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27 November 2012 - 9:27am | posted by | 0 comments

Why Jargon Clouds the Benefits of Real-Time Bidding

Simon Haynes of DigilantSimon Haynes of Digilant

An over-reliance by technology providers on complex terms and measurements is preventing their customers from seeing how online advertising has changed, says Simon Haynes.

The online advertising industry is suffering from a severe case of hellenologophilia. That’s a compulsive love of technical terms, to you and me.

It’s no wonder that the majority of marketers still don’t fully understand how online advertising and the way it is bought have changed for the better in the past couple of years. The language that the industry uses to talk about the subject seems designed to confuse them.

We measure CPMs, CTRs and CPCs, and extol the virtues of DSPs and SSPs offering RTB, often without ever explaining in simple terms just why they matter to the person holding the purse-strings. Indeed, it has recently been suggested that two-thirds of marketers couldn’t tell you what terms like demand-side platform, supply-side platform and real-time bidding actually mean.

It’s easy to see how we came to be in this position, where arcane language clouds the view of what brands can now demand from online advertising. The number of options available to them and their agencies is growing all the time, but so too is the pressure to prove the case for every spending decision they make.

The easiest way to do it is nearly always with cold, hard data. So we come up with reams of figures to tell advertisers how much they’ll spend for every thousand sets of eyeballs, how many of those eyeballs’ owners will click on an ad and what it will cost each time they do.

But all these figures really do is sell the advertising technology, by showing it’s more efficient than some of the alternatives. None of our industry abbreviations actually help marketers make the argument to their own company boards about what they get for the money they spend on online marketing.

There’s only really one calculation that will matter to the marketer who’s ultimately responsible for a brand’s advertising. Did it deliver an increase in sales, and if so, at what cost?

In other words, all that matters to them is the return they get from their marketing investment. However we go about it, the sales pitch from suppliers should only ever be about one thing – giving marketers confidence that the advertising options they and their agencies choose are the most efficient and cost-effective means of improving sales, both in the short term and in the long term.

Thanks to real-time bidding, the tools now exist to erase most of the doubt. The phrase ‘real-time bidding’ itself should be self-explanatory: advertisers bid to buy the specific ad space they want, when they want it, in a real-time auction. And this makes it all the more difficult to understand why its benefits have not been clearly communicated to the majority of brands yet.

Of course, this ignorance is not quite all-pervasive, and some advertisers are already convinced.

Online marketplace eBay, for example, said earlier this year that it would aim to buy 40% of its online display advertising in the UK in real-time auctions by the end of 2012. It already buys two-thirds of its online ads in the US like this. The volume of ads bought this way is increasing rapidly and the market is expected to be worth over £500 million by 2015.

So what has eBay seen that two-thirds of marketers are still unaware of?

Again, the principle of real-time bidding should make this self-evident, without the need to resort to acronyms and abbreviations to back up the claims. Advertisers, often through their media and digital agencies, only bid for the ad impressions they want to buy. They can specify the users they want to target, the times they want the ads to appear and the sites where they're shown. They also get to set the price they want to pay.

The upshot is that advertisers don't have to pay to reach people who are never going to buy from them. They can also tailor their message much more accurately according to the kinds of behaviour they're looking to prompt from consumers, because knowing who the users are – as well as where and when they'll be seeing the ad – means you've got a better idea of what they'll be receptive to.

If your online marketing strategy is well thought through, real-time bidding can therefore be used to achieve all kinds of objectives. It might be that you want consumers to click through to your website, but you might instead want them to watch an embedded video or to make a purchase there and then. The response you're looking for might not even be online behaviour at all; you might be looking to catch someone on their lunch-break to tell them about the offer you're currently running in a store down the road.

And this is another reason that it's a bad idea to rely on confusing figures when trying to persuade people that real-time bidding is the best way to buy online ads. There are too many ways of measuring the results, and not all of them are relevant all the time. The response rates and sales uplifts that one brand gets from its ad campaign aren't guaranteed for every brand just because they buy their ads in the same way, especially if the amounts of money they want to bid and the impressions they want to buy are different.

But also, and more importantly, no technology can be the silver bullet.

What advertising technology such as real-time bidding platforms can do is provide the tools to give a smart ad strategy the best chance of working – and also to provide the evidence that confirms whether it has. Like any marketing technique, real-time bidding won't automatically increase return on investment unless there's some thought behind who you're targeting, where you're likely to find them and what your message is going to be once you do.

And it's just as important to follow up afterwards to analyse what worked and what didn't. Did you really get the impressions you paid for? Did they run when and where you wanted, and were they seen by the consumers you were targeting? That data should all be laid out transparently in front of you, so you can be confident of what you're getting.

It doesn't need to be as complicated as we often make it sound.

So next time someone tries to sell real-time bidding to you on the strength of a dozen different acronyms, tell them to dispense with speaking Greek, and get down to explaining how a well planned strategy of targeted online ads can start to deliver the returns your business needs.

Simon Haynes is Managing Director for Digilant in the UK.

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