To steal a lick from the great Sam Cooke, “a change is gonna come” for display advertising pricing, selling and inventory. Forrester Consulting’s new report released today calls for a change in the way display ads are bought and sold, favoring bidding over pre-negotiated CPMs. The continued runaway growth in available inventory is making that CPM model harder to support, says Forrester. It states: “Despite its heavy usage and expected growth, online advertising doesn’t currently function as efficiently as possible. In fact more than 30% of marketers expect the effectiveness of display media to decrease over the next three years. The time for change is at hand.”

Forrester is sticking to late lat year’s that display advertising will grow at a rate 17% to reach almost $17 billion by 2014, despite a 2009 drop in spend.  Forrester expects this increased investment to come as advertisers gravitate toward rich media and online video formats and get smarter about planning and measuring display buys.

In “Media Buying Goes Real Time” it predicts that marketers embrace bid-based ad buying. Performance-based ads currently make up more than half of all online media buys, according to the report and marketers fluent in cost-per-click deals where ad placement depends on bid price are ready to optimize display ad buys. In fact the report shows that more than 80 percent of marketers surveyed would spend more money online if they had better targeting available.

“We see advertisers and publishers gravitating toward a new approach to media buying which will allow for better targeting,” it says. “It is the largest driver of more online display spends. New labels for this new approach are stealing their way into the online advertising lexicon. You may have heard of ‘real-time bidding,’ or ‘real-time optimization’ taking place on ‘demand-side platforms’ or ‘publisher-side platforms’ and ad exchanges. We find that none of these commonly used terms perfectly describes the strategy needed for better media buying and selling. So Forrester recommends a new and specific approach called dynamic media buying optimization (DBO) which we define as: Dynamically adjusting the price of an ad impression based on its specific audience data and performance history.”

The report was commissioned by AdMeld, which also held an event today to discuss its version of Forrester’s DBO, called real-time bidding. During his opening address at the AdMeld Partner Forum 2010, Michael Barrett, AdMeld’s CEO, discussed rapid emergence of Real Time Bidding (RTB) as a platform for buying and selling ad inventory. Barrett cited factors such as enhanced pricing, efficiency, transparency and control of data as reasons for the technology’s growth and said it had the potential to bring billions of additional dollars to the display ad market.

Forrester stressed the following action points for publishers:

• Following buyer dollars. Publishers who don’t place inventory on bid-based buying platforms will be ceding ad sales to other publishers who do. As more marketers (and their dollars) flock todemand-side instead of ad networks or buying directly, any publisher not participating with biddable mediaplatforms will lose access to potential buyers.
• Selling audience, not ad space. Marketers and publishers have long used content as a proxy for target audience, but better data, improved targeting technology, and real-time bidding allow marketers to buy based upon actual audience identification.
• Selling smarter, higher margin deals. Conventional relationship-centric sales negotiations can be lengthy and require tedious manual bookkeeping, resulting in errors and high cost. Selling inventory through automated bid-based platforms frees up publisher sales organizations without sacrificing margin and data to ad networks.
• Building user-centric sites. Audience-based buying means that inventory that delivers valuable audiences becomes desirable whether it is on the home page of a branded site or three pages in on noname.com. But audience is not the only variable that will determine price. Media buyers will also pay for placements on sites with engaging content, well-designed customer experiences, and the ability to support flexible ad units.