News organisations must engage with RTB advertising

Journalists tend to focus on the shifts in media consumption as they try to make sense of the disruption in their industry, but they have often overlook the shifts in adverting beyond the precipitous drop in newspaper advertising since 2005. That collapse, more than 60 percent since 2005 in the US, has been driven not just by the decades-long decline in circulation but also that there are simply cheaper and more efficient ways for advertisers to reach audiences than passive banner or print advertising. The collapse in newspaper ads has driven some news groups into bankruptcy, driven many small dailies to become weekly publications and has driven news groups to shift the balance in revenue from advertising to reader revenue.

Frédéric Filloux has a great look forward to 2014 with his normally insightful advice on how digital media will survive to see 2015. I completely agree with him that the glut of online advertising is driving prices downward. I part company with him about RTB – real-time bidding. RTB, aka programmatic or algorithmic buying, can seem dauntingly complicated on its face, but after you cut through the acronym-intense eco-system, it is really quite straightforward. RTB is simply an automated way that advertisers can place ads on sites based on the audience they want to reach and the price they are willing to pay. RTB platforms mine the rich data-stream being collected about you.

It is a natural evolution of the data-driven targeted advertising system that we’ve seen develop since the late 1990s. To quote Alan Mutter, this is why media economics have shifted from reach to each. It’s not about advertisers casting their message as far and wide as possible but by precisely targeting their message to audiences they think are most open to their message. RTB can target age, income, geography and other demographic factors.

Again, for journalists who aren’t on the business side, it’s important to understand that RTB is mostly used for selling remnant advertising. What’s remnant? Your sales team sells as much of their ad space as possible – direct sales – but they may not be able to sell all of your pages. Unsold pages are remnant, and these unsold pages have traditionally been sold on ad networks. RTB is really just an evolution of the ad network model. News groups have become wary of ad networks because the returns are so abysmally low compared to advertising they sell on their own, and news groups and Filloux are worried that RTB, with its auction model, will simply put even more downward pressure on ad prices. Filloux says:

Thanks to Real-Time Bidding (RTB), publishers actually fuel the price deflation by auctioning their leftover inventory on various marketplaces. In doing so, they generate some revenue – at the expense of the format’s per unit value (in such auctions, expect no more than 5-10% of nominal prices). In addition this process mechanically applies negative pressure to premium placements because the advertisers will opportunistically purchase a guaranteed and targeted audience wherever available.

He is right to a point, but we’re already seeing smart engagement around RTB. RTB, and indeed all digital advertising, is about data, and just as news groups like the Financial Times realised that owning their customer data is key to their business, news groups are realising that if they power their own RTB exchanges with their own data, it can be a competitive advantage. Condé Nast launched a premium RTB exchange two years ago, and last year, they appointed an RTB senior director, Alanna Gombert. She said that that their RTB rates are similar to their direct sales rate card. She talks about premium RTB, and that is consistent with the magazine group’s premium content.

While news groups operate in a different space than a magazine publisher like Condé Nast, they still have the opportunity to create private RTB exchanges to leverage their data. This is especially true for large newspaper groups with rich user data that they have gained with their paid content strategies. Paid content is as much about user data as it is about shifting the revenue mix. Filloux doesn’t say that news groups shouldn’t engage with RTB, but I think they must engage with it. Data driven advertising is not only a reality that cannot be ignored, it can also be an opportunity. Fortunately, news groups got the memo. As Digiday wrote yesterday, the New York Times and the Washington Post have already appointed RTB chiefs. Own your future; don’t fear it.