The End of Header Bidding?

April 13th, 2016

Some may think so, because Google just announced that they’re supporting Open Dynamic Allocation, which we at AppNexus invented. Here’s my quote in the Business Insider article:

If Google has finally embraced open dynamic allocation, that’s a good thing for publishers, and we welcome them to the party. If they’re providing tools to help publishers see exactly what’s happening inside their auctions, all the better. If, on the other hand, this proves to be just another measure to create artificial advantages and disadvantages in the market, then it’s the same old game.

I’m skeptical that Google will really do it right, but even if they do, cookie matching and other reasons may mean header bidding still makes sense. Don’t sound the death knell quite yet…

Header Bidder redux

February 15th, 2016

A couple of recent articles on header bidding, with a few quotes from yours truly. The first announces our mobile header bidding solution called Mobile PriceCheck, which is great for increasing yield on apps and mobile web:

http://adexchanger.com/mobile/appnexus-tosses-its-mobile-header-bidding-solution-into-the-ring/

The second is about header bidder wrappers like prebid.js, which we believe is a tech that should be open source and standard, because that levels the playing field and allows innovation on top:

http://adexchanger.com/ad-exchange-news/header-bidding-wrappers-another-step-toward-the-end-of-the-waterfall/

Enjoy!

Future of Advertising on the IAB Mainstage

January 26th, 2016

Michael Rubenstein and I got to do a fun presentation on the main stage at the IAB Annual Leadership Meeting this year. The topic: The next $50 billion will be enabled by Technology. Here’s an excerpt:

Introducing the AppNexus Publisher Suite

November 14th, 2015

I had the great privilege of introducing the AppNexus Publisher Suite at our Summit in NYC this November. This was the culmination of over 2 years of work and hundreds of millions of dollars of investment. I could not be prouder of the team that built this together.

Coming Full Circle on Viewability

November 5th, 2015

The anti-viewability guy (me) comes around and talks about some things that we need to do to make viewability work.

Header Bidding Smackdown at IAB

November 4th, 2015

Here’s a clip from the much-anticipated debate between me and Jonathan Bellack of Google about header bidding. I have a great deal of respect for Jonathan, but his views are colored by the fact that Google has little to gain and much to lose as header bidding takes off. Marketingland called this one of the hot topics of the conference. As you can hear from this clip, he is trying his hardest to slow it down, but it seems inevitable at this point.

 

Header Bidding and the Second Price Auction

September 23rd, 2015

A somewhat technical diatribe, this article originally appeared on ExchangeWire: https://www.exchangewire.com/blog/2015/09/22/header-bidding-another-nail-in-the-second-price-coffin/

Auction dynamics are not exactly cocktail party conversation (unless you are at an AppNexus Summit), but they are critically important to how economic systems like RTB advertising work. RTB has historically worked on a second-price auction model, explained clearly here. As RTB has matured, however, some of the assumptions behind the model havestarted to break down, and both buyers and sellers are seeing unexpected results. The rapid rise of header bidding is exacerbating some of these challenges.

Header bidding is the practice of soliciting bids before the primary ad server runs, then including them in the ad decisioning process. Header bidding is taking off because it allows a (somewhat crude) form of true competition between guaranteed and RTB demand, without bias toward any one demand source, and, thus, increases publisher yields significantly.

A simplistic example can show how header bidding gives unexpected results. Imagine that for a given impression bidder A is called from the header, and represents two marketers willing to pay USD$3 and USD$1 for that impression. Imagine also that the primary ad server has a local bid of USD$2 from its own exchange or a non-guaranteed standing order. Because it is called from the header, bidder A does not see the local bid. If all of these bids were in one-second price auction bidder A would win and the auction would clear at USD$2.01 – this is the expected outcome.

With header bidding, however, bidder A only returns one bid (or maybe even just an indication of interest level). Then, either the header javascript or the primary ad server compares that bid to the other bids received and awards the impression to the highest bidder. This means bidder A must choose to return either their the highest bid in the auction or the closing price following the auction. In most cases, bidder A returns their closing price (USD$1.01, assuming a second-price auction), and then loses to the local bid of USD$2, even though they would have been willing to pay as much as USD$3.

If instead bidder A returns their highest bid (USD$3), then we run into the second problem: header bidding provides no mechanism for passing back second price when the impression is awarded and the tag is called. This means bidder A is called to serve the impression, but when they run their own auction, they don’t have the USD$2 local bid, so they still close the auction at USD$1.01, even though it should have been USD$2.01.

In the first case, the buyer loses an impression they would have paid 50% more for, and in the second, the publisher loses half their revenue. Either way, header bidding does not produce the expected results for either the buyer or the seller.

Part of the challenge arises because publishers would like to enable more premium programmatic inventory (and increase yield) by allowing guaranteed and RTB to compete on the same level, but they are priced in fundamentally different ways. Publishers doing header bidding are allocating inventory across both RTB and guaranteed by comparing bids that come in with their local order CPMs – and in the case of dynamic allocation, pseudo bids for guaranteed lines – and choosing the highest bid. This is effectively a first-price auction.

Header bidding is just one type of multi-level auction that breaks the second-price paradigm, it also happens when a DSP aggregates bids before sending them on to an exchange. For example, when a DSP gets an opportunity to bid on an impression, they may represent marketers who bid USD$2 and USD$3 for that impression. For reasons of efficiency or integration, many DSPs will only send the USD$3 bid. If the exchange’s second highest bid is USD$1, then the auction will clear at USD$1.01, although it should have cleared at USD$2.01.

Since multi-level auctions favor the bidders, some sellers have started to implement features like soft floors and dynamic hard floors to tilt the balance back. These tactics effectively make second-price auctions look more like first-price auctions.

Some buyers have made the shift to first-price auctions already. Criteo and Amazon, for example, only buy for themselves, so when they provide a header bid, there is no second price auction happening afterwards. Many sophisticated bidders already don’t bid their true value because they don’t trust the second-price dynamics, and instead use custom algorithms or programmable bidders to vary their bids as if they were participating in a first-price auction.

The second-price auction isn’t dead yet, but it is reeling from some tough body blows. Cascading auctions – including header bidding and DSP bid aggregation – and flooring tactics are causing auction dynamics that are counter-intuitive, and eroding trust in the system. Any time an auction is run without complete transparency into the full bid landscape, the second-price auction breaks down. Interestingly, the first-price auction maintains integrity despite cascading auctions and flooring tactics.

We at AppNexus are doing significant research right now to understand the impact of this potential shift. While the buying and selling tactics may change, some market participants have demonstrated the first-price model can work, and may actually work better, because everyone gets results that match his or her expectations. Solving the conflict between the first-price auction in dynamic allocation and the second-price auction in RTB would help promote the growth of premium programmatic for many publishers and buyers. Ultimately, a more transparent and predictable auction dynamic benefits everyone.

Talking Publishers with AppNexus in Europe

June 24th, 2015

My first big presentation as an AppNexus executive, discussing why the market needs a full-stack publisher suite. Enjoy!

AppNexus Acquires Yieldex!

March 18th, 2015

I could not be happier to announce that AppNexus has agreed to acquire Yieldex. This is the culmination of years of work by an absolutely stellar team, and I am so proud of them all. Thank you, most sincerely, for your effort and camaraderie as we made this journey together.

Worth reading Brian’s post as well, with accompanying video: http://blog.appnexus.com/2015/yieldex/

What’s In Store For The Ad Tech Industry in 2015

January 12th, 2015

This post first appeared in MediaPost: http://www.mediapost.com/publications/article/241031/whats-in-store-for-the-ad-tech-industry-in-2015.html

We all get inundated by the day-to-day minutiae of running our businesses in the ad tech industry, so it’s often surprising when a new year rolls around and we look up to see what we helped make happen. Here are a few of the bigger shifts we have seen over the last 12 months, and what might be in store for 2015.

The “Year of Mobile” Finally Arrived
After seven or eight years of next year being the “year of mobile,” last year actually was the year of mobile. Facebook mobile ad revenues passed desktop ad revenues. More people connected to the Internet via mobile devices worldwide than on desktops, according to comScore. Most new startups are “mobile first.” What’s interesting is that despite the growth, the industry is still grappling with the implications of this shift. Loss of cookies as an identifier, the difficulty of telling stories on small-format screens, and the fragmentation of apps all present challenges for 2015 and beyond.

Native Advertising Becomes a Preferred Ad Format
One way that publishers have begun capturing meaningful revenue on mobile devices is through native advertising. Once a Facebook-only format, dozens of top publishers have redesigned their sites to endless scroll formats that incorporate native ads, because they are much more valuable to brand marketers than banners. In 2015, we should see native advertising continue to grow and begin to mature into a more predictable and scalable ad format, as the providers incorporate tools to provide forecasting and guarantees.

Publishers Dig Deeper Into First-Party Data
Also in 2014, Data Management Platforms or DMPs finally went mainstream on the publisher side. While most advertisers and marketers have been capturing data for years, publishers are just beginning to capitalize on the trove of data they possess. In a world where context is increasingly commoditized, publisher first-party data has become a key differentiator to command higher value for publishers and marketers.  In 2015, we should see more marketers using both publisher and marketer data together to improve outcomes.

Transparency Helps To Combat Ad Fraud
Ad fraud finally became obvious as an industry-wide problem in 2014. Particularly in open-market RTB exchanges, statistics as high as 60% fraudulent impressions have been cited. Viewability metrics have been pushed hard by the IAB and the MMC to help combat certain kinds of fraud, but ultimately even they admitted the technology isn’t there yet. If we can continue to shine a bright light on this problem by increasing transparency, this is an area where we should see substantial improvement in 2015.

Video Explodes With Demand Exceeding Supply
Video as an ad format, whether on mobile or desktop, has finally begun tempting TV brand buyers onto the internet. Video grew dramatically in 2014 and should continue to explode in 2015. Video is often the only format where demand exceeds supply for many publishers, and thus the majority of the sales have been up-front guarantees and not RTB. Improvements in programmatic capabilities, especially automated guaranteed buying, should contribute greatly to this growth.

Automated Guaranteed Goes Mainstream
Speaking of automated guaranteed, 2014 seems to be have been the year of testing, and 2015 is shaping up to be the year where automated guaranteed buying comes into its own. We are starting to see publishers requiring buyers to use automated guaranteed channels for certain kinds of buys in order to reduce costs. More importantly, we are seeing big brand buyers mandate that publishers accept automated guaranteed buys through standard APIs in order to consolidate reporting. 2015 should see dramatic growth as publishers and buyers realize the efficiencies from automating routine tasks.