Are CPMs Actually Increasing?
“Get ready to pay more,” said Jay Friedman, partner and COO of the Goodway Group, which advises agencies on programmatic.
While some buyers see price increases they attribute to header bidding, not all of them mind. Some said increased prices came with better quality or improved acquisition metrics.
MediaMath sees higher prices when bids pass through header bidding, at least from the exchanges that share that information.
“It’s form of privilege, and privilege comes at a price,” said MediaMath VP Tanuj Joshi.
Others on the buy side, however, say header bidding artificially increases auction prices, and they’ve adjusted their bidding strategies because of it.
Criteo – once the sole header bidding partner for thousands of publishers – attributes some price increases to the rise of header bidding, but it decreased its bids because it didn’t see better value.
“The more non-second-price the auction is, the more you bid down,” said Patrick Wyatt, SVP of product management at Criteo.
Buyers who only bid what they’re willing to pay aren’t concerned about the difference between what they bid and where the auction clears.
“Intellectually, it doesn’t bother me that one [impression] clears at $5, one at $7,” said Eric Bosco, CEO of ChoiceStream. “My value is my value.”
Buyers also don’t mind paying more if it allows democratized access to quality inventory.
“We see header bidding as a shift to make more auctions more fair,” said Rocket Fuel CTO Mark Torrance. “It’s better for the publishers, and also better for the demand side who would not have access to that inventory.”
Unfortunately, the same pricing mechanics that lead buyers to pay more could also lead them to bid against themselves.
Imagine that a buyer submits a $5 bid to four different exchanges for the same impression, which clears at $2, $3, $3.50 and $4. The publisher would select the $4 bid to show the impression. But if the buyer hadn’t submitted that $4 bid, it might have ended up at the $3.50 clearing price.
The other way a buyer might bid against itself is when a header partner passes that $4 bid into the ad server. Google Ad Exchange has the final opportunity to beat the bid via enhanced dynamic allocation. The same buyer may pay $4.01 or higher for the impression it bid on earlier.
GroupM Connect is not concerned about this.
“If you would have asked me five years ago, I would have said that [bidding against yourself] is a major risk,” said Joe Kowan, global head of programmatic at GroupM Connect.
But research from GroupM’s Exchange Lab “proved that taking precautions to mitigate [bidding against yourself] would hinder campaign performance multitudes higher than bidding against yourself,” Kowan said. “It’s rarely even worth considering unless you are a massive advertiser.”
Tweaking bidding strategies and publisher connections to accommodate header bidding takes resources from other priorities.
“If I’m an agency trading desk and now have to develop a whole new set of intelligence around bidding algorithms, how am I making those fees?” Friedman said. “This is probably the biggest leap in complication I’ve seen in a while in terms of being able to truly understand what you are bidding on, why and when.”
Will Header Bidding Change How Buyers Connect To Sellers?
Some buyers want to use header bidding tech to connect to a select group of publishers.
While directly connecting to publishers isn’t new (Criteo and Amazon connect directly with thousands of publishers, which reduces tech fees and allows funds to be reallocated to publisher acquisition teams), some direct connections let DSPs cut out SSPs.
AudienceScience, for example, began pursuing direct header integrations for clients like P&G five years ago. The setup allows advertisers to “buy from the premium publishers, buy using their data, and with universal frequency capping,” said Michael Greene, VP of product strategy at AudienceScience.
MediaMath is also working on a solution that leverages technology from its Akamai acquisition, which solves some of header bidding’s infrastructure and security issues, said the company’s VP of product planning, Eric Picard.
“We want our demand to get as close to supply as possible, with as few hops or intermediaries in the middle, and to deliver ads, not ad tech,” MediaMath’s Joshi added.
Buyers who believe in the open exchange but want to avoid second-pricing themselves are culling their suppliers. While DSPs used to establish connections to as many supply partners as possible, they may soon start buying through a smaller number of exchanges.
Because the same impression can come through exchange channels five or 10 times, leading to price increases, DataXu is revisiting how it accesses publishers, said company co-founder and CTO Bill Simmons.
“DSPs like DataXu need to strike preferred partnerships with preferred exchanges and require them to send publisher inventory through the exchange only once – while blacklisting it from other exchanges,” Simmons said. That way they can avoid the waste of bidding against themselves.
Similarly, Criteo is going to withdraw demand from SSPs because of header bidding. “We will have more incentive to run direct deals,” Wyatt said.
GroupM Connect, which already focuses on private marketplaces and works closely with publishers, hasn’t changed its strategy, Kowan said. When it sees strong performance from a header tag in an open exchange, it uses that as a conversation to start a direct integration.
Kowan is not surprised to see more DSPs go GroupM Connect’s route and focus on curating supply instead of fishing in the open exchanges.
“DSPs [are] starting to pivot and go the direction we have and build direct relationships with the publisher. They realized that these open exchanges are not what they are cracked up to be,” Kowan said.
Agencies can curate header bidding supply more manually, too, on a campaign-by-campaign basis. The independent agency PMG pays close attention to which publishers have header bidding integrations, because these setups improve reach.
When it assembles a media plan, PMG will consult with its DSP and target spend toward publishers running header bidding. “We are always trying to figure out a way to buy qualified, good inventory,” explained media operations director Cristina Freeman. Header bidding simplifies that process.
Plus, the company doesn’t have to deal with the hassle of setting up private marketplaces. That said, it’s receptive to publishers who reach out and want to establish a direct relationship if a PMG client is buying a lot of inventory through the header.
But not everyone likes the idea of buyers focusing on differentiated supply. ChoiceStream staffs a small publisher acquisition team to make sure it can access enough of quality publishers’ inventory programmatically. But it doesn’t like it.
“It’s disheartening, because it’s back to unautomated,” Bosco said. Establishing direct relationships with publishers creates “essentially an old-school ad network.” He prefers focusing on tech over supply. “Fundamentally, you can differentiate yourself on inventory or data. We picked the data front.”
DSPs moving into the territory of SSPs worries Friedman. Although some could be lured by access to unique supply, publishers technologically need to limit total partnerships.
“I prefer a hard line between the buy side and the sell side,” Friedman said. “I would not want my DSP having a header tag and having that direct relationship with the publisher. That goes over the line for a lot of folks.”
Whatever the outcome, header bidding is ushering in a stage of transition for buyers and sellers as they figure out what to do as their access to each other improves, but via another imperfect method.