Tyler Fitch is Director of Ad Network Sales at hi5 Networks, Inc., a social media website.
I know the AdMeld Partner Forum in NYC a couple of weeks ago has been mentioned multiple times already, but I wanted to give it some more love anyway. The conference was fantastic, sporting almost all of the top minds in the real-time bidding (RTB) space. The one thing that I didn't like though was the absence of discussion about SSPs (Sell-Side Platforms) for publishers. Later, at the after-party, I made it a point to walk up to each DSP and ask, "What can you do for me!?"
One may wonder, "Why should DSPs even consider building an SSP?" That's easy: they are missing out on 50% of the revenue. Ad exchange models currently charge both the buyer and the seller. Even if DSPs served 100% of all impressions they would only be making 50% of the revenue. Well…. ...unless DSP's use the new technology to find another way to arbitrage CPMs… which of course they would never do. 😉
This brings me to my next point, RTB doesn't do much good at all (or might even have a negative effect) for publisher CPMs. RTB allows advertisers to buy on an even more effective dCPM (dynamic CPM) than is offered on non-RTB exchanges.
For those not familiar with dCPM, it is a pricing model available on exchanges that allows an advertiser to set a maximum price they are willing to pay for a single impression. Each dCPM campaign needs to have some sort of performance goal in order to hit an advertisers ROI (Return On Investment). Not only does the exchange optimize on the usual ad size, demo or section but it also optimizes on price.
For example, a dCPM advertiser sets a max of $2.00. They see an impression from their target audience come in through an exchange and they want to bid on it. The exchange knows that the next highest bidder is only willing to pay $1.00, so they only bid $1.02 to win the impression. This has actually been good for publishers in the past because it brought a large amount of brand dollars onto remnant inventory that would have only gone to direct buys in the past. But, RTB gives the buyer an even bigger edge, allowing them faster optimization and greater transparency into CPMs. The buying is almost too efficient.
In my experience so far with RTB, I have only seen average CPMs with minimal fill. Real-time bidding (RTB) gives advertisers transparency into what they have to pay for each impression as well as real-time optimization allowing them to choose their price. In the long run, this means less spend for a lower price.
Not all is lost though. These technologies can be flipped for the publisher. I have created a list of ideas on how I think RTB technology can be used for sell side:
- Demand - Multi-Exchange bidding is the key. This has become a little less relevant in the past year because DSP's are building on multiple exchanges but knowing that I can get access to dynamic bidding from Google, Microsoft, Yahoo and so on, leaves me with a warm fuzzy feeling inside. This also allows for one exchange to make up for another ones shortcoming i.e. Google's Ad Exchange does not go well with UGC (user-generated content) or international inventory but pays high CPMs in the U.S., while the Right Media Exchange does well internationally and is cheaper to run.
- Dynamic Floors - Now that advertisers are getting smarter about what they bid on exchanges it is more important for a publisher to find out exactly what each impressions is actually worth and how much an advertiser is willing to pay for that impression. SSP's should be able to optimize floors against size, placement and data segments. A real world example: We tested one advertiser that used dCPM bid against our house ad inventory and found that by adjusting the CPM of our house ads and breaking the arbitrage, we showed 60% less ads but increased our revenues by 30%. If we can do this in real-time, I believe the gains can be even bigger.
- Data - DSP's are allowing buyers to get transparent data optimization. Why can't publishers use this to their advantage? Getting reporting by dataset gives publishers another weapon against arbitrage of their inventory.
Most publishers will never have the resources to build their own SSP. We rely on technology companies to build them for us. There are millions of dollars to be earned by making one, so why hasn't anyone tried to make a good SSP?