Over the last several years, there has been a transformation in the way publishers monetize their inventory, particularly surrounding advancements in supply side ad server technology. While these advancements have given buyers greater equity and access to quality inventory, it has also made the supply chain more complex, creating a need for transparency to truly understand what is happening in the auction.
The supply side is changing
Historically, publisher ad servers had a waterfall method for inventory fulfillment. Within a Publisher’s ad server, there would be a tiered system of prioritization for all supply partnerships. Conventionally, campaigns bought directly would be at the top of the waterfall, followed by a number of SSPs (Supply Side Platforms), and lastly remnant fulfillment partners. These priorities are set at the discretion of the Publisher, based on a number of factors such as fees, relationship, opportunities to connect to buyers, etc. As programmatic buying grew, it created a need for a more ubiquitous auction to allow for programmatic bids to compete with direct rates.
This resulted in the birth of Header Bidding. This advancement in automation gives all inventory fulfillment partners (direct ad server campaigns, SSPs) an equal opportunity to win an impression, based on price. If an SSP is willing to pay more than a direct campaign, that SSP, in an ideal scenario, will be able to fulfill and win the impression.
Header bidding, which has now been adopted by most publishers, brought complexities to the dynamics of the programmatic auction. One example of an auction dynamic shift is the move from second price auction (the winning bid would pay $.01 more than the second highest bid) to first price auction (the winning bid will pay their respective bid). This shift happened so that a buyer’s bid would get carried into the ad server auction and have a fair chance at winning.
What does this mean for buyers?
Given the changes that have happened on the supply side, buyers need to adjust their strategies to most efficiently maximize outcomes.
Bid Inflation: Now that auction dynamics have shifted, buyers run the risk of over-paying for inventory. Historically a bid that would have been lowered in a second price auction is now the price that you clear at, which can cause a large increase in the CPMs a buyer sees.
Less Transparency: According to an eMarketer Survey in 2018, only 40% of a marketer’s dollars end up going to the Publisher. Approximately 55% go towards “Ad Tech Tax”, meaning fees for buyer platforms, verification partners, fees for SSPs and resellers. Buyers need to become aware of these taxes, and shift investments to maximize the dollars going to the publisher. While this sort of data would ideally be shown within a bid stream, there is a gap in what advertisers want to see, and what a majority of platforms are willing to share.
Brand Safety Risks: On both sides of the ecosystem, there are times when full transparency about who is buying, or where the inventory is being sourced from, is lacking. The more middle men between buyers and sellers, the more risk there is that the impression is not running in a brand safe environment, or that the impression is fraudulent.
What should buyers be doing?
1. Adopt and support industry initiatives. There have been many steps taken to help create greater transparency and efficiency in the ecosystem.
- Ads.txt: verification on a publisher’s site on who is authorized to sell the inventory
- Ads.cert: the continued growth of ads.txt, and the ability to identify the authorized sellers throughout the supply chain
- OpenRTB 3.0: the addition of a digital signature, to help combat the manipulation of data transferred throughout the supply chain, which leads to ad fraud
2. Adjust bids to compete in new auction format. If they haven’t done so already, buyers and their agencies must quickly adapt the way they are bidding to account for 1st price auctions. To help, DSPs have introduced bid shading, or algorithms that inform what bid a buyer should be placing based on the auction type and historical data. Buyers should test in here to understand how it impacts win rates and CPMs.
3. Test and eliminate inefficient supply paths. While there is no one technology or tool out there that will streamline supply path optimization, buyers should begin testing in and out of different SSPs and deal types to determine how best to buy a publisher’s inventory. While this is still largely manual, learnings can be adopted on a larger scale and have great impact on the quality of the buy.
4. Collaborate with the sell side. While the industry has taken steps in the right direction, there is a lot more to do. Immediate steps that marketers and agencies can take is to directly collaborate with publishers and supply side exchanges. Work to build a partnership that allows for data sharing to ensure buyers are getting access to quality inventory, while publishers are maximizing yield.