As RTB grows within the ad industry, there are software vendors inventing new ways to enhance every step in the process. Did you know on DSP trading platform “A” that there is frequently thin inventory at 5pm eastern and prices spike in the travel category? There are analytics firms more than happy to help you identify these trends, and uncover the optimal time to make that trade. There is an entire VC backed industry to improve your performance, measure your results, track, crunch the numbers, and show you the best way to plan, purchase, add data, execute and report your digital media. RTB is growing rapidly now trading display, mobile, video, premium ads and email.
We represent some of these media tech firms. For marketers and agencies it’s difficult to perform wheat/chaff separation with all the jargon, third party software, white labeling and lack of consistency in the industry.
In most categories there are great strides being made and incredible firms aiding the process. For some parts of RTB however, there are land grabs. Firms have end games that are really about their own profit.
To uncover how and why, let’s look at some basic differences between trading stocks and ads; with the biggest being transparency. This is highlighted by there being no “tape.” Every trade for stocks listed on the NY Stock Exchange or NASDAQ hits the tape. This includes trade, price, volume and time, ultimately providing deep price discovery. Real-time pricing (bid/ask/volume) is updated multiple times per second. This process delivers transparency and price discovery into the market. It’s not perfect and high frequency traders (HFT) with super computers among others, game this system. Even with its flaws, this remains an incredibly fair system for most equity trades.
Indeed, there still is no tape for RTB. Every exchange/broker has its own algorithm that maximizes its business model. That doesn’t infer that everyone is getting ripped off, on the contrary, that in of itself would be a bad business model. There is certainly limited transparency compared to what an equity trader is accustomed. We set parameters on audiences and geography and tested with several DSPs. We have added third party data. On our tests, the only delta is price. Each price level query brings a different set of bid/ask responses. This means that the DSP algo is deciding what inventory to display based on our price selection and not providing complete transparency across available inventory fitting our specs.
There are many pluses of even our current environment. You can learn to play the RTB game their way and understand the algos. Multiple brokers are common at the trading desks of large media agencies and many already know their work-arounds. Entrepreneurs exist in media planning and buying. A one or two person shop can open and can compete with the majors using RTB. Some of the DSP systems are as sophisticated as professional trading platforms (Knight Direct, where are you?).
As time passes, and the industry matures, transparency will be achieved. Our crystal ball predicts that there will be a mass consolidation in exchanges, the number of brokers will increase, many with specialization, and the better service providers will thrive. It all will be in a more efficient marketplace, where price discovery will be possible.
The entrepreneurial media tech firms are accelerating this process. Knowledge is truly power and media tech’s analytics and data are educating an entire industry.