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RTB, Ad Exchanges, and Facebook's Big Advantage

Published: January 22, 2013

Author: Molly Shotwell

Today’s post is by AdExtent co-founder Ron Pick.

evil bot
This evil bot’s fraudulent impressions aren’t such a big problem for FBX.

The rise of Ad Exchanges and Real Time Bidding (RTB) technologies in the last couple of years has brought increased opportunity for advertisers of all kinds. The underpinnings of the technology enable advertisers looking to target specific audiences and content to programmatically purchase what they determine to be the most relevant impressions, and pay for those impressions individually at a market rate.
This evolution in media planning and procurement of traffic has seen new companies spring up that utilize this technology for themselves and advertisers.
From traditional online agencies to specialized retargeting companies, RTB is leveraged to expand client offerings and increase scale by offering their advertisers a way to purchase premium and remnant inventory at scale.
But as the saying goes, where there is great opportunity, there is also risk. The rise of RTB has invited with it a host of very smart people and companies who leverage their understanding and the relative openness of the market to build systems that maliciously game the market to generate huge profits for themselves at the expense of others.
The way this works is by using web-bots to emulate real users. These bots scour the web looking for retargeting cookies that they can fetch. These retargeting cookies are very easy to come by. For example, most large- and medium-sized e-commerce sites generally drop a couple of them from different vendors.
Once those bots have gotten their [retargeting] cookies, they bring the bot back to fabricated content sites designed specifically to purchase impressions from ad-exchanges and networks. By leveraging the ability of RTB to buy a single impression to a retargeted visitor, the advertiser initially buys an impression for this fake visitor, not being able to differentiate or ascertain if the visitor is real.
While on average these impression may cost very little (usually a couple of tens of cents to a few dollars per thousand impressions), if you multiply this process tens and hundreds of millions of times a day across thousands of advertisers,  you get a hefty cash-generating machine.
It’s like finding a recurring charge on your credit card bill for some ringtone you purchased in 2006. Essentially stealing a few cents to a few dollars from every exchange advertiser, preying on the chance that this will either go unnoticed by the advertiser, or at most the advertiser will blacklist the false domains. (Note: many of the larger networks have introduced tools for verification and auditing that aim to filter out many of these results.)
But talking about this scheme, which is not unlike search-based click fraud, is not meant to put you off retargeting or RTB altogether. RTB’s opportunities still bring huge benefits to many advertisers that, in spite of the apparent fraud, still manage to generate ROI and with healthy margins.
This is where I think Facebook Exchange has a real advantage. Being a closed network where bots cannot easily crawl or manipulate content (at least to any tactic I am aware of) gives FBX a big advantage in the world of RTB – especially for retargeting.
To a greater extent, we can say that Facebook traffic is real traffic. This is why, in part, a lot of the current players in the FBX space have seen positive results.
In addition to the lower competition, which in turn yields lower average CPM costs and higher ROI, FBX inventory is comparatively good.  Of course it is also arguable that FBX has its own drawbacks. Relatively confined ad units allow for limited possibility to entice users’ attention, and as long as Facebook remains the ad server, limited serving capabilities remain (along with no social data that can be leveraged in any way to learn more about the users you are targeting).
I have also heard arguments that the Facebook ad platform does not yield the click-through rates of web-based display targeting or retargeting. Visitors are generally focused on their news feed and the goings-on of their friends and are more prone to banner-blindness. But cases for this banner-blindness exist outside Facebook as well.
This also brings us to the possible advantage Facebook may have in terms of viewability. A recent comScore study showed that 31 percent of ad impressions aren’t seen by the user, largely because they’re below the fold.  Facebook Ads are either always above the fold or statically placed on the page so that even if you scroll down your feed, the ads follow you down.
Going forward, we can expect that the technology players in the RTB space will find ways to eliminate fraud or marginalize it. Until solutions are found, the problem seems to be growing. Facebook seems to be a player with an advantage here.
ron pick adextent– Ron Pick is co-founder of AdExtent, a company that develops solutions for improving performance of display retargeting campaigns thought dynamic creatives and optimization algorithms.

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