Media & Advertising

Advertising

Instant Ads Set the Pace on the Web

Joshua Bright for The New York Times

At AppNexus, from left, Michael Rubenstein, president; Brian O'Kelley, chief executive; and Mike Nolet, technology chief.

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Time is now on the side of online advertisers.

Advertisers have been able to direct online messages based on demographics, income and even location, but one element has been largely missing until recently: immediacy. Advertisers booked slots in advance, and could not make on-the-fly decisions about what ads to show based on what people were doing on the Web.

Now, companies like Google, Yahoo and Microsoft let advertisers buy ads in the milliseconds between the time someone enters a site’s Web address and the moment the page appears. The technology, called real-time bidding, allows advertisers to examine site visitors one by one and bid to serve them ads almost instantly.

For example, say a man just searched for golf clubs on eBay (which has been testing a system from a company called AppNexus for more than a year). EBay can essentially follow that person’s activities in real time, deciding when and where to show him near-personalized ads for golf clubs throughout the Web.

If eBay finds out that he bought a driver at another site, it can update the ad immediately to start showing him tees, golf balls or a package vacation to St. Andrew’s, Scotland, often called the home of golf. If a woman was shopping, eBay could change the ad’s color or presentation.

“The biggest problem with advertising was that decisions about what ads to show were made way in advance of when they actually appear,” said Brian O’Kelley, the chief executive of AppNexus. “There are a lot of reasons you want to make those decisions as close to when the ads run as possible.”

Compare real-time bidding to, say, billboard advertising. In the real-time process, billboard space would be auctioned off second by second, and tailored to each viewer. Here comes a red Camry, driven by a 40-year-old woman who is on her way from the grocery store: which advertiser will pay the highest price to show her an ad?

“Even throughout the course of a day, information can change pretty dramatically,” said Neal Mohan, vice president for product management at Google. “The more precise you can get in terms of being able to act on it as soon as you get that information, the better it will be.”

While companies have been plugging real-time bidding for a couple of years, industry heavyweights are now behind it. Google introduced its revised DoubleClick Ad Exchange, offering real-time bidding, in September. Yahoo is testing the process on its Right Media Exchange, and Microsoft on its AdECN exchange.

A consumer would barely notice the shift, except that ads might seem more relevant to exactly what they are shopping for. It is another way in which marketers are massaging information — and something that has raised ire in Washington, where the Federal Trade Commission has been holding discussions on tailored advertising.

“The fact that you can be auctioned off in 12 milliseconds or less just illustrates how privacy in this country has rapidly eroded,” said Jeffrey Chester, executive director of the consumer group Center for Digital Democracy.

The bidding is good news for publishers, because advertisers are willing to pay more for targeted ads. In a Google study, publishers received prices on average that were 130 percent higher on ads sold through the DoubleClick exchange, compared with ads sold through networks. United Online, the parent company of sites like Classmates.com, has been working with the company PubMatic to sell its unfilled ad space in real time, and has gotten 50 percent higher prices on those spaces, said Jeremy E. Helfand, the chief sales officer.

Advertisers say real-time bidding cuts down on wasted money. “You can use less media, because you’re using more selected, or more efficient, media,” said Edward Montes, managing director for Havas Digital North America.

AppNexus is one of the companies helping marketers automate their analysis and bidding. AppNexus plans to formally introduce its management platform on Friday, which eBay has been using for more than a year.

Part of AppNexus’s pitch is computing power: an advertiser has to receive an ad impression, analyze it, decide what to bid on it, and decide automatically what ad to show in less than a quarter of a second to avoid slowing down the page-load time. It also lets companies funnel what they know about a Web user into the ads they show that person. EBay, for instance, has files of information on its customers: what they’ve bought, what they’ve searched for, where they live. Previously eBay had to buy a block of ads from a network or exchange, and when someone it recognized showed up, they could partially customize the ad. Now, customers are offered one by one, and eBay — using AppNexus’s automated system — only bids on the ones it thinks are worthwhile.

AppNexus examines a number of factors to figure out who to bid on, and how much to bid. The process makes the most of the real-time information.

One factor is the site the person is visiting: Is this a site that has performed well for eBay? Is the spot where the ad would run an attractive one, or downpage where someone might miss it?

Another is how many ads the person has seen recently.

“You might algorithmically say, ‘This is the 51st ad this person has seen in the last 30 minutes, therefore I’m not going to pay for this impression, because the likelihood they’ll click on it or respond to it is lower,’ ” said Matt Ackley, vice president for Internet marketing and advertising at eBay.

Using data providers like BlueKai or eXelate, AppNexus can add information about what a person’s been doing online.

“It’s a lot about being able to get the right users, but it’s also about passing on certain instances where we don’t think you’re in the market, based on what you’ve been doing in the past hour,” Mr. Ackley said.

Mr. Ackley said he had seen triple-digit increases in return on investment — the ratio of overall sales to overall ad spending — since he began working with AppNexus, though he declined to give specific figures.

Results like that have some marketers and online publishers suggesting real-time bidding might revive a sluggish market. Spending on banner ads declined 2.3 percent in 2009, to $4.76 billion, according to the research firm eMarketer. Meanwhile, spending on search rose 2.2 percent to $10.78 billion.

Until the arrival of real-time bidding, said Mr. Mohan of Google, “the technology hasn’t really been there to deliver on the promise of precise optimization, delivering the right message to the right audience at the right time” in the display world.

“We believe display advertising can be not just a big opportunity for Google, but more importantly, we think that the overall display advertising pie, as it exists online today, can be substantially larger,” Mr. Mohan said.

This article has been revised to reflect the following correction:

Correction: March 15, 2010

Because of an editing error, the Advertising column on Friday about technology that allows marketers to direct instant online ads at specific Web users misspelled the given name of a Google executive in some editions. He is Neal — not Neil — Mohan.

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