In a post for Medium titled "Demystifying Programmatic Marketing and RTB," Twitter director of product Ameet Ranadive explains the mechanics of real-time bidding in a way that is descriptive, detailed, and easy to understand.
The whole post is worth a read for anyone who'd like to have a better grasp of what real-time bidding entails, but the meat of it, at least as far as it relates to Twitter's future business plans, lies in two paragraphs near the bottom under the heading "RTB Re-imagined for Mobile and Native Advertising."
Here's what Ranadive had to say (emphasis mine):
"RTB retargeting is primarily being pursued with traditional display advertising, and is still relatively early with mobile advertising. I have written previously about how mobile ROI is difficult today due to consumer shopping behavior on smartphones and the fragmentation of Internet usage across devices. The fact that users tend not to convert directly from smartphones makes RTB retargeting a challenging proposition on mobile. The way that RTB retargeting will initially develop on mobile will be via driving users to perform in-app conversions, on apps that they have already downloaded to their smartphone. However, in order to tap into the full RTB retargeting opportunity, the industry will have to solve the problem of targeting and measurement across devices.
Similarly, RTB retargeting is also in the beginning stages with respect to 'native' advertising. One of the hallmarks of native advertising is that the ads blend seamlessly into the consumer experience, and often strongly resemble content. The ads used in RTB retargeting with traditional display are often little more than a call-to-action to buy, with product information, pricing, and a product image. These ads probably look more like ads than content. In the context of native advertising, RTB retargeting ads may therefore not be able to blend in as easily to the consumer experience. Thus, RTB retargeting ads may need to be re-imagined for native ad platforms."
Several things here are fascinating. For one, Ranadive's focus on "in-app conversions" is - perhaps - indicative of the company's desire to induce mobile users to purchase products they've seen advertised on Twitter directly from within the Twitter app, or from inside other apps served by Twitter's MoPub mobile ad exchange.
Already, the incumbent social media giant, Facebook, has benefitted handsomely from such in-app conversions. The company is expected to announce that around 20,000 mobile app makers have signed up for ads that allow Facebook mobile users to click a link that initiates an app installation or purchase. In the second quarter of 2013, Facebook made 41% of its revenues from mobile advertising.
If Twitter could clear this hurdle, it would be a huge win for the company, given that it recently announced that more than 70% of its advertising revenues are coming from mobile ad buys.
The company could also do itself a favor by figuring out a way to make its advertising products - the promoted tweet, trend, and account - available to be traded via real-time bidding. As of now, Twitter's advertisers can target users based on their interests, location, and peer groups, but the ads Twitter sells do not allow the targeting of individual users in real time the way Facebook's do. We're not saying that Twitter is about to do this - but Ranadive's column shows that it is the kind of thing the company is thinking about.
Twitter's $350 million purchase of the mobile advertising tech company MoPub is widely thought to have been made with the hopes of creating a real-time bidding platform for mobile that would allow marketers to automatically purchase ads using Twitter's data that would appear on mobile devices outside the Twitter platform. Facebook's FBX platform allows something similar, but the ads appear inside Facebook.
In order to get RTB ads inside Twitter, the company will need to create a product Ranadive said the industry has yet to figure out: a programmatically traded advertising unit that seamlessly fits into the user experience the way a so-called "native advertisement" does. As it stands, all of Twitter's advertising products are native ads, but none are traded programmatically.
What's interesting is that Twitter might have just laid the scaffolding for such a product yesterday, when it announced that Twitter's desktop website and mobile app will show embedded videos and photos on the main timeline, without users first having to click a link for them to appear. This means that moving forward, the photos and videos advertisers embed in promoted tweets will be viewed by everyone who sees the tweet, and the media will flow seamlessly between photos and videos tweeted by other users.
If Twitter could make those photo slots open to advertisers via real-time bidding, they might just clear both of Ranadive's hurdles in one giant leap. And who knows, maybe Twitter will find a way to make clicking on some of these branded photos initiate a purchase.