“On TV & Video” is a column exploring opportunities and challenges in advanced TV and video.
Today’s column is written by Jonathan Teitloff, director of product management at TripleLift.
Don’t go chasing waterfalls, please stick to the bidders and the auctions that you’re used to. Ultimately, we know that you’re going to have it your way or nothing at all.
Over the years, programmatic has optimized the buying and selling process. What started as a ranked buying system in ad servers known as “waterfalls” has evolved into “unified auctions,” all thanks to header bidding technology that allows multiple buyers to bid on inventory simultaneously, which maximizes yield for publishers. Header bidding was a no-brainer that led to a new industry standard for digital advertising.
But as more advertisers shift spend to connected TV (CTV), a lot of their bids for this cutting-edge format are getting stuck in waterfalls.
Why is this? One reason is that linear TV is bought through upfront spend commitments, so traditional broadcasters selling CTV require waterfalls to ensure they fulfill all their guarantees. But what if there was a better way for CTV publishers to maximize yield?
Newer CTV ad serving solutions may have the answer. Rather than relying on just waterfalls and tags, these platforms fetch all demand at once so that CTV publishers can run a unified auction for programmatic demand while simultaneously managing direct-sold campaigns and preferred priority deals. This “blended bidder” approach offers the best of both worlds in a single solution.
Another way for CTV publishers to combine the benefits of programmatic and direct-sold inventory is the tiered auction. Rather than stack ranking supply-side platforms (SSPs) one after the other, a CTV publisher can place multiple SSPs in the same tier. Each SSP then competes against the others in their tier and has a first-look advantage over SSPs in lower tiers.
While innovations like these give CTV publishers more control over their auctions, they also require additional attention and expertise to manage.
Here are some factors CTV publishers should consider.
In the game of programmatic auctions, CTV publishers have the “dealer’s choice” in choosing how the auctions are won. Many CTV ad serving platforms offer auctions based on more than just cost per thousand (CPM); publishers can select winning bids based on revenue per second (RPS), fill rate and more. Publishers can also set rules for exceptions when demand from one tier should trump another.
SSPs shouldn’t need a handicap to drive revenue for publishers. But in a tiered auction, SSPs that are placed in higher tiers win even when a lower-tier SSP submits a higher bid. Tiered auctions not only lead to inefficiencies but can prevent lower-tiered SSPs from competing in the auction all together. Over time, as buyers shift their bids to higher-tiered SSPs that are more likely to win, publishers will become reliant on only a few SSPs for all demand; as those SSPs gain leverage over more and more of the publisher’s revenue, they can charge higher fees and make other demands. To keep yield healthy and prevent relationships from becoming one-sided, it’s important to have demand diversity.
The best way to run a fair game is to ensure everyone gets credit for their wins. These new CTV ad servers also make that easy with reporting that shows the opportunity cost of placing partners in lower tiers. Because all bids are fetched at once across all tiers, it’s easy to calculate the revenue cost when an SSP loses an auction because of priority rather than bid price.
Sometimes it takes a wild card to win a game of poker. The same holds true in the Wild West of CTV. Despite the risks, there are some cases when a waterfall is helpful in an auction. For example, a publisher may want to prioritize demand from SSPs that have unique creative executions or targeting capabilities. This can help differentiate the publisher’s inventory for advertisers that are seeking new and exciting opportunities with CTV. Another way to use tiers is to set up “house ads” at a low priority to prevent “slate” (the static message that appears in an ad break when there’s no ad available).
Raise the stakes
Ultimately, publishers should look for a strategy where all parties are incentivized to put their best foot forward. If an SSP partner requires legacy waterfall mechanics to win, they may be putting their own interests first and leaving potential revenue on the table. CTV publishers that challenge the status quo and adopt fair auction mechanics will reap the benefits of working with the many new partners available to them in this rapidly changing space.