The old saw, “half my ads work, only I don’t know which half” may soon not be as true as it once was. In yesterday’s marketplace, companies tried to target their ads by choosing the television shows, magazines and other mediums that had demographics most closely resembling their target audience. But the measurements were crude, and billions of dollars were spent putting advertising in front of people who had zero interest in the product. If you lived in an apartment, advertisements promoting lawn mowers were a sign of money being wasted and advertising’s inefficiencies.
Online advertising promised a better use of advertising dollars. Ads could be tied to the content the consumer was interested in seeing, thus boosting the chances that the ad would be relevant. If your Gmail email talked about a vacation in the sun, Google’s ads would proffer ads touting tempting resorts in the Caribbean. But these ads were purchased well in advance of the ad actually appearing.
But as reported recently in the New York Times, online advertising has stepped up its game and become real-time. Companies such as Google, Yahoo and Microsoft let advertisers buy ads in the milliseconds between the time someone enters a site’s Web address and the moment the page appears. The technology is called real-time bidding, and it allows advertisers to examine site visitors one by one and bid to serve them ads almost instantly.
“The biggest problem with advertising was that decisions about what ads to show were made way in advance of when they actually appear,” Brian O’Kelley, the chief executive of AppNexus told the Times. “There are a lot of reasons you want to make those decisions as close to when the ads run as possible.”
The story compared real-time bidding to billboard advertising. In the real-time process, billboard space would be auctioned off second by second, and tailored to each viewer. Here comes a red Camry, driven by a 40-year-old woman who is on her way from the grocery store: which advertiser will pay the highest price to show her an ad?
“Even throughout the course of a day, information can change pretty dramatically,” said Neal Mohan, vice president for product management at Google. “The more precise you can get in terms of being able to act on it as soon as you get that information, the better it will be.”
Advertisers say real-time bidding cuts down on wasted money. “You can use less media, because you’re using more selected, or more efficient, media,” Edward Montes, managing director for Havas Digital North America, told the Times.