A common question we hear from marketing execs is what the difference is between purchasing ad space directly from a website publisher and buying indirectly through a real-time bidding (RTB) system. Here, we take a look at how these work, the pros and cons of each, and what makes the most sense for local campaigns.

The Direct Buy

The first place that newcomers to the online display ad market often look to find advertising space is on the websites that they want the ads to run on. On many websites somewhere in the small links in the footer can be found the words, “Advertise with us.” Seems like a simple proposition. For $X per month, your ad will show right here. The drawback is that the visitors to that site might not all reside in the region your business serves. Larger websites do sometimes offer geo-targeting, but they are likely to be somewhat cagey about how many impressions actually get served in specific areas.

Publisher’s View of Direct Buys

Selling advertising represents the main source of revenue for a large majority of websites. The most straightforward way to do this is to hire a sales team and negotiate directly with advertisers. As the traffic on a website goes up, the process tends to get more complicated, requiring a dedicated ad server and a team of people to manage everything. Though it requires more work and technology on the publisher’s part, selling to advertisers directly typically generates higher revenues. Of course, for the advertiser that means that the direct buy costs more.

Ad Networks

Between negotiating contracts, building traffic, and billing, managing an ad system can become a hassle that many publishers decide to outsource to an ad network. Many have turned to Google’s AdSense in hopes of a quick, easy solution, but have discovered that it offers low revenues and a less than transparent revenue model. In the past, any publisher left out of the direct ad sales game was forced to turn to services such as Google AdSense, but real-time bidding offers a better way for them to make the most out of any unsold ad space.

Same Inventory, Different Purchase Methods

Website publishers have long been struggling to increase their ad revenue with as few headaches as possible. The more sought-after a publisher’s inventory is, the better prices he or she will be able to negotiate. Direct ad sales remain popular despite the difficulties involved, largely due to their high revenues, but most publishers simply have too much inventory to sell all of it directly, and therefore turn over portions of it to ad networks. This means that advertisers wanting to get their ads onto those sites can often get the same placements, but for much less cost.

Consolidated Inventory Adds Options

The more times ads are seen by viewers, the more business they can generate for the advertiser. Since impression levels in narrow geographic areas are usually small for any single website, it is necessary for advertisers to place ads on more than just one or two sites. Buying space through an exchange makes this process much simpler. In addition to this, RTB networks offer additional targeting tools, so that ads can be aimed at specific types of viewers as well.

Fluctuating Inventory

The one drawback to purchasing inventory through RTB is the fluctuations in the amount of space available. Because demand for ad space changes throughout the year some publishers may hold back inventory from the real-time bidding market during busier seasons. For example, high-advertisement seasons such as Christmas generate a lot of direct sales, which means less real-time bidding inventory. Last holiday season, for example, real-time bidding inventory costs skyrocketed after Black Friday. Between lower inventory volumes and higher prices, marketers were forced to compete, and many marketers were unable to maintain their volumes due to the higher costs.

This should clarify the differences between making direct ad buys and going through an RTB network. For the local advertiser, the benefits of RTB are really what make display advertising a viable option for getting their brand in front of customers.