This article was originally published in AdAge on January 3, 2013.
What is programmatic guaranteed? And what makes the market so ripe for it?
In the rest of the ad business, when you allocate your media budget, you expect this budget to be spent. This has not been the case with real-time bidding — the fastest growing segment of digital media. Until now.
Real-time trading (or real-time bidding, or RTB) has always been about the “spot” market — the non-guaranteed. It’s the inventory the sellers can’t sell. Chief revenue officers at top comScore publishers and media heads at leading agencies are amused, and often confused, by the spot market’s complexity. They know that the real money is in guaranteed budgets.
Programmatic guaranteed (also known as “futures” or “programmatic premium”) combines real-time trading and automation with guaranteed, 100% book-to-run budget capability. It’s the ad-tech world and the “real” world, together at last.
Advertisers submit electronic RFPs (request for proposals) to publishers, with rich, structured meta data about audience, budget and desired outcomes. Publishers offer packaged inventory to a marketplace. The media kit and editorial calendar, with their seasonal and feature-driven calendars, are now electronic and searchable. Super premium, unsold premium and other guaranteed and private rights are presented, discovered, negotiated, sold and transacted in the digital-ad equivalent of the iTunes store.
Audiences aggregated across publishers — or across a class of publishers (think about various indexes in the financial market that connote quality or value, such as the S&P 500) are offered in the same marketplace, according to cycles followed by the media planner and buyer. Advertisers can RFP audience aggregators, who package an audience across a designated publisher class. All this — on your iPad — at lunch.
Here is why this is happening now:
It’s the budget, stupid. Programmatic guaranteed — a market that may soon bring in $9.1 billion a year — has four components. Each has its own dynamics and stakeholders: the mid-tier and premium direct sales of most publishers ($2.65 billion), the mid-tier and premium direct sales of the top five publishers ($2.65 billion), the ad-network business excluding RTB ($1.8 billion), and the existing RTB market ($2 billion).
The ad-tech industry has already laid the pipes. Unlike the early days of online advertising (AOL’s walled garden) or search (Google’s way, or the highway), real-time trading is an open framework, with enough agreement around standards that companies can participate without too great an investment. Support for this openness has come from the leadership of the Internet Advertising Bureau and its various initiatives, including its Quality Assurance Guidelines, OpenRTB and its newly formed Advertising Technology Advisory Board and Council.
A bigger pot of ad dollars await. The current RTB market is $2 billion. Ad networks, agency trading desks and demand-side platforms (DSPs) are all asking themselves the same thing: How do we grow 50 percent, 75 percent or 100 percent? Dipping into a $9.1 billion pot is a lot more attractive than mud wrestling for the same $2 billion.
At the same time, agencies and marketers continue to struggle with reducing the operational costs associated with digital (20% to 30% of a media budget is spent on overhead, or execution costs) and they know that until they reduce that percentage, digital spend will only creep beyond its current 10% share.
DSPs and ad networks have long pushed for “better” inventory — higher quality content and demographics. On the flip side, supply-side platforms (SSPs) are always pushing for bigger, better cost per thousand and overall budgets to support the delivery of that “bigger, better” inventory to automation.
As soon as we can sort all this out, the ad technology can be subjugated, so that it seamlessly supports buyers and sellers working more closely together. The only debate is how much budget will move to programmatic guaranteed, and how fast.
As 2013 gets underway, I wanted to share a window into the Rubicon Project and what will continue to allow our team to win. The email below was sent by Frank (our CEO) over the holidays. The email is an embodiment of our cultural values. Wouldn’t you want to work for a company like this?
As for me, I’ve taken my $2,013 (look in Frank’s email) and donated it to the Student Conservation Association. By creating service projects for high school and college students in national parks, cultural landmarks and other green spaces, the SCA teaches young people important life skills while building the next generation of conservation leaders. The SCA gave me the privilege of working in three of our national parks. #payitforward
Best wishes for a fantastic 2013, Jay
Here is Frank’s email prefaced by our cultural values:
THE RUBICON PROJECT CULTURAL VALUES
- Innovation: We invest our thinking and resources into change that will propel the industry and company forward.
- Excellence: We do things right, not always first. If we can’t do it best, we won’t do it.
- Good People: Pride drives us to win, respect and humility help us learn, and having fun celebrating our wins (big and small) keeps us energized.
- Competitive: We are driven to win and are highly competitive; externally not internally.
- Transparency: Knowledge is powerful. Transparency keeps us honest. We believe in the highest level of transparency possible with our team, investors, customers and partners.
- Active Communication: Communication makes or breaks relationships. We will devote time and effort in making communication a priority.
- Accountability: Personal accountability is the fuel that powers our overall system of accountability.
- Speed: We go fast but don’t hurry.
- Mistakes are OK: If we aren’t making mistakes, we aren’t moving fast enough. Making mistakes is the key to innovating and learning.
- Test/Measure Everything: What gets measured, gets done. What gets tested, gets better.
- Community: We consider ourselves to be fortunate and believe in paying it forward to those in need.
From: Addante, Frank
Sent: Sunday, December 23, 2012 4:58 PM
Subject: Profit! = Bonus, Donation, Gift – Happy Holidays!
(warning, this is the longest email I have ever written. thank you in advance for reading this on your holiday…)
Dear Rubicon Project Team,
I cannot even begin to tell you how excited I am to write this note. I’m in Chicago with my family and today is the first day in a long time I’ve had to slow down, take a deep breath, reflect on the year and truly soak in a full appreciation for all that we accomplished together as a team.
I’m not going to go into detail on every one of our accomplishments in this email. We’re a bit spoiled by our own successes, I go on to Yammer and it seems that every day we have multiple things to celebrate. It’s a challenge in itself to keep up with all of the good news that is generated by all of your dedication and hard work.
Having said that, you know my philosophy for Rubicon success:
Great People innovate Great Products and great products attract Great Customers
It’s clear that we’ve made tremendous advancements in each of those categories. There is no question that we have the BEST team, the BEST products and it’s proven by our customer roster and financial success.
2012 was a big, big year for us. We accomplished something that no other independent company has, in our industry, at scale. WE ARE PROFITABLE! Let that soak in… WE ARE PROFITABLE! Not only have we achieved this important milestone, but we have done it with:
- massive revenue scale
- a pure-play tech, transparent business model
- low-margin fees
- continually making massive investments into our team, product and acquisitions
Profitability alone is a huge differentiator in our market. That combined with the four points above make us elite. Each of you should be very proud of this incredible accomplishment, but you should be admired for the way we did. We have always remained committed to doing the right kind of business in the right way. It has taken a lot of discipline – and I’m so proud that we have also done it with an obsession for our long-term goals and a strong will to never cut corners. I am filled with pride as I write this.
When our family picked up Allison and I up at the airport, they asked how I was doing and I told them that I couldn’t be happier. I also told them that I needed to spend some time alone to write a note to my team to tell them how proud I was of them and thank them for making me the luckiest CEO in the world.
Through the years (and from some very direct people) I’ve learned that I have extremely high expectations, a low tolerance for inefficiency and very little patience. I am almost never satisfied and always believe I (and by association) “we” can do better. It’s rare that I am truly impressed and almost never satisfied. I have to tell you, I am really, really impressed by what you have accomplished in 2012 and in the 5+ years since we have started the company.
This is truly a special company and it’s powered by a special team.
One of the reasons that I was excited to write this note is because of what being profitable enables us to do. When I’m interviewing someone to join our team, the most important question that I ask them is “What does it mean to you personally if this company is successful?” The responses usually range from pride in building something to money to career growth to learning… Here’s my personal answer…
I have been very lucky to have built some very successful companies at a young age. Many have told me that it’s been due to my own hard work and perseverance. I think that’s part of it, but part of it is luck. There are a lot of people in this world that work hard that haven’t had the same outcomes. So, for me, i wanted to take all of that success and luck and pay it forward. I wasn’t looking to start another “corporation” before I started Rubicon. I was planning on taking all that I’ve learned in building great teams, products and companies and use those learnings to go build a non-profit charitable organization. I hadn’t decided what that was, yet – but I knew I wanted to do something good for the world. When I decided to start the Rubicon Project with Craig, Duc and Julie, I told them and our first investors that the following things were important to me:
1. I needed to incorporate community and philanthropy into the company fabric
2. I wanted to always put team first and build a culture that people admire
3. I only want to build a business I am proud of – do it the “right” way, never cut any corners and always follow my gut instincts
We have been really good at all of these sometimes, sometimes we have lost focus on them… But I can say with confidence that we have always been great at least one of them. In 2013, I want to be great at all three. It starts now.
I’d like to celebrate our big year and big milestone of profitability in the following ways.
1. Give back to our team
2. Give back to our community
3. Invest in our culture
1. Giving back to our team: $2,013 bonus for everyone
- As a big THANK YOU for your hard work, commitment and loyalty – to celebrate our first big year of profitability – we are issuing a $2,013 bonus to everyone
- This couldn’t be possible if it wasn’t for each of your individual contributions and for each department and function of the company performing with near precision throughout the year — managing to plan and to budget in terms of revenue, expense and cash management.
2. Giving back to our community: 1% of profits to charity
- when we formed the company, we made a commitment to give 1% of our operating profits to charity
- I’m personally very excited about this one because it’s been something I’ve been looking forward to for 5 years and we’re finally able to do it!
- here’s what we’re going to do:
A. I want to recognize and support EVERY ONE of the charities our team supports. As such, half of our charity pool will be distributed equally to charities that each of you believe in. (more details to come…)
B. The other half is going to go to a charity that is very very special to me, CASA
I’d like to explain to you why this organization is so important to me and why your contributions to this, through our profit proceeds, mean a lot to me…
CASA is a non-profit organization that serves abused and neglected foster children. CASAs are volunteers who make a commitment of 2 years of their lives to serving 1 foster child at a time (yes, just one.) It’s a very special organization – these foster children are dealt a bad deck of cards (physical abuse, sexual abuse, parents who are drug addicts, sometimes they’re babies left on door steps or in dumpsters.) These children become wards of the court/state and are slung throughout the foster care system. Basically, their “parents” are a judge who only has time to meet with them (in a court hearing) for only 6 minutes every 6 months, on average. The children have social workers, lawyers, foster homes and foster parents that are constantly being swapped out and changed – the system is an absolute mess. It’s so bad that a child passed away this year and the state refused to pay money to properly “dispose of his remains” let alone a proper funeral. This child’s CASA pulled people together to raise money to give this child a proper funeral. CASAs are the only consistent adult presence in these children’s lives and handle everything from their health care to education to ensuring they have proper food and housing.
I got to know CASA through my wife, Allison. Philanthropy is very important to both of us – it’s one of the things that drew us together. Allison left a very successful career in advertising and media to dedicate her life to philanthropy. CASA is one of the organizations that she chose to be a full-time volunteer. I shared with her that I really wanted to do more good for the world and it had been difficult for me with running a high-growth company. I would often feel guilty if I didn’t dedicate all of my energy and attention to Rubicon. I would also feel unfulfilled and guilty if I wasn’t giving back to those in need. Allison and I came to an agreement that she would become a full-time volunteer so I could spend all of my energy on Rubicon. It’s been a partnership that has not only been fulfilling for me but one that gives me extra motivation to work hard to make Rubicon a great success.
In 2011, CASA suddenly lost 100% of its government funding. It was a potentially disastrous event. After serving foster children for 34 years, these children were going to lose the only consistent thing they had going for them. All of a sudden, CASA was like a fledgling startup all over again. I joined the board because I saw it as my opportunity to take much of what I’ve learned and apply to a cause that was in real need. The board stepped in, gave CASA the “seed” money it needed to rebuild. I’m happy to say that starting from $0, the organization, through the passion of its staff, board and volunteers has not only rebuilt itself, but over that same period of time has also doubled the number of children it serves. It’s truly an amazing story and I am so humbled to have been a part of it. I’ve had the fortunate experience of seeing two organizations in 2012 accomplish what most could never have imagined.
When I started Rubicon, I dropped off all of the Boards (including one for a company I started) and advisory positions so that I could focus 100% on Rubicon. I left space for a cause that I could truly believe in. Now, 100% of my focus, attention and dedication goes to Rubicon and to CASA. I’m proud to be part of both.
With that said, I am humbled to say that CASA has chosen to honor Allison and I at their first-ever Gala on May 1, 2013. This ”Evening of Dreams Gala” is an incredibly important event and milestone for CASA. In part, it celebrates an important year for the cause and its mission to serve the 23,000 foster children in Los Angeles alone. The event is hosted by Dax Shepherd at the Four Seasons Beverly Hill Wilshire Hotel.
More information here (website still being built): http://casala.org/casa-of-los-angeles-first-annual-evening-of-dreams-gala/
2012 was an important milestone for the Rubicon Project and an important milestone for CASA. As such, the other half of our charity pool is going to go to sponsor the CASA Gala.
We’ll be in the company of other recent supporters such as Disney, Mattel, Kaufmann and NBC. Aside from this being a wonderful thing to be able to do for CASA, it will also help raise our visibility in our community – it’s a great opportunity to show how we’re using our financial strength to support our community. One of our biggest challenges in 2013 is going to be recruiting A++ talent (almost 100 new team members in the plan) while keeping our cultural fabric strong. I’m hoping that our show of commitment to CASA at this Gala which will host many business, technology and financial leaders – will help us attract other “good people” to join our team.
Allison and I have been big supporters of CASA, both with our personal time and financially. We are so passionate about the cause and the dire position the organization has been in, that we dedicated our wedding this year to CASA and asked our guests to make donations to CASA in lieu of gifts. Rubicon has also been a great supporter through donations of time for various needed skills, opening our office space up for training events, supporting the Glamour Gowns event and donation drives. I’m excited, through this donation and through the Gala to merge two worlds that are very important and dear to me.
With our donation, we’ll also have two tables, seating 20 people. I am looking forward to having 20 of you join me for this special event. I’ll work with our Culture Committee to figure out a fair way to invite 20 (it’s a black tie event, so for those who may be wondering — yes, I will be wearing a suit and tie!) :)
3. Investing in our culture: Team Gift
- Team Gift: We have a small gift for each of you to highlight one of our most important cultural values: Communication. We’re hoping to be able to get them in time to distribute at our first team meeting. Until then, it’s a surprise!
- Rest and Relaxation: As you know, we have committed to a mandatory shut down for U.S. operations the weeks of Christmas and 4th of July. It’s important to me that everyone recharge. In addition to you all deserving it, we all do our best work when we are less stressed. This decision did not come lightly, we currently spend over $(xyz) a day to keep the company operating. So, 5 or 6 additional days is a big financial commitment at our scale.
All in all, I’m happy that we are in the position that we are today. Being profitable affords us more flexibility to invest in our team, culture and community in addition to innovation and technology…
All of the benefits and donations noted above to invest in our team, culture and community total over $1.5 Million!
A BIG THANK YOU to all of you for making this one of the best holiday seasons ever for me!
I can’t wait for 2013! It’s going to be an incredible year – our most ambitious plan ever to grow our team, culture, products, revenue and market share! Driven to win.
Happy Holidays to You and Your Families!
P.S. – yes, this is public information – you are more than welcome to share…
FRANK ADDANTE | CEO & FOUNDER
the rubicon project
Auctions conducted—impression by impression—inside of 125 milliseconds.
Real time bidding (RTB) holds the promise of making our digital plumbing smart—solving major challenges around media, audience and data fragmentation. But in practice, despite all the promises, and despite all the actually capabilities, most of the time we still have a dumb pipe.
But the market is about to bifurcate—to the supply (RTB Exchanges) and demand sources (Ad Networks, DSPs and Agency Trading Desks) that make the leap to what I call “smart pipe” and to those that get left behind with a “dumb pipe” approach.
For all the talk, many implementations of RTB and the ad technology stack today result in the equivalent of running glorified re-targeting ad networks—user targeting across dark pools of inventory—or other situations that are only marginally better.
For all the press releases and sponsored iMedia presentations proclaiming the newest capabilities, the truth is the ad technology stack is super complicated and it takes both good intentions and coordinated work up and down the supply chain—publisher, RTB supply, RTB buyer, ad servers, ad creative producers—to deliver a smart pipe. Way too much exchange traded media gets lost in a sea of iFrames, entering a vast black hole that drives down its value for both the brand (ex.: I care about environment and audience) and the direct response (ex.: I care about ones and zeros—data to optimize) buyer.
Who is culpable in regards to our industry’s dumb pipe syndrome?
There is plenty of blame to hand out:
- Publishers need to work with exchanges to provide a clear view into the source of the impression.
- Exchanges need to pass this transparency along with data about the page, ad slot and user to its bidders to provide the greatest liquidity and demand for each impression.
- RTB Buyers (ad networks, DSPs) must accept and consume this data to create value by offering advanced targeting, optimization and reporting/insights.
- Agency Trading Desks and operating agencies need to develop & expand the workforce that can utilize this value; must be able to explain and convey this value to clients and must capture client budget that is about media investment not only cost reduction.
- Clients need to demand smart solutions and put their money where their mouth is. Programmatic buying can deliver a full suite of value from direct response to brand—clients need to understand, demand and fund these smart pipe capabilities when working with their suppliers.
Everyone in the supply chain has a job to do to deliver the smart pipe and some companies are further along than others. Anyone in this supply chain can drop in one or two Iframes, or not catch and pass along an important piece of data, and there is diminished value for everyone.
The good news is many in the ad tech stack are stepping up. In addition to specific company-to-company cooperation, initiatives through the IAB Networks & Exchanges committee and OpenRTB will assist in facilitating the smart pipe approach.
I declare 2012 the year of the SMART PIPE!
SSPs are Dead.
Niedermeyer. Dead. (anyone?)
SSPs (supply side platforms) began to emerge in 2007 to help large publishers “YIELD OPTIMIZE” demand from ad networks—all 400 of them.
It was a great pitch: Mr. Big Publisher, you utilize 20-70% of your inventory to make 80% of your revenue from direct sales. Let me manage all the second channel (remnant) demand via ad networks—you’ll make more because I the SSP know how to “YIELD OPTIMIZE” among this crazy world of 400 ad networks.
The YIELD OPTIMIZATION business—the reason for the creation of SSPs—is Dead. Finito. Over.
Ben, Rajeev, Frank—before you lunge for the phone (or lunge at me), I’m actually going to explain to everyone your bright future. Bankers please get your pencils ready.
SSPs are now Exchanges. There has been a buzz word merger. Someone tell Terry Kawaja so he can adjust his bubble chart (bubble chart, get it?).
Effective immediately all digital media executives are to cease and desist all usage of the acronym S.S.P. and use the fully formed noun “Exchange”.
Optimization has moved to the buy side.
Real Time Bidding enabled supply (otherwise known as Exchange) allows all RTB buyers—ad networks, DSPs, agency trading desks—to bring their own optimization to the table. RTB caused the death of SSPs and their emergence as exchanges.
In fact at a recent conference, Admeld’s own Ben Barokas said his business has shifted from 15% RTB/85% YIELD OPTIMIZATION in January 2010 to 54% RTB/46% YIELD OPTIMIZATION in January 2011. At best, yield optimization is a legacy business among SSPs.
NEW: Merger to Exchanges—all RTB Enabled
Google did not buy Admeld the SSP for $400 million. Google bought Admeld the Exchange for $400 million.
See my earlier post Google, Admeld & The Need for Diabolical Liquidity.
What do you think? Leave a comment below or contact me.
[These views are my own. If you want to speak with CONTEXTWEB in regards to RTB, go here.]
Thanks to DOH for the movie reference.