The German display market is the biggest in Europe. IAB Europe's recent report estimates Germany to be worth around the billion euro mark in terms of display buys. As the data-driven display is showing strong growth across Europe, Germany has been dragging its heels. Will automated trading and RTB get any traction there in the short-term? Wolfgang Bscheid, CEO at Munich-based DR agency Mediascale thinks there are significant barriers to RTB adoption in the German market. Here he explains why it will take a lot longer for Germany to go real-time.

Is the industry really ready for RTB in Germany?

When ´Spiegel´, one of Germany´s most important business publications writes a cover story about real-time bidding it has got to be big? Right? If you take a closer look at all of the articles on the subject, there’s little evidence that RTB is working in Germany. Marketplaces are being described as breakthrough trading platforms and publisher-focused targeting technologies that sell conventional profiles are being praised as innovative. No real progress has been made.

We need to look at the particulars of the German market to understand why RTB is still lagging here.

What is Real Time Bidding and why is it important for online display?

This new media trading concept was conceived in the US. Currently there’s just about 1% of US media inventory being sold via RTB (real time bidding). This percentage might appear relatively small, but it is growing fast.

There are a number of reasons why Germany is so far behind in terms of trading through RTB. As the term implies, real-time bidding simply means trading online media on an automated platform in real-time. Well, if you can trade frozen orange juice and cement in real time, why not online media? Similar to the stock market, the actual trading tension occurs somewhere between the demand and supply of whatever it is you are trading. As soon as demand exceeds supply, prices raise and vice versa. There is one big problem in Germany with relation to online media: there is barely any inventory category where demand exceeds supply (with the exception of video advertising).

How might demand and revenue increase using RTB? To answer that question you have to take a closer look at the U.S. and other mature market. Germany’s standard placements and targeting have become less sophisticated than the US.

Dealing with actual prospects has become a common media currency. Only by targeting user profiles with purchase intent can campaign efficiency be boosted. These profiles are in high demand amongst advertisers.

This kind of profile information is common in Germany as well, although the term we use here is “retargeting”. Why? In most cases, the profile information is generated on the advertiser’s website. German ecommerce sites are increasingly making use of these profiles to target their own users, but are refusing to share data with others. Publishers can offer a lot of information about user behavior, but unfortunately much of this does not capture purchasing intent.

What are the possibilities for growth in the German RTB market?

With this in mind, there are two ways RTB can become successful in Germany. The first is that auction platforms succeed in aggregating a large amount of profiles with purchasing intent. In this case we would have a classical seller´s market situation and the bidders would be able to successfully boost their revenues. But due to restrictive data protection laws in Germany and the unwillingness of big ecommerce sites to reveal their customer information to buyers, this is not going to happen in the short-term.

The other possibility is that sellers offer conventional targeting on their platforms. This scenario will lead to a buyer´s market here in Germany - with auction-based platforms putting downward pressure on publisher eCPMs. As a result, prices for online media will decline even more. Unfortunately every exchange market reacts in the same way in terms of pricing.

Will big German agencies warm to RTB?

When impressions are traded in real time, the bidder with the highest offer automatically wins - regardless of agency size or media purchasing volume.

Let’s say agency trading agreements are ignored in RTB. Holding companies will lose interest in putting media spend through RTB as smaller nimbler players with superior bid management skills win auctions. If real time bidding platforms manage to somehow integrate agency-specific discounts into the system, then smaller agencies will not be able to compete.

Holding companies will not want cede any ground in the display market here – and that will restrict growth in the short-term. Ultimately automated trading will have a massive influence over the online advertising industry. But there is still some way to go before RTB gains ground here in Germany.