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:

1. Publishers need to work with exchanges to provide a clear view into the source of the impression.
2. 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.
3. RTB Buyers (ad networks, DSPs) must accept and consume this data to create value by offering advanced targeting, optimization and reporting/insights.
4. 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.
5. 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!