Reducing Private Exchange Friction With a New Protocol Upgrade

by Andrew Casale (VP Strategy)

Private exchanges were designed to bring publishers and buyers closer together, address concerns of channel conflict, and ultimately increase inventory value. We have yet to see this model create a unanimously positive feeling from both buyers and sellers. I contend this is largely because of friction that is inherent in the model of putting one’s most valuable opportunities behind a manual process.

The first wave of the private exchange was based on preferential treatment that gave top-tier buyers a first look at ad space in return for higher prices. However, this was met with lukewarm appetite by buyers who did not see enough value generated to justify higher pricing. Sellers of private exchanges adapted, and the latest iteration of the model now provides additional value in the form of more transparency, unique ad opportunities, unique inventory, and/or data in return for higher bid prices. You’d be hard pressed to find a buyer who wouldn’t see value in any of those categories. And while there are now happy buyers using and benefiting from this model, the process to buy needs improvement to reduce friction.

Last year many of the supply-side exchanges, myself included, proposed that bidders move toward supporting multiple bid responses in the real-time bidding protocol. After months of debate, multiple bidding is finally starting to become a reality with several key demand-side platforms now supporting it. The result? As expected, the bid stream becomes denser with this capability in place, which is leading to a higher volume of impressions cleared through the exchange. Now I propose that we continue on that path and look at the benefits multiple bid requests could create—another valuable protocol upgrade.

Today when a banner renders on a webpage that is activated for sale by an exchange, that impression is rapidly transmitted to every connected demand-side platform in the form of a bid request. The bid request is a static representation of the impression, and effectively grants DSPs an opportunity to bid. Part of the problem with the protocol is that it is based on one “static representation” of an impression. It’s all or nothing, and a supplier has to effectively pick how they want to represent that single opportunity and its reserve price to all buyers. When inventory is deemed premium or presents the possibility for channel conflict, more often than not that single opportunity is stripped of all value, made opaque, and all value is reserved only for transactions that are developed via a manual protocol (i.e. dealID).

There are only so many on the buy side that can effectively strike and execute private deals, and there are only so many publishers who justify the effort. For everyone else, we remain in a state where the best opportunities are rendered unavailable if the protocol does not change.

This is where multiple bid requests come in. One impression can spawn multiple opportunities, in parallel and in real time, each with their own reserve price. For example, a completely opaque impression can be offered up for bid at a low reserved price. Buyers won’t know what they’re getting, but the cost is low. That same impression can be made available as a semi-transparent request, where the buyer will know the domain, the reserve price is a little higher, and the buyer gains a measure of comfort about the environment of the impression. A final option can be full transparency at the URL level with the reserve price set at the highest amount. Different buys will start to fit into different buckets of desirability. And so while a DR campaign may be fine with the low-cost opaque option, a CPG buyer who would have passed on the option in fear of brand safety now has the opportunity to bid transparently. Today the technology has evolved enough to handle these various scenarios in real time. And while each bucket will not necessarily get a bid, the benefit here is we give all buyers a shot at all opportunities without manual work.

The argument against this would be that by adding multiple bid requests, the overall “perceived” supply in the market will expand. Today many remark that we already have practically unlimited scale at a pace of some 600,000 bid requests per second and growing, so why would we want to create more? The reason in my view is because the volume of premium, quality impressions is exponentially smaller than the entirety of display. To counter this reality, we want to give the most valuable publishers a louder voice in the sea of supply so that they can better stand out, as they rightfully should. By adding more bid requests we can expand the potential value that each independent impression can create for buyers. Transparency and price are really just one dimension where this can be applied. It can also be used for bigger formats – addressing the fact that supply is still dominated by only three static ad sizes, and moving us toward a model that would support something as innovative as the IAB’s Rising Star ad units. If every option has its price, why not make bigger formats available? If they are available to be bought without friction, at the publisher’s price, why not allow the same space—that would otherwise sell a less impactful unit at a lower price—to work harder?

If things stay as they are, we will continue to run into the friction created by sellers opting to create more value by tucking their best opportunities in behind a manual process and away from the open marketplace. Instead, if we start to sprinkle in new opportunities, where they are warranted and where the technology supports it, the programmatic buying channel will further grow its share of the media plan. I am not suggesting that multiple bid requests should be applied to every publisher, but the biggest and most well known could stand to benefit exponentially.

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