PubMatic’s Goel: ‘Multi-Bid’ RTB Will Solve Lingering Frustrations

PubMatic is pushing a “multiple bid” process to spur more real-time bidding.

In a white paper promoting the idea of multi-bid, the sell side platform outlines some of the frustrations that continue to hold back RTB usage by sellers. Those frustrations include volatile pricing, low CPMs, and weak liquidity.

PubMatic argues the current programmatic bid process, though a vast improvement over traditional media buying workflow, is still not as efficient or mutually beneficial to buyers and sellers as it could be. Normally, a publisher sells an impression through a platform and it’s available to perhaps 50 demand side platforms. Each DSP may have anywhere from 25 to 1,000 advertiser clients, some of which may bid on the impression. They run an internal option, narrowing the bid to one advertiser – typically the highest bid – and transmit that bid to a supply side platform.

“Despite all the advancements in RTB, that activity results in a lack of buying liquidity in the market, because all these DSPs are aggregating all their advertiser demand behind just one bid,” says PubMatic CEO Rajeev Goel. “When you have a second price auction market, it doesn’t make any sense to do that. Who’s to say that a single DSP might have the two highest bids for the ad impression? If we look at the top 50 or so DSPs, the buying is very concentrated with roughly two-thirds of the RTB spending coming from the top five DSPs.”

Transmitting all bids from all DSPs would lead to higher winning bid costs, since RTB prices are set on a “second price” basis where winners pay $0.01 more than the second highest bid. In cases where the top two bids come from a single DSP, a multi-bid protocol would result in a higher winning bid price than you see with a “single bid per DSP” approach.

This begs the question, is there a benefit for advertisers? Goel makes the case this way:

“For advertisers, in a multi-bid environment, the buyers have a much better chance to realize their marketing budgets. For example, many budgets, especially ones devoted to retargeting, will oftentimes remain untapped because of the delivery constraints imposed by the one-bid format. As publishers are presented with more bids for premium placements, they’ll be more encouraged to open up additional inventory to meet that demand.”

He adds there may be additional marketer value in the form of campaign feedback: “When a DSP’s bid is rejected, they don’t tend to get a lot of feedback on their bidding strategy. They’ll usually be told only one reason, such as it was the result of a block list. Now, if they submit 10 bids that are ultimately rebuffed, they’ll have more data to go on than if they just did one.”

The current RTB environment is growing, Goel says, but the implementation of multi-bid would please platform operators who also have higher expectations.

“There’s a significant opportunity to improve the current model,” Goel adds. “Given the sophistication of publisher controls, block lists, transparency, price floors and cross-channel selling rules, there’s an opportunity to draw in better quality inventory and attract higher quality inventory, while promising a better outcome for the advertiser as well, by moving to a multi-bid process.”

Again, Goel is quick to concede that multi-bids are not the ultimate antidote for what plagues RTB. At the very least, he said it will promote better understanding for DSPs looking for what sort of bids worked with a particular publisher goal, because it will allow them to see why some of their bids succeeded and others failed. “We think this will open up both sides to accelerate their adoption of RTB, while leading to…problems of growth in the market being ameliorated over time.”

(For more on this topic read Esco Strong’s AdExchanger column, “Second Guessing the Second Price Auction Model“)

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  1. This argument would only be valid if there was a shortage of inventory. The fact is that there is more inventory than demand. The only logic for having multiple bid is if you are trying to create a demand landscape, ie. price modeling.

    • Diego Panama

      I’m not sure that bidders/DSPs always pass the highest bids and this might be another argument for multiple bids. DSPs control budgets and are incented to spend them. A campaign with two days left willing to pay $1.50 for an impression might win the DSPs top bid even if there is another campaign willing to pay $1.75 but has 30 days left. It’s important for advertisers to understand how their DSP bids on their behalf…