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Consider the scenario of four impressions, and there is only one bid for each. This is a reasonable case in such an imperfect
market as RTB. Two impressions each get a bid of $5 and the other two get bids at $20. What’s the best floor here? If your
strategy is the capture as many bids as possible then you’d put your floor at $5, and you’d capture all those bids and earn yourself
$20 (all four impressions fill at $5). But if you set your floor at $20 instead, you’d capture only two of the bids (at $20), and you’d
have yourself $40!
How does this play out? In the short run we’ve seen the development of Rubicon’s dynamic price floor technology which can read
the tea leaves of the market and maximize revenue in RTB. Simply put, dynamic price floor technology solves for the
imperfections in the market by aligning floor prices with known demand throughout the user session. You can then pepper in
expected yield from other demand source to balance out what you collect on the wasted impressions. “Waste” is an important
concept in this market. The way I look at it is, in many ways, like DeBeers looks at the diamond market. You bring your best
quality inventory to the premium market (DSP) and let the rest go to industrial uses (ad networks) or to your secret vault (house
ads, for us).
Data leakage, unfortunately, happens out of sight for us. A nefarious DSP or other party plugged in to a DSP can read the stream
of pages that come through in bid requests. These are tethered to a user ID or some unique combination of request parameters
(IP + Browser + OS + Language, for example). So with a page URL, an identifiable user and tons of bid request volume a nefarious
entity could reach out, scrape pages and build an audience profile for the users without any compensation to the publishers for
the courtesy of the impression data. This type of activity is very difficult for SSPs to police from a technical perspective, but there
are usually contractual obligations that DSPs are adhering to that, legally, should discourage it.
www.rubiconproject.com | Los Angeles | Seattle | New York | London | Paris | Hamburg | Sydney
TOP 10 THINGS PUBLISHERS NEED TO
KNOW ABOUT REAL-TIME BIDDING
5. MOST SSPs ARE USING A SECOND PRICE AUCTION MODEL.
If there’s anything that AdSense proved, it’s that the second price model drives up bid prices while delivering fair market value for
the thing being purchased. The SSPs used this model as a jumping off point when they developed their systems. A few controls
have been put in place to protect the publisher inventory from certain failings of the market. It’s imperfect, you see. An SSP can’t
always expose every impression to every possible buyer. There are simply too many things that can go wrong with the Internet.
As a result the current state of most of the RTB universe is that it’s a second price auction with floors.
Today a private exchange is more about restrictive access than it is about doing deals with agency trading desks. There are two
ways to go about this: the first is to just allow certain DSPs to touch the inventory and then ask them to restrict the buyers of that
inventory on their side. This can come with or without a billing work-around, but that’s not really a publisher problem from an
operations standpoint. Floors can be enforced or not, it depends on the deal. This is a phone-intensive operation generally
handled by trade desks with four different companies in the mix.
The second way is to simply set up priority access around certain inventory, like your homepage. Some SSPs have a simple
priority to buyer exposure. Imagine the three buyers get a first priority auction, if they don’t like the impression enough it goes
to a second set of buyers and another auction is run, and so on. This is very general, but you get the idea. The technology and
the mentality around the Private Exchange are evolving to increase efficiency so that impressions and money can flow a lot more
smoothly through them. The next iterations should be interesting.
So there you have it. I hope you’re not overwhelmed. Keep in mind that you’ve got partners working hard for you to understand all
this and keep you in the black and safe.
www.rubiconproject.com | Los Angeles | Seattle | New York | London | Paris | Hamburg | Sydney