The death of the salesforce? Real-time bidding on the rise

“Is this a death of a salesman?” asked David Moore, IAB chairman, at PubMatic's Ad Revenue 2010 conference yesterday in New York. Moore was referring to the rise of real-time bidding, which enables publishers to auction advertising inventory without face-to-face interaction. 

PubMatic's CEO Rajeev Goel estimates that RTB will make up 20% of non-guaranteed advertising by 2011. PubMatic is a supply-side platform for premium publishers that offers real-time bidding. The company released a study this week in conjunction with several demand-side platforms, finding that real-time bidding delivers an average 64 percent ad revenue lift for publishers across all verticals. 

For publishers, real-time bidding is both exciting and terrifying. It can help publishers sell out their non-guaranteed inventory, but it also risks the same problem as ad networks: the commoditization of online inventory. And publishers don't want to lose control of their inventory by throwing it into an auction.

“It is scary,” said Chris Stevens, senior director at Orbitz Worldwide, which both buys and sells inventory. “You put stuff in there, you don't necessarily know how it's going to be used. You don't know how the data is going to be extracted or who it's going to be resold to.” But Stevens acknowledged that sellers still get a lot out of RTB sales, including a higher sell-through rate. 

“You do have to dip your toe in the water with RTB carefully, because there are unscrupulous third parties out there that will find a way to exploit it if there is even a crack,” he said.

To prevent commoditization, publishers should create a floor value to their inventory, which is a good yield management practice in general: Don't sell below a certain threshold. 

Matt Greitzer, co-founder of Accordant Media, an agency buying desk for real-time bidding, said he is seeing pricing floors more frequently, which drives up prices in RTB environments. Still, not all publishers know how to take control of their inventory, whether through RTB or other channels.

“The ability is there for publishers to prevent massive commoditization, but not all of them are taking full advantage of it,” Greitzer said.

How RTB can help

While there are pros and cons, RTB is a trend that is here to stay, with media buyers increasingly interested in buying advertising through this model. Publishers have to decide how it fits into their business. 

For a mid-sized publisher trying to get more bang for the buck from remnant inventory, the auction market could be the ticket. RTB can find buyers for previously unsold inventory and expose publishers to new advertisers. Audience targeting levels the playing field for advertisers. For instance, TV Guide was hooked up to Mercedes ads because of RTB audience targeting, said Ian Wallin, TV Guide's senior vice president for digital ad sales.

Wallin said RTB has been successful for TV Guide by controlling the process as well as they can, using sell-side platforms and blocking unwanted ads. RTB has grown to about 10% of the publisher's online ad sales. “It's been a good thing for us in terms of lifting our overall pricing and getting new advertisers. We're also getting new insights from the data,” he said.

“Frankly, for a mid-sized publisher like us, it's a hard thing to say 'I'm not going to take those extra dollars,'” Wallin added.  

RTB will take an unknown slice of the pie going forward, but that doesn't mean it will kill the direct sales model. “Media buying is changing, but media planning and the consulting of a sales force is still going to exist,” said Nathan Woodman, COO at Adnetik, an audience targeting system for media buyers.

Search and social media were supposed to kill direct sales too — a prediction that did not pan out. “I've heard the 'death of the salesman' thrown out there for every new thing that's come along,” Wallin said.