What Is Real-Time Bidding And Should It Be Cheap?

Posted by Tim Nichols

Oct 29, 2013 3:46:00 PM

real-time biddingWhat is real-time bidding and does data support that media buyers should pay lower prices because they are advertising online using real-time bidding technology? Great question. Real-time bidding technology enables real-time media buying, which is indeed a smart and efficient way to advertising online. This doesn't necessarily mean that impressions purchased should be significantly cheaper.

First of all without people like Brian O'Kelley, CEO of AppNexus, and many others real-time bidding, real-time media buying and real-time advertising technology in general wouldn't be at the level of popularity and sophistication that we are seeing today. Second, keep in mind that this article looks into just one small slice of the entire real-time bidding and real-time media buying pie. One can easily show data points and evidence to represent a strong case for both paying lower or higher prices to buy media online using real-time advertising technology.

The objective of this article is to provide an example that makes people think and examine the fact that just because you are buying online media using real-time bidding technology doesn't automatically mean that price points should rapidly decrease for ongoing campaigns or start off low right out of the gate.

First off, real-time bidding is a relatively new and very dynamic method in which to buy online advertising. Real-time bidding technology enables the buying process to be automated where media buyers can evaluate, bid on and purchase ad inventory on an impression-by-impression basis. As a result, real-time bidding and real-time media buying creates one-to-one connections to consumers with greater scale, effectiveness and efficiency.

Recently, a new brand client registered for an account on ExactDrive's self-serve advertising platform. Even though we say it is a self-serve advertising platform there is almost always a certain percentage of hybrid between self-serve and managed services. This is great as it allows us to work more closely with clients, discuss various media buying strategies and gain a deeper understanding about the client's objectives, questions, needs and goals. 

This new client wanted to run a retargeting campaign using dynamic ads that would show a carousel of the last 5 products a user viewed while visiting their website. (Note: you can see a couple example dynamic ads we have perviously designed by visiting our sample page.) This particular client had a good gameplan. A) Retargeting is often a high performing online advertising method that generates a lot of success for clients and B) dynamic ads provide an additional layer of connecting the client's products with potential customers. Every potential customer is unique, so not wasting ad impressions with a "one ad fits all" mentally is a good strategy to have.

Despite having a solid campaign foundation the client had a closed mindset towards the pricing strategy they were willing to accept or test out, being that we are using real-time bidding technology to buy media in real-time we should be able to, "sit back and wait for the almost free super high quality impressions to become available". Well, first of all, this strategy is not unique just this single client. There are thousands and tens of thousands of campaigns following a similar strategy, trying to get the most bang for the campaign's budget.

Having so many campaigns trying to buy cheap but high quality impressions results in driving up the overall price to purchase those impressions. In addition, this is a retargeting campaign so there's already a limited pool of users available to advertise to in the first place. Trying to be aggressively price conscious will only make the size of the user pool smaller. The lower you bid or are will to pay for a potential impression then the higher probability you will lose the bid to someone else and won't display an advertisement to your potential customer that was just recently visiting your website.

If you know a potential customer has visited your website, looked at your products but didn't pull the trigger on making a purchase then you better be somewhat agressive at getting your brand back in front of those potential customers as soon as possible. Trying to buy impressions at too low of a price can sometimes do more harm than good because you are potentially losing out on more new revenue then the money you believe you are saving as a result of buying cheaper impressions.

Also, lets not forget that quality is almost always influenced by price. You can pretty much guarantee that a pair of pants for $15 versus $75 will be of a lower quality. Naturally there are exceptions to the rule but you get the point. The same rule of thumb exists for advertising online. Yes, you can sit back and be strategic in purchasing your media and be price conscious but you also need to be aware that going under a certain price point will start hurting the quality of the impressions and as a result can have a negative impact on the overall performance of your campaign.

There's a lot more meat on this real-time bidding bone to chew on but it will have to wait until another time. I am recovering from back surgery and have to put strict limits on how long I sit and babble on and on :-)

Topics: Media Buying & Planning, Online Advertising, Real-Time Bidding, Real-Time Media Buying, Advertising Strategy, AppNexus

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