Mess with the best, die like the rest..
A few more videos talking about what we do at AppNexus.
Love the headline from this AdExchanger article: AppNexus Strikes Back Against Google’s Attempt To End Header Bidding. With some nice quotes from yours truly:
“Everything starts as a hack and becomes more and more stable and built into the infrastructure,” said Shields, the father of early ad server NetGravity, which was bought by DoubleClick. In its first iterations, the ad server had some hack-like qualities to it, he remembered.
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…
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:
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:
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:
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.
The anti-viewability guy (me) comes around and talks about some things that we need to do to make viewability work.
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.
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.
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.