Advertising Technology

The Fate of RTB is Not Tethered to the Cookie

A longstanding industry issue has been the implications on privacy that cookie based targeting creates, and Do Not Track legislation is not going away. Forthcoming versions of Mozilla’s Firefox, Microsoft’s Internet Explorer, Apple’s Safari, and Google’s Chrome browsers have installed Do Not Track mechanisms that could potentially have a substantial impact on the digital advertising industry as a whole. Numerous organizations ranging from the Direct Marketing Association, the Digital Advertising Alliance, and members of the House of Representatives have expressed their concern over the effect Do Not Track policies will have on publishers, advertisers and brands whose revenue relies heavily on the buying and selling of digital advertising. Even Yahoo and other major parties have announced plans to ignore Do Not Track requests from Internet Explorer users.

In my experience, when the topic of privacy and 3rd party cookies come up, industry professionals express concerns about the future of RTB, as if its fate is tethered to the cookie. I think this is born out of the belief that because the RTB protocol relies and benefits heavily on the usage of cookies, it also requires cookies to transact. To be clear, RTB would not be uniquely impacted – every component of digital marketing that relies on targeting would be impacted. Every channel of sale in display would lose the benefits of the third party cookie. And although third party cookies play a massive role in the number of impressions sold via RTB, the fact is that RTB in its current form is not exclusively cookie based and can survive without them, if need be.

A stat that few are probably aware of is that a sizeable number of impressions are sold today without any cookie data whatsoever via RTB. This is because the exchange can’t always get a cookie match in place for a user before it is required to put that user out for bid. This is a process between the exchange and the DSP, which allows for the exchange to identify and store a specific cookie identifier for any given demand side platform. That process then allows the demand side platform to leverage its own profile data set on the given cookie for bid decisioning. But this is not available 100% of the time, and so cookieless impressions are still sold. In fact as of October 2012, 18% of all RTB impressions sold via Index Platform are sold without cookie data.

While concern is justified, the intrinsic nature of RTB would allow it to evolve and thrive regardless of any limitations placed on the third party cookie. Although the third party cookie has propelled targeted advertising, RTB is a buying model that can adapt and it has been successful for reasons beyond the third party cookie.

We launched a recent survey conducted by Advertiser Perceptions on the effectiveness of RTB and private ad exchanges. Operation efficiency was the number one ranked area of satisfaction of RTB. Because of the real time transactional nature of the RTB model, it is best positioned to innovate around any limitations on 3rd party cookie usage or availability. It lends itself to new ideas and rapid movement.

If the third party cookie went away, there will likely be a return to publisher first party data, which the model can make immediately accessible to a wide swath of buyers relatively easily. In the absence of any data, one could still try to achieve a similar level of targeting by focusing in on publisher specific audience affinities.

Real-time bidding is in its infancy, and there are still misconceptions about how it works, and the benefits it brings. However, the nature of RTB, regardless of the existence or limitations placed on third party cookies, will still allow for automated transactions, and increased speed and efficiency of digital ad buying. Publishers will continue to have the ability to sell unallocated inventory and increase revenue, and have their sales team focus more on building relationships, rather than calculating transactions. Regardless of the outcome of the Do Not Track debate, RTB is here to stay.

Andrew Casale is the vice president of strategy at Casale Media, a core technology company that maximizes digital media value for the world’s leading publisher and advertiser brands. Look for his column the first Thursday of every month.

  • Avi Spivack

    Thank you, Andrew, solid piece; however, I think the “cookieless 18%” number is slightly misleading. I think you are saying that roughly 18% of imps are rendered cookieless because a cookie-match does not occur due to the dropoff in data passage. That is fine, but don’t advertisers think they are buying cookie-targeted impressions (and without a cookie, the impression is then “untargeted”)? While the underlying RTB trading platforms might function from a technical standpoint, data-driven online ads rely on third-party cookies to allow the ecosystem to flourish.

    • Andrew Casale

      The intent of the piece was to point out that RTB is not reliant on the cookie to
      transact, and so I opted to point that out by leveraging data on buying
      transacted absent cookies – no intent to mislead I promise 🙂

      You are certainly correct that many advertisers expect buying based on cookies in RTB today. Although I will also say that buying an impression absent cookie data is not fair to unilaterally call untargeted. The cookie is very valuable, but with each bid request we are also transmitting environment information (geo, IP, OS, etc) along with site and context (URL, category, brand safety, etc). The DSP algo is taking all that into account before it bids.

      And I agree with your final comment, I am a big supporter of data driven targeting that the cookie makes possible. That said, when you look at something like mobile, or the potential implications of legislation, it’s important that we be objective in our understanding of what these pipes are capable of and how versatile they are, should our usage of cookies become constrained.