“There’s a bit of a battle for survival in online advertising,” said Joanna O’Connell, an analyst with Forrester Research in Cambridge, Mass. “There are always more ad dollars to be had, but there is some finite set of big players through which many ad dollars will flow.”
Online advertising is a fragmented marketplace with publishers, advertisers and middleman networks. Rubicon acts as a broker that can, in a sense, negotiate deals among all these parties.
“Rubicon was a pioneer,” said Jason Fairchild, a top executive at Pasadena ad tech firm OpenX. “Those guys said, ‘We’ll manage all the networks.’ That was a real innovation.”
The ad tech company has 240 employees at offices around the world; most work is done in the West L.A. headquarters – a wide warehouselike space. With its rows of computer terminals and walls of TV monitors showing real-time metrics, the setting doesn’t look too different from the building’s previous role as the production studio for TV show “24.”
Adding to the sophistication of modern advertising technology was the advent of real-time bidding, in which ad companies were able target their campaigns at customers who would have the most value and price them accordingly.
For example, if someone has been browsing through car sites, he would be more valuable to an auto manufacturer that’s placing ads on the Wall Street Journal’s website than an advertiser selling, say, mattresses. When this person visits the newspaper’s website, Rubicon communicates with its network of ad companies to determine the best fit and highest bidder; the winner gets to place the ad in front of the potential customer. For each ad sold, Rubicon takes a small cut.
This entire interaction between Rubicon, the ad buyer and the destination website happens in the microseconds before the page loads. Currently, Rubicon handles 6 billion transactions every day, which is a volume three times greater than the Nasdaq.
That prevalence of real-time bidding online and the ability for ad buyers to target particular people is the reason some ads seem to follow you around from site to site.
“Historically, advertisers only had one way to communicate with consumers and it’s all passive,” Tappin said. “What’s fascinating about digital is you can be interactive and much more relevant.”
It’s a growing field. According to New York market analysis firm eMarketer, real-time bidding was a $1.9 billion industry in 2012 and is projected to hit $3.3 billion this year. That amount is still only a portion of the projected $17.7 billion online advertisers will spend in 2013, but the growth of real-time bidding will help companies such as Rubicon that are heavily involved in the process.