Today's column is written by Zach Coelius, CEO of Triggit, an online advertising technology company.
To my frustration, talking about proprietary vs. open software standards is a really good way to get eyes to glaze over in the ad business.
Nevertheless, in this post I am going to try and explain why real-time bidding (RTB) is truly an open software standard - and why “open” is a really, really, really big deal for all of us.
The best definition of a software standard that I can find is on Wikipedia:
“[A] Software standard essentially is a certain agreed to terms, concepts and techniques by software creators so that many different software can understand each other”
Now, let’s break it down further and relate it to online ads.
There are two types of standards: proprietary and open. A proprietary standard is a standard that is owned and controlled by a company or a group of companies who can restrict, change, charge for use, or do whatever they want with it. A good example of this in the ad business is the Adwords APIs that enable search advertisers to build software for buying Google search ads.
An open standard is a standard that no one controls and upon which anyone can build software without having to worry about the standard suddenly changing or access being restricted. The entire Internet is built on top of open standards like HTML for websites, SMTP for email, and FTP for transferring files. With an open standard, many independent parties can build software that can communicate with one another without having to coordinate or make any agreements in advance. They can build websites, email servers, web applications, client software, and anything else you can imagine while trusting that their creations will be able to communicate with the rest of the Internet. Clearly, as we have seen with the amazing growth of the Internet, “open standards” is huge.
Ok, so how is RTB a software standard and why does that matter? At its core, real-time bidding is a mechanism for passing information between the software of two parties, a buyer and seller. The seller is the publisher, aggregator or the ad exchange looking to sell an ad impression, and the buyer is a media buyer looking to acquire media in order to achieve certain results. With RTB, each time there is an available impression the seller’s software passes a message to the buyer’s software with all the data about the impression such as the URL, IP address, ad location and size, cookie ID, etc. The buyer’s software then takes that data and runs a computation to determine if it has an ad that will match the impression and if so what to bid for it. If the buyer wins the bid, they serve an ad to that impression.
So far so good. But why is that important? The key to understanding why RTB is a software standard is to see that the core message being passed—data about an impression—is something that all parties understand, agree upon and that can’t be changed unilaterally by anyone. Data about an impression is the unchangeable standard in RTB. When Google’s RTB passes us data about an impression, it is the same as when Appnexus or any other seller passes us data about an impression. Our software can take data about an impression from any seller, parse it with our secret sauce and make a bid for it without having to worry too much about which seller it is coming from. What that means is that we can build one piece of software for buying across the entire RTB ecosystem. Moreover, once there is a standard in place, any new company that wants to join the party will have to build their piece of the puzzle according to the standard. We recently saw this when AdECN/ Microsoft announced that they were going to support RTB. Parties on all sides of the equation will now have to support RTB or get left in the dust.
Finally, after almost 15+ years of Internet advertising we have a standardized mechanism for buying and selling media using computers.
So, what do you think?