Archive for January, 2010

Publishers Must Demand Real Openness

Monday, January 11th, 2010

Google’s release of the DoubleClick Ad Exchange 2.0 has introduced Real-Time Bidding (RTB) to a much wider audience. While they were not the first, they are probably the biggest, and their entry is starting to legitimize RTB as more than just a niche.

Neal Mohan’s introductory blog post emphasizes the three main principles behind the development of their exchange: simplify the system for buying and selling, deliver better performance, and open up the ecosystem. It’s this last point – openness – that I’d like to explore.

Real-time bidding offers some openness for the buyers: they are delivered each impression, with the floor price, URL, and cookie, and have a fixed amount of time to bid. They are then notified if they win and a request is made to deliver the advertisement. What’s surprising is that unlike a standard auction, at eBay for example, if they lose, the potential buyer has no idea what the winning bid was. Google gets to keep all that information.

Even more incredible is the fact the publishers also aren’t told the winning bid amount. They get an aggregate value for their earnings, but can’t see the value of each impression. This is as if you auctioned 10 things on eBay, and at the end, eBay sent you $100, but refused to tell you what item 1 sold for vs item 2 or item 3.

This information asymmetry is largely to the benefit of Google, but also skews to the buyers. Savvy buying systems can tweak bids up and down in real-time to do crude discovery of the “true” value of different kinds of inventory and how it varies over time. Publishers have no such ability to discover their inventory value at an impression level. Worse yet, while buyers can bid different prices for each impression, publishers have no ability to re-set floor values on each impression to push the bids up. Of course, they would need new tools to do this (SSP, anyone?), but it is much harder without data.

One final point on how the system is stacked against the publishers: any buyer can participate in any of the exchanges, and indeed many of them do. But since Google does not give publishers their impression values, it is very hard for publishers to find out if some of their inventory would perform better on a different exchange. And to add insult to injury, Google makes it almost impossible for non-DFP publishers to participate at all.

Publishers should be wary of using any ad exchange until they get real openness, and the tools – like an SSP – they need to ensure the deck isn’t stacked against them.

This post also appears at in “The Sell-Sider,” a column written by the sell-side of the digital media community.