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Real Time Bidding vs. Direct Buy

Real Time Bidding vs. Direct Buy

  • 12.16.2016

Even though it seems a little obscure to choose between direct channels and real time bidding (RTB) at first, the thing you want to achieve at the end is the same: placing your ads on a web site. The process of reaching that ultimate result varies depending on your choice between RTB and traditional direct buys. Let’s see together how they differ from each other.

1) Web Site vs. Specific Audience Targeting

The basic difference between direct buy and RTB lies under the shift from buying ad impressions in bulk with direct buy to auctioning every single impression separately to the highest bid with RTB. With direct buy, you basically buy impressions in bulk in order to show them in a specific context. Even if you are allowed to filter the audience that see your ads simply on the basis of geography or browser type, you ultimately have to target your ads to a specific web site. 

With RTB, in contrast to direct buy, every single impression is evaluated and bidded during the auction process in milliseconds. RTB allows you to specifically target ad viewers based on demographics, psychographics, and behavioral pattern. In addition, RTB enables you to reach many web sites instead of just one site as it is in the direct buy process.

2) Guaranteed vs. Non-Guaranteed Supply

Guaranteed vs. non-guaranteed supply is another difference between direct buy and RTB because the level of certainty whether your ad campaign will yield result at the volume of your need matters. With direct buy, you buy a great amount of ad inventory at a fixed CPM rate to be delivered in the future. So, in a sense, that inventory you buy is guaranteed for you and eventually you will receive the impressions you agreed upon.
With RTB, you are in the auctioning process with many other advertisers bidding at different rates for every single impression at the same real time. That’s why the ad inventory is considered as non-guaranteed and it is not certain that you will win the impression you bid on together with many others.

3) Manual vs. Programmatic Workflow

The workflow of launching campaigns is also different in RTB and direct buy processes. To a great extent, direct buy is composed of manual process. That manual process requires human effort in planning and execution of the campaign. Reaching out and making initial contact with publisher, negotiating and planning a contract between parties, creating ad tags and e-mailing them to each other are parts of that manual process. Of course, that process tends to include more human errors and requires more time and effort, thus it is hard to manage.

On the contrary, RTB is a programmatic process and almost everything from controlling the flow of campaign to reporting takes place on an online platform and in real time.

4) CPM vs. eCPM Pricing Models

Pricing model in direct buy process and RTB process is different from each other as well; since with direct buy, you buy impressions in bulk; however with RTB, you bid on each of the impressions separately.

Direct buys are priced at a fixed CPM rates. That means that all impressions are priced the same. On the other hand, with RTB, every single impressions is bidded on and priced individually. That’s why CPM metric is not appropriate for advertisers to report the effectiveness of their campaign. Thus, the suitable metric for RTB pricing is what is called as effective CPM or eCPM.

5) Accessibility

The final difference between direct buys and RTB is the accessibility of each one. To put it in other words, the level of barriers to entry is different in each approach. Direct buys typically have higher level of barriers to get started when compared to RTB. 

The barrier faced when it comes to direct buys is the sizable minimums in ad spend. You should be ready for a commitment of at least $5,000 - $10,000 for a direct buy to get guaranteed inventory. However with RTB, since you buy ad inventory through demand side platform (DSP), the barrier is much lower and you are not required any financial commitments and operational management. 

As you can see, these two different process have their own advantages and disadvantages at the same time. Direct buys might be inefficient from both price and operation standpoint but offers guaranteed supply. RTB, on the other side, eliminates pricing and complex operational problems but does not provide guaranteed supply. With those in mind, it can be said that these two approaches can be performed in a complementary way after done with a comprehensive consideration in terms of creating a scaling methodology and a data analysis.