Transforming premium media buying through real-time trading

Transcription

1 Transforming premium media buying through real-time trading

2 Smaato White Paper Welcome to the second in a series of Smaato papers about the monetization of mobile advertising inventory. The first piece in this series, Successful Global Monetization Strategies for Mobile Apps and Websites, addressed mobile monetization from square one: what to think about when trying to develop a monetization plan. In this next installment we ll delve a bit deeper into the different buying models, how they work, and the motivations behind them. First, some terminology: What is Programmatic? In the realm of digital advertising technology, Programmatic is the buying and selling of digital advertising via Real- Time Bidding (RTB) systems. It should be noted that via RTB systems usually, but does not always, mean real-time decisioning. The pipes of RTB infrastructure can be used for transactions other than just free market auctions. Direct Direct (or, Guaranteed) selling in internet advertising is probably as old as internet advertising itself. Advertiser A agrees to buy X number of impressions from Publisher B, to be delivered during a specified period of time. As long as Publisher B provides sufficient opportunities for Advertiser A to display his ads on Publisher B s property during this period, Advertiser A agrees to pay a particular rate for these impressions. That rate is negotiated at the beginning of this process. Pretty straightforward and if you are the accountant or CFO for Publisher B you love this: Advertiser A just gave you an easy way to forecast your revenue. Premium The definition of Premium inventory in digital advertising is frequently debated. For our purposes we can define Premium as inventory a publisher would typically not be willing to sell outside a Direct/Guaranteed agreement. This type of inventory is the publisher s most valuable; high in the funnel, it s value and performance allow publishers to charge higher CPMs and insist on upfront advertiser agreements. All other inventory is then sold through indirect/non-guaranteed channels such as ad networks and open auction RTB, something discussed at length in the first paper in this series. Blurring The Lines It would be convenient if there were a clear line between premium and non-premium inventory, but of course it s not that simple. Especially with the efficiencies created by RTB, it is clearly possible to offer any type of inventory to indirect buyers and, on an impression by impression basis, potentially monetize at rates higher than Direct IOs. Moving away from ad tech for a minute, consider why this might be: value vs. commitment. For example, why do you (hopefully) not pay hotel-like rates for your home, yet the hotel industry a booming business where we regularly pay exorbitant rates for lodging? Of course, this is because we re only committing to those rates for a very short period of time. We are willing to pay a premium for four walls and a bed because it suits an immediate, ephemeral need. After which we have no further obligation. 2 Copyright 2014 Smaato Inc. Transforming premium media buying through real-time trading

3 The balance, or struggle, between advertising supply and demand deals with exactly the same problems. The publisher, and especially the aforementioned publisher s CFO, wishes they could sell everything Directly, up front, at premium CPMs. Conversely, in a perfect world (outside sponsorships and the like) the advertiser would only commit for very short period of time -- preferably on a per impression basis. And given the lack of commitment, they may very well be willing to pay a much higher rate for that impression/user than they would be if an upfront commitment were required. So why not just offer everything via RTB and control floor prices carefully? Several reasons: as the publisher, for much of your inventory you can sell it Directly, at a premium, so of course you re going to. Second, you may well have a direct sales staff; selling the same inventory via an exchange that this sales staff is out selling directly may very well result in channel conflict -- impressions being sold to the same or similar advertisers at very different rates. And third, perhaps the most important thing to a publisher: control. Control over the specific ads that appear on your site, control over brand or other sorts of conflict, control over your ability to plan, and control over revenue or yield. Programmatic Direct Programmatic Direct is an attempt to bridge this issue between access and control, value and commitment. When a publisher reaches a scale where these types of decisions need to be addressed, using a monetization platform that allows for Programmatic Direct buying is an effective way to offer more premium (not a greater quantity of Premium, but rather premium er inventory) inventory to RTB buyers. It allows publishers to move the bar between Direct and Indirect more toward the center of the equation. Programmatic Direct Lifecycle SELLER APP / MOBILE WEBSITE UPFRONT DEAL TERMS Inventory Duration Audience Targeting BUYER DSP / AGENCY Ad Request 1 Bid Request 1 Bid on Ad Space Fixed Ad Request 2 SMX Smaato Global Mobile RTB Ad Exchange Bid Request 2 no bid Ad Request 3 150ms Bid Request 3 Bid on Ad Space Fixed Source: Smaato SMX The concept has a few different flavors, but the general methodology is this: Unlike an open auction, buyer and seller communicate and agree up front on deal terms. Inventory, price, duration, audience, targeting, etc. Copyright 2014 Smaato Inc. Transforming premium media buying through real-time trading 3

4 Like RTB, buyer has the ability to take or pass on any impression. This is the key difference from traditional Direct: the advertiser has control of the final Buy decision. The impression may be priced at a fixed rate. If the buyer takes it, they ve already agreed to pay a fixed price, no bidding is involved. Impressions are sent to the buyer via RTB The impression may not have a fixed price but rather only an agreed upon floor price. Buyer bids for the impression however competition is with a known subset of select publisher-approved buyers. Usually called a Private Exchange. Mobile Programmatic Solutions According to emarketer, global mobile advertising spend will reach $31.5billion this year and expected to grow to $94.9 billion by As mobile monetization continues it s explosive trajectory and more and more brand dollars are focused on mobile properties, mobile monetization solutions must allow for the control needed by publishers and the reach and flexibility needed by advertisers. Smaato s self-serve Publisher Platform (SPP) offers a full suite of Programmatic buying options, and gives Smaato publishers direct access to over 270 mobile focused demand sources around the world. It is Smaato s mission to help mobile developers and publishers monetize their properties in the most effective way possible. A mature global RTB market like Smaato s SMX is a critical first step. Adding Programmatic Direct controls allows publishers to directly interact with larger budgets and brands while still maintaining the control they need over their mobile advertising inventory. Global Mobile Ad Spending (in Billions USD) 100 $ $ $ $ $ $ Source: emarketer, March Copyright 2014 Smaato Inc. Transforming premium media buying through real-time trading

5 About Smaato Smaato is the leading global mobile RTB ad exchange (SMX) helping mobile app developers and publishers increase ad revenues worldwide. As an industry pioneer and leader, Smaato operates the leading mobile RTB ad exchange and Supply Side Platform across 78,000+ mobile app developers and mobile publishers. On demand side Smaato globally connects 100+ Ad Networks and 170+ DSPs. Smaato is an initial member of the OpenRTB Mobile subcommittee and an active member of the Mobile Marketing Association, Mobile Entertainment Forum (MEF), Singapore Infocomm Industry (SITF), Singapore IT Federation and the German Digital Media Association BVDW. Smaato received a Top 100 Private Company Award by AlwaysOn Media (2013, 2012, 2011, 2009 & 2007), is one of the AlwaysOn Global 250 winners in the Mobile category (2014, 2013, 2012 & 2011) and was named a company to watch in 2010 by Financial Analyst Company GP Bullhound. Smaato s global headquarters are in San Francisco, California. The privately held company was founded in 2005 by an experienced International management team. Smaato s European office is in Hamburg, Germany and the APAC office is in Singapore. Smaato Inc. AMERICAS 240 Stockton St, 10th San Francisco, CA T: +1 (650) americas@smaato.com 1115 Broadway, Suite 1007 New York, NY T: +1 (646) americas@smaato.com EMEA Gerhofstrasse Hamburg, Germany T: +49 (40) emea@smaato.com APAC 333 North Bridge Rd. #05-00 Singapore T: apac@smaato.com