Traditional advertising was about placing adverts in mass media channels (TV, radio, newspapers, magazines etc) to influence mass markets. Not any more. The proliferation of 1,000s of media channels has put an end to that, as has the shift for us to consume our preferred news and content on the Internet.
In the futuristic film 'Minority Report', Tom Cruise is propositioned by digital adverts talking to him about his personal needs as he walks past billboards and advertising hoardings. Given the latest technology advances, this might be the future of advertising. Not mass messages for mass markets, not even more focused messages for market segments; but individual personalised messages just for you and you alone, enabled by digital marketing technology.
The broad category for this new kind of advertising is called Programmatic Media Buying (PMB), and the most hyped component in the stable is called Real Time Bidding (RTB). RTB works a bit like Google Search Adwords. The auction price of an online advertising space on a web site is defined by supply and demand. Mostly RTB is used for so-called 'remnant' advertising inventory - the cheaper, less attractive advertising slots, rather than premium inventory (the best slots) which is sold directly to preferred big brand advertisers, especially for corporate advertising campaigns.
Publishers like the Financial Times fear that RTB will cause them to lose control of their premium online inventory. Top publishers don't want 'undesirables' advertising in their precious media, no matter how much advertisers are prepared to pay for the space. Some publishers are piloting RTB in so-called 'private marketplaces' with their preferred advertisers in order to circumvent this problem.
RTB can display a web advert tailored to an individual who is web browsing based on his / her previous purchases, demographic profile, location, device usage, operating system used, search data, web browsing habits etc. RTB includes inbuilt customer scoring and predictive analytics technology so that advertisers can bid a dynamic variable amount (£) for a specific advertising impression based on an individual customer's attractiveness and propensity to buy.
This all sounds great for publishers and advertisers as display advert personalisation has been shown to increase returns by 10X over traditional online banner advertisements. But there are some significant challenges awaiting the advertising industry. In particular, RTB relies on consumers opting into cookies. Many of us are not so keen on being tracked. For example, the Mozilla Firefox browser offers Do Not Track (and Adblock plug-ins) as an option. More worrying for RTB is that Microsoft's Internet Explorer 10 will have Do Not Track as its default setting. In addition, smartphones do not allow for the placement of cookies, thus limiting RTB's effectiveness in this key growth market.
It is still relatively early days for RTB, and new advertising technologies are developing at a furious pace - especially as the industry titans Google, Facebook and Microsoft all have large stakes in the online advertising market. In addition, there is a myriad of other specialist best-of-breed vendors targeting the advertising technology market. This creates a complex and fragmented market landscape and digital supply chain for the media buying industry to navigate. Supplier consolidation will undoubtedly follow quickly as product suites broaden into full advertising technology platforms.
RTB was only introduced in late 2009, and in 2012 accounted for £1Bn (c. 10%) of the UK's online display advertising spend according to the IAB / PWC. ZenithOptimedia reckons the market will be worth £2.5Bn by 2016. UK opinion leaders such as BSkyB, Tesco and TalkTalk are progressively upping their RTB investments. No wonder the publishing and advertising industries are getting so excited.