AdMeld, a New York City based ad inventory optimizer, just closed on a $15 million round of venture funding, in the latest sign that the real-time bidding (RTB) market for display advertising is on fire.
Last month, Google paid a reported $70 million for demand-side platform Invite Media. And just a few weeks ago, brand safety startup AdSafe, which will increasingly work with RTB platforms, raised $7.5 million.
The rise of RTB is the biggest story of 2010 in online advertising, and has been written about extensively in ad industry publications. But people outside of advertising don’t seem to know anything about it.
Here’s the basic gist:
Sites across the web track your browsing behavior via cookies and sell basic data about you. The Wall Street Journal has a fairly hysterical article on this today that is attracting a lot of attention, but there’s no fire here: this is anonymized data, used to serve you ads. It means you’re more likely
to see ads for things you actually care about, and it keeps the Internet free. Good times.
Web publishers offer up display inventory to the RTB market through services like AdMeld’s; rather than signing up for a fixed CPM, they sell each individual ad impression to the highest bidder, based on whom that individual ad is being served to.
Advertisers purchase these impressions directly, or increasingly through demand-side platforms like Invite, MediaMath, or Appnexus. They run algorithms that know who they are looking to advertise to and how much they are willing to pay, and automatically purchase the best ads in real time. The slogan, rapidly becoming a cliche, to describe this is: “buying an audience instead of buying inventory.”
That said, the context still matters – brands don’t want their ads served next to objectionable content, no matter how well the audience fits. Brand safety companies like AdSafe keep an eye on where publishers’ ads are going.
The upshot of all this is that each ad impression is worth much more. AdMeld CEO Michael Barrett says ads sold through RTB generate 2-3 times as much revenue for his customers on average, and up to 10 times as much in some cases.
The RTB market will be worth around $1 billion this year, Michael tells us, still only a small fraction of display advertising, but given the rapid growth and obvious upside, we asked if he thought RTB would completely replace the old model of ad networks.
He gave about the most straightforward answer we’ve ever received to a question like that: “Yes, actually. in the fairly near future.