Display Ads: How Direct Buys & RTB Interact

ET by Ratko Vidakovic

One of the most common questions that marketers face in buying display advertising is whether to contact a publisher or ad network directly to purchase inventory (called a Direct Buy), or through indirect channels using real-time bidding (RTB) systems.

To those with experience in the RTB realm, it’s well understood by now that there is an element of unpredictability and fluctuation in the availability and consistency of volume from specific publishers or sources of ad inventory. This can often lead to frustration, especially when trying to optimize and automate your campaigns.

To appreciate why this happens, it helps to understand how ad inventory becomes available in the RTB ecosystem, how direct sales orders (aka insertion orders) affect the amount of inventory available, and the interplay between the two sales channels for website publishers.

The Publisher’s Dilemma

Website publishers are in a tough position. They have a strong desire to increase their advertising revenue with as little headache as possible. For publishers needing a quick revenue solution, outsourcing the whole process to Google AdSense has typically been the easiest way to go. The problems with AdSense, however, are that it’s restricted to buyers on the AdWords platform, the revenue model lacks transparency, and the revenue yield to the publisher is low.

More savvy publishers — often with larger amounts of traffic and higher revenue goals — either turn to selling their inventory directly to advertisers through direct ad sales, or by outsourcing it to an ad network that handles it on their behalf. Direct ad sales typically yield the highest RPM (Revenue Per Mille — or revenue per thousand pageviews) for publishers, especially if their inventory is highly sought-after. Direct sales usually require more technology, like an ad server, as well as people to handle ad operations (like setting up campaigns, updating creatives and managing clients).

The downside to this process is that it’s very inefficient for both publishers and advertisers: it requires numerous manual tasks, such as negotiating and transmitting contracts, trafficking campaigns, billing, and so on. Despite these challenges, publishers continue to prefer direct ad sales for the simple fact that this yields the highest revenues.

Yet, most publishers are unable to sell off their inventory directly. So, what to do with this unsold (or, in industry-parlance, remnant) inventory? The answer, traditionally, was Google AdSense (which makes this unsold inventory available to AdWords advertisers). But, now it is possible for publishers to expose their unsold inventory to the RTB ecosystem to auction it off indirectly to the highest bidder, getting the highest RPM possible.

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