties, it makes it easier for automation to fully take hold. Publishers benefit tremendously, as do advertisers, who are going to reach their audiences with greater ease. It comes down to even more impressions sold, at a lower operating cost, which is a victory for every party involved.

Follow Frank Addante (@frankaddante), AdExchanger (@rubiconproject) and AdExchanger (@adexchanger) on Twitter.