The End Of Header Bidding? Google Opens Up Dynamic Allocation To Outside Demand

Google-dynamic-allocation-outside-exchangesIn a major change to its Double Click for Publishers ad server, Google will bring in the real-time bids of a publisher’s outside exchange partners to its dynamic allocation product.

The feature addresses a key problem that led to the rise of header bidding, essentially doing away with Google’s previous policy where it only allowed its ad exchange to compete for each impression.

In the past, Google’s ad server merely estimated what an outside exchange could bring in, and did not let them submit bids for every impression. That dampened yield as ad network spend gave way to programmatic. Header bidding solved for DFP’s deficiencies by soliciting bids before the ad server call, finally allowing bidders to compete on actual price, not an estimate.

Exchange partners participating in the pilot program include Rubicon Project and Index Exchange. Publishers include, Hearst, Meredith and Zillow.

So, will this change kill off header bidding?

According to Rubicon Project, it will not.

“We see our partnership with Google as complementary to innovations in header bidding,” CTO Neal Richter said. The company also noted that changes in DFP did not support private marketplaces or dealID, “which we believe will be necessary in the near future.”

Google answered this way: “We are just trying to help publishers make more money without compromising user experience,” stated Jonathan Bellack, director of product management for DoubleClick.

Bellack was referring to the fact that header bidding, besides improving yield, can add latency to a page.

When it adds outside exchanges to dynamic allocation, Google will connect via server-to-server integrations, which speeds up the process. All partners will submit their bids in parallel, including Google AdExchange, Bellack said. No exchange partner can gain an advantage in the bidding process.

Google said it has been working on the change for “months.”

Separately, the company opened up DFP First Look, its initial response to the rise of header bidding, to all publishers. Because the product is in its early stages, DFP First Look will only include demand from Google Ad Exchange, not from outside exchange partners, according to Bellack.

Although that might change, that means in the pilot program there are some places where exchanges like Rubicon and Index Exchange won’t compete.

Bringing in real-time bids unifies demand, increasing yield for publishers, but it will likely cause problems for buyers, who assume that different exchanges have different pools of inventory.

Bellack listed two side effects of this switch. One, if buyers have the same query from the same user offered to them multiple times from different exchanges and SSPs, a buyer’s technology costs could rise.

Two, and more importantly, buyers risk bidding against themselves (“second pricing themselves,” in Bellack’s phrasing) if they submit different-priced bids to different exchanges.

The same problem exists in header bidding, and it means buyers end up paying more. “There needs to be a discussion in the industry about what this means for buyers, and that’s a big part of what we are doing before we scale up,” Bellack said.

A more unified auction, where all buyers see an impression, could also mean that it’s harder to win the auction. That’s especially true for buyers on Google Ad Exchange. Until now, they were able to outbid the final price submitted by another exchange, thanks to dynamic allocation. Post-change, they will face more competition from other exchanges.

Bellack said Google will be asking questions and measuring the impact of this change on buyers and publishers throughout the pilot program. “We believe that more accurate pricing will be good for the industry.”


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1 Comment

  1. I think the buyers will soon identify that all of these exchanges will offer similar audiences due to integrations with one another and in the end they all will end up as indistinguishable players on the publisher end. On the upside, the buyers will now have to come up with a uniform bidding strategy across these platforms, ask for more transparency on where their ads are running to avoid bidding against themselves. Solving this will help curb arbitrage in the digital space.