A report by IDC, commissioned by demand-side platform The Trade Desk, said real-time bidding (RTB)-based "forward markets" will see massive spending increases over the next five years.
The report said RTB-based premium display ad spending is expected to grow globally from $230.3 million in 2013 to $14.2 billion by 2018. The United States, which is leading adoption of RTB-based forward markets, is forecasted to spend $211.8 million in 2013 ballooning to $9.4 billion by 2018.
In IDC's analysis, RTB-based forward market buys are the automated equivalent of guaranteed upfronts in direct sales, whereby advertisers pay today for ad inventory – assured to meet a set of predefined metrics – to be delivered in the future. (More: The Difference Between Programmatic RTB And Direct)
For example, an agency may send a proposal to a demand-side platform that contains details on target audience, available budget and KPI goals. The contract is then fulfilled automatically on an impression-by-impression basis, with financial penalties for non-performance also being paid to the buyer automatically.
IDC said the increased efficiency of these automated markets mean their direct sales equivalents will be rendered obsolete. Non-performance penalties are one example. “Even today, publishers’ inventory forecasting capabilities are terrible,” IDC said, and are the most frequent cause for default on performance metrics guarantees. In a direct sales model, publishers are forced to negotiate “make-goods,” or financial penalties, on a client-by-client basis.
The report cited increased efficiency throughout the ad campaign planning process, which on average it found takes 40-60 steps and contributes to the 20% of media budgets spent on tasks not related to data or media buys.
A primary concern among publishers looking at RTB markets is diluting their brand value in an open, commoditized marketplace. Private RTB-based marketplaces have been used by some publishers to take advantage of automation while still allowing them some degree of control over sales.
The report concluded that while private marketplaces have helped publishers become more comfortable with RTB-based markets, they too face pressure from open marketplace alternatives. Although eCPM rates are forecast to contract in the short term, long-term rates should rise along with bid activity.
Despite concerns by publishers over losing control of their ad inventory, IDC said the increased efficiency brought by automation meant those who refuse to automate sales will not remain competitive. Examples cited include Yahoo and The New York Times, both of which have seen the use of direct sales models result in decline of top-line revenue alongside the rise of RTB-based spending.
IDC’s report was based on interviews with 20 digital ad executives in the United States, United Kingdom, Germany and France, as well as previous research and public industry data.