Ad Exchanges and Real Time Bidding The
Next Big Thing
There is a great deal of buzz in the industry around Ad
Exchanges and the technology associated with them. However, it is not well
understood how they operate and what the benefits to publishers and advertisers
are. In researching this topic, we found that while Real Time Bidding (RTB)
receives a great deal of attention, there are other attributes of Ad Exchanges
that are not widely discussed, yet have the potential to make a major impact on
the digital marketing ecosystem. We’ll attempt to clarify some of the concepts
used in the Ad Exchange technology stack in this article. First let’s examine
traditional Ad Networks.
How
Ad Networks Operate
In the Ad Network model, the building blocks are the traditional
components of web advertising: Web Content Servers, Publisher Ad Servers,
Advertiser (third party) Ad Servers, Database Providers, Cookies, Tracking
Pixels and Content Delivery Networks (CDN).
The process generally works as follows (simplified for clarity):
User begins to load a web page.
Web page issues a request for an advertisement from the
Publisher’s Ad Server which logs the request and returns a “NET TAG”.
Web page issues request to the Ad Network Server, which
processes its pixel, reads and/or drops its cookie, queries its database and
applies targeting (demographic, geographic, contextual, behavioral or all of
the above) algorithms. It then applies the rules set in the contract with the
advertiser. If it finds a profitable match it issues an ADV TAG and logs the
transaction. If it does not find a match, the Ad Network may pass the request
on to a partner Network, which repeats the process to determine if it has a
profitable ad to display and so on until a network claims the impression. This
processes typically involves multiple http requests and redirects, which impact
load time negatively.
Web page processes the ADV TAG resulting in the Advertiser Ad
Server either serving the ad or handing off the request to a Content Delivery
Network (CDN).
The browser loads the ad, if the user hasn’t already moved on to
another page.
Whew!
This architecture has evolved as the online advertising industry
has matured. At this point, it has become what tech types refer to as a
“kluge”- a process which is inefficient, slow to serve creative, problematic to
traffic, difficult to report upon and expensive relative to the real cost of
the media. Add in secondary networks, yield management techniques and third party
data sources and you have a cumbersome architecture that does not scale well.
What
Ad Exchanges Do
If you’ve read this far, you now understand one of the most
important (if not often publicized) rationales for Ad Exchanges: Efficiency.
Suppose instead of the “Round Robin” approach described above, there was a
centralized mechanism for aggregating the impressions offered across multiple
Ad Networks and matching them (based on the advertisers target, budget and
placement requirements) with the most appropriate ads? What if this
mechanism existed in the cloud with a well understood API (application
programming interface) for audience targeting data and there was dynamic
auction functionality around pricing which allowed the publisher to supply his impression
to the highest bidder at any given instant? Add self serve applications for ad
creation, traffic, campaign management and reporting and you have the basic
components an Ad Exchange or Demand Side Platform (DSP)
Real
Time Bidding (RTB)
Real Time Bidding is a dynamic auction process where
each impression is bid for in (near) real time versus astatic auction
where the impressions are typically bundled in groups of 1,000. The potential
advantages are cost efficiency, higher performance and greater granularity with
targeting and measurement.
Demand
Side Platforms (DSP)
Demand side platforms (DSPs) give buyers direct RTB access to
multiple sources of inventory. They typically streamline ad operations with
applications that simplify workflow and reporting. These products are directed
at agencies, agency holding companies and large advertisers (the buyers). The
technology stack that powers an Ad Exchange can also provide the foundation for
a DSP, thus there is a synergy for plays in both spaces.
Supply
Side Platforms (SSP)
Large publishers incorporate yield management techniques to
increase ad revenue. This typically involves managing multiple networks. The
SSP play uses the data generated from impression level bidding to help the
publisher increase the value of his inventory by being on target. Applications
to manage ad operations are also bundled into these solutions. Again, the
technology is adapted from the Ad Exchange tech stack.
Obstacles
to Adoption
While this technology sounds promising, there are arguments
against Ad Exchanges:
Questionable ability to appropriately value premium inventory.
Devaluation of direct sales efforts.
Fear of the commoditization of inventory (allegedly suppressing
price).
Suitability of addressing Branding as well as Direct Response
objectives and goals.
While the jury is certainly still out, sentiments on these
issues are leaning in a positive direction based upon these assumptions:
Homepage takeovers, guarantees and deep integration on major
properties will continue to command premium pricing and require the efforts of
direct sales teams to package, promote and manage.
Because Ad Exchanges increase reach and provide hooks for
multiple third party data sources to plug in to the ecosystem, the ability of
the architecture to leverage RTB functionality with accurate targeting
potentiallyraises the value of inventory. Perhaps advertisers will pay
more to reach consumers that have been qualified by current, actionable data
and are therefore more likely to have immediate brand interest or purchase
intent.
The tactical advantages of Ad Exchanges potentially make
branding campaigns across premium inventory more effective by broadening reach.
Additionally the tools for targeting, traffic, frequency capping, rotation and
reporting are ROI enhancing to brand as well as direct response efforts.
The
Players
The technology supporting Ad Exchanges is complex and expensive.
In order to scale up to handle the level of traffic enterprise clients demand,
software engineers often have to code tools from scratch. Open source and/or
off the shelf databases just can’t handle the load.
Therefore, it’s no surprise that the big three (Google, Yahoo
and Microsoft) are taking the lead in building out Ad Exchange infrastructure.
Their deep benches and pockets allow them to invest the resources necessary to
make technology like RTB actually work.
Yahoo’s Right
Media was arguably the
first out of the gate with an exchange. With broad reach across the Yahoo
network it is well positioned and has recently committed to offering more
premium inventory.
Google AdEx leverages the DoubleClick Ad Serving platform with RTB. As is typical with Google, the
technology stack is the most sophisticated of the top tier exchanges.
Microsoft AdECN is Microsoft’s Ad Exchange for the Microsoft
Media Network.
AdMeld helps premium publishers maximize revenue from
their ad inventory, reduce operating costs and eliminate unwanted ads by giving
publishers access to demand from ad networks, exchanges and DSPs.
PubMatic is an ad monetization and management solution
which combines impression-level ad auction technology, brand protection tools
and ad operations support.
The Rubicon
Project offers Supply and Demand platforms with integrated
API’s for data providers.
ContextWeb provides real-time contextual targeting.
AdBrite is an advertising exchange focused targeting
and optimization, has real-time bidding, API functionality and a self-service
account management interface.
OpenX combines ad serving and yield management
with RTB.
Media Math is a demand side buying and analytics platform
that aggregates the AdEx, Right Media and AdECN exchanges.
DataXu offers a real-time ad optimization platform
which manages buys on an impression-by-impression basis across AdEX and Right
Media.
AppNexus is single-point integration to exchanges and
inventory aggregators, including Google’s DoubleClick,
Microsoft’s AdECN, and others.
Turn is a demand side platform with
targeting, exchange integration and analytics.
Audience Science specializes in segmentation and
targeting data.
x+1 is a targeting platform for advertisers
and publishers. They also build dynamically assembled
landing pages and
micro-sites based on demographic and behavioral data.
Triggit integrates with Ad Exchanges via its RTB
Platform.
Invite Media’s Bid Manager is a RTB buying application.
Thanks to adexchanger.com and mikeonads.com for the
knowledge.
