James Green sat down with Marketing Land to take a look at the explosive growth of the bidstream, the challenges of header bidding, and how automation and data science will shape the future of ad buying.
Why has the bidstream grown so much? Header bidding: an advanced programmatic technique that lets publishers offer inventory to multiple ad exchanges (simultaneously) before making calls to their ad servers. If no one buys the impression, the same ad goes up for sale on a broader range of exchanges. In other words, the bidstream has grown because companies are selling the same impression multiple times.
What does it matter if you don’t see all the bidstream? Think of it this way: For most clients, only a very small percentage of the population will ever buy what they are selling.
For example, 7 to 8 million cars are sold in the US each year, and Toyota brings home about 15 percent (just over 1 million cars). If you’re only listening to 50 percent of the available audience, you’ll see about half of the Toyota buyers. You’ll need to perform twice as well as competitors that account for all 1 million buyers to get the same result.
As a result, the ad tech business has become a game for the big players. All of the smaller DSPs (demand-side platforms) have gone out of business because they couldn’t see enough of the bidstream to be competitive.
Why has this happened?
Many theories say second price auctions are great because they encourage everyone to offer their best price – knowing that they’ll only pay the price of the 2nd highest bidder (and that this will cause overall prices at the auctions to be higher). However, header bidding is mostly done with 1st price auctions – you buy the highest you can and if you win, you pay that price and it all goes to the publisher. As a result, publishers have seen big gains because of header bidding.
Google poses a major problem as DoubleClick has almost all of the publisher side of the business. Google could easily build an ad auction business directly into DoubleClick and solve the monstrosity of a problem that we are experiencing.
DoubleClick still works on a priority system where ad campaigns are set to certain priorities (not prices), and these decide which campaigns get served first. The biggest mystery is why Google doesn’t innovate this system.
To read the full article, jump over to Marketing Land to read more about the rapid growth of the bidstream and how data science will impact the future of ad buying.
Magnetic is an artificial intelligence company that uses machine learning to deliver smarter, faster, and more effective advertising. Our powerful AI platform continuously analyzes the attributes of over 350 million live user profiles alongside real-time inventory supply and bid opportunities to deliver highly performant audiences and profitable campaigns for our clients.