The price is right? Let the data answer that

Programmatic audience targeting has increasingly become table stakes and today provides fewer performance increases than in years past.

There are plenty of vendors providing competitive (and increasingly comparable) ways to target consumers based on the data available through third-party exchanges. After years of innovation, audience targeting is reaching a new level of maturity, and marketers are looking for new ways to gain an edge.

One opportunity to find that edge lies in applying the same data used to segment audiences to processes — including that collected offline — outside audience targeting, namely to determine the right price to pay. In that respect, bid optimization has emerged as a new venue for innovation in display advertising, using many of the same tools already well-proven in the world of audience segmentation.

You don’t hear as much about using offline data and technology to determine accurate bidding. I look across the industry and still see the lion’s share of the efforts devoted toward using offline data and technology to segment audiences, while the same offline data and technology remain comparatively underutilized when it comes to optimizing bid price.

Who wouldn’t want to increase conversion rates while decreasing cost per acquisition (CPA) without changing the targeting? Too many people assume that real-time bidding (RTB) has this optimization baked into the auction format, that supply and demand will always ensure that we’re paying the best price. That’s not the case. In reality, bid decision-making is based not only on supply and demand market forces but on algorithms, and those algorithms are only as good as the data that informs them. In audience targeting, we typically layer in first-party data, offline data and other proprietary sources, but bidding algorithms don’t.

There’s a plausible reason that marketers don’t seize this advantage: the methods for determining RTB pricing are opaque compared to those for fixed targeting audiences. The costs for a fixed targeted audience are clearly stated, but the actual pricing for RTB is usually determined by black-box algorithms and is aggregated as an average CPM post-campaign. Typically, we don’t learn why some impressions are worth more than others or whether someone is pulling prices out of thin air. And as a result, we fail to grasp the ways we can further optimize for bid price.