RTB Ad Spending To Double In 2012 – But Is It A ‘Race To The Bottom’?

While real-time bidding is a hot topic in online advertising circles these days, the amount of dollars actually flowing into these systems is still relatively small. But a study commissioned by supply side platform PubMatic from consultancy IDC says that’s going to change significantly over the next four years. Meanwhile, PubMatic’s SSP rival The Rubicon Project is trying to dispel the notion that RTB is as some publishers like to say, “a race to the bottom,” with data that suggests that some publishers are actually seeing prices lift from ad exchanges.

The increasing interest in RTB comes as the overall display marketplace in the U.S. continues to heat up. Display spending is expected to hit $12.33 billion by the end of this year and then rise 20.2 percent to $14.82 billion in 2012, according to recent eMarketer figures. Overall, eMarketer has forecast $31.3 billion to be spent in total web advertising in 2011, up from $26 billion in 2010. In 2012, eMarketer says online ads will reach $36.8 billion.

Within that context, the amount of online ad dollars making their way through RTB systems in 2011 will be about $1.1 billion, says IDC analyst Karsten Weide in a report that will serve as the center of a discussion at PubMatic’s RTB 4 conference in New York today. Next year, Weide says that RTB spending will nearly double to $2 billion in the U.S.

Most premium publishers still look askance at RTB and ad exchanges — at least publicly. As the IDC study suggests, publishers are putting more of their inventory into RTB systems. The fairly recent introduction of “private marketplaces,” which put a variety of controls and options in publishers’ hands, has helped unlock some of that ad space. But for the most part, publishers feel they have little choice to to participate in bidding environments. After all, when marketers are directing more money into RTBs, publishers feel more pressure to follow or else lose out on that incremental revenue to another outlet.

The primal worry for publishers is that if they do open themselves up to RTB systems, it will drive the value of their direct sales down-after all, why should a buyer spend all the time haggling over the price of a home page ad when they can just bid on it, and likely get a much lower price, in an exchange environment?

Rubicon, which along with PubMatic and other ad tech firms in the exchange space, have shifted their businesses from being “yield optimizers” that helped raise publishers’ CPMs in ad network environments. So there is a natural interest in demonstrating that RTB is not a threat to publishers.

With that in mind, Rubicon, which conducted a survey of 500 publishers in August and September with Econsultancy, found that 73 percent of respondents said that display dollars have gone up in the last year. About 44 percent now sell their display ads via RTB. Also, while a number of prominent publishers, such as WSJ.com, Bloomberg.com and TheStreet.com, the research also found that two thirds (66 percent) of publishers sell inventory through online advertising networks.

Lastly, Rubicon found that publishers said that RTB provided a 20 percent lift to their display revenue.

Still, don’t risk cannibalizing their direct premium sales if they just rely on automated bidding methods of selling?

In a conversation this week with Rocket Fuel President Richard Frankel, a former executive at Yahoo, he said that some publishers have been shy about admitting they appreciate RTB. “You can’t have all these marketers growing their RTB budgets if there were no sellers,” said Frankel, who’s company works mostly with agencies on the demand-side. “It’s not that the pipes of RTB environments are shiny. Marketers are moving their money into RTB because it’s more efficient, there’s clearer ROI. And publishers are pouring more inventory into exchanges for only one reason: they’re getting paid more.”

The Rubicon study is here, and the PubMatic/IDC report is here.