The Death and Rebirth of Real-Time Bidding

Mattia Fosci

March 6, 2023
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min read

Once a cornerstone of programmatic advertising, it’s only a matter of time before open-market real-time bidding (RTB) is consigned to the history books. To the surprise of absolutely nobody, the ad industry’s head is firmly in the sand. But RTB is resilient and offers privacy-preserving paths to economic success that must be fully exploited.

What is Real-Time Bidding?

Let’s start with the basics. Our data is constantly harvested when we use the internet. Thousands of our personal data points enter something called the so-called ’bidstream’, a torrent of information that describes who we are, what we like and what we presumably want to buy to… well, anyone who’s interested. In an open market, countless companies can then access this data and decide which of us they want to target and bid for our attention. This is how most online advertising works. The problem is that it’s out of step with our recently acquired idea of privacy as a human right. In the past few years, there has been a growing realisation that freely sharing personal data with thousands of different companies across the globe can lead to data leaks (who’d have thought!), malicious actions from foreign adversaries, targeting of vulnerable people, and discrimination. This does not mean that the people working in this industry are unethical, but the impacts of technology are almost always understood after adoption. Awareness builds, attitudes change, regulation usually follows, and incentives are created for the tech to evolve. This is the fate open RTB will likely suffer.

What’s happening in Hamburg?

Right as you’re reading this, a court case in Hamburg threatens to disrupt online advertising forever. The plaintiff’s argument is simple: the data that goes into the bidstream is personal (there is little doubt about that); individuals have not given meaningful consent to share this data with an unspecified number of legal entities that are largely unknown to them (this is also hardly disputable); this data-sharing practice can cause damage to the individual (this one is more difficult to prove, but there seems to be sufficient evidence to state that there is a real possibility of harm). Therefore it looks exceedingly likely that the court will rule RTB, in its current open form, to be against the law. So what about the forecasts that expect the RTB market to almost double in size in the next decade? That is possible, but only if RTB is used in compliance with the law. The Hamburg court case will have Europe-wide ramifications, and the US will likely follow a similar path if CPRA starts biting as expected and the Federal Government steps in to harmonise State regulations. That does not mean that RTB will disappear overnight: a grace period will likely be given during which the openRTB protocol will be replaced by a new protocol that bakes in privacy protection. But RTB does not need to be rewritten to work without personal data - it already does. Reducing reliance on open RTB revenue, investing in alternative revenue streams, and adopting future-proof technologies are all rational business decisions.

Catching two birds with one stone

The basic requirement that must be met to work in a post-RTB world (personal data not being shared in the open market) has significant overlap with the more immediate challenge of disappearing third party cookies and mobile identifiers. A solution to the cookie problem can also solve the RTB problem, but this is not always the case. Replacing the cookie with mainstream cookieless solutions (hashed email addresses, server-to-server tracking or probabilistic IDs) just changes the type of personal data that is shared, which doesn’t work. By contrast, advertising technologies that do not insert personal identifiers into the bidstream catch two birds with one stone by being both cookieless and resilient to likely changes to RTB. This is the approach taken by Anonymised. As we discuss here, anonymised targeting doesn’t mean that an individual is never identified by anyone, but that the thousands of parties that work the programmatic supply chain only access anonymised data. The individual is only identified by an entity that they know and consent of, a steward of their data whose job is to act as the anonymisation layer for the industry. Marketers then bid on target audiences and perform all the essential marketing functions that make the whole industry economically sustainable, without the liability of handling the personal data of billions of individuals.

A low-hanging fruit: strategic diversification of revenue flows

The RTB protocol already contains activation pathways that allow for privacy-preserving bidding in direct deals between publishers and advertisers, and within private marketplaces. As cookies disappear, both direct deals and private marketplaces are expanding their market share. These activation pathways are not new, exotic or onerous for the industry. With the right product, advertisers can set up campaigns and buy inventory at scale with no friction at direct, guaranteed or open market prices. Publishers can empower their sales team with accurate audience data or just optimise demand by setting price floors that reflect the expanded addressability of their cookieless audiences. Activated as key-values for targeting, anonymised data scales and optimises these activation paths. The data can be overlaid on private deals that programmatically buy inventory at open market prices in a programmatic marketplace, and It can be embedded into curated audiences sold directly to advertisers via third-party curation platforms or directly on the Anonymised interface. So long as the connection between the bidding process and the individual remains severed, no personal data is disclosed to buyers, sellers or intermediaries during the bidding process yet no marketing function is hampered.

Events in Hamburg strongly suggest that the death of open-market real-time bidding is coming sooner rather than later. Rather than bury our heads in the sand and hope we get through it, the wise approach is to test existing alternatives and start planning their implementation. Anonymised data offers a way forward to publishers and advertisers preparing for the death of the cookie, and to those looking further ahead to the inevitable collapse of open RTB. If you want to get ahead of the competition and prepare your company for the ad-pocalypse, then let’s chat. Those publishers and advertisers who diversify their revenue flow and tech stack today are the ones who’ll thrive tomorrow.

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