The Deal with Yield

How do you know if a demand source is incremental, negative or neutral???

Determining yield benefit is nearly as much art as science, given the murky visibility a publisher has into the endless unknown factors affecting a bid’s clearing price.? We can, however, do some forensics to rationalize the benefits.? Let's dive in.

Understanding Yield in a Dynamic Marketplace

In the simplest terms, yield in ad tech refers to the revenue generated per unit of inventory, typically measured as eCPM (effective cost per thousand impressions). However, determining yield is not a straightforward calculation. It's crucial to remember that a publisher's inventory is sold on an impression-by-impression basis through a real-time bidding process.

• Averages can be misleading as they don't reflect the true dynamics of individual impressions being sold at varying prices. There is a distribution of the average.
• Instead of thinking about inventory being sold in large blocks, envision it as a continuous stream of individual impressions being auctioned off, each with its own unique set of metadata and clearing price.
• Note: Even Publishers with great instrumentation (reporting) and the most skilled of teams still have a difficult time understanding these nuances. Nonetheless it is always worth pursuing the answer.

The Priority of Price Priority

In a fair and efficient marketplace, price should be the primary factor determining which demand source wins an impression (ahem, Google).? Your ad server and SSP (Supply-Side Platform) should operate on a net price priority, meaning that bids are evaluated based on the revenue they generate for the publisher after accounting for any platform fees or take rates. (Caveat: dynamic take rates can sometimes distort this process).

• There should be no priority other than “price” in your SSP unless you, the publisher, have specifically established a preferred tier.? The SSP should never create priority without your knowledge.? The major SSPs are set up this way and should be very comfortable and transparent with you about any and all arrangements on your inventory.??

What's the Price?

One of the central questions in media trading is determining the actual value of an impression.?

• Is it the publisher's rate card price, or the highest amount a marketer would theoretically pay, or is it the market clearing price??
• Ultimately, market clearing price reflects the dynamic interplay of supply and demand in the real-time auction.?

While no answer satisfies all parties here, this question demonstrates the classic buy-side vs. sell-side struggle.? Perhaps, the value is in the eye of the bid-holder.

Evaluating Demand Sources: Incremental Value

When assessing the performance of a particular demand source, such as a private auction deal, it's essential to look beyond the absolute eCPM and focus on its incremental value.

To determine incremental value - the lift that a partner provides, you can do some testing:

• Basic: Turn on and off the demand source to see if eCPM or page RPM is changed. Fill rate is a factor, but you should be looking at the net results of the entire stack's yield. Focus on smaller, varied slices of inventory like browser, device or geo to see the effects
• Intermediate: Perform overlap analysis of bidders to see if there are any correlated patterns of performance. Incremental lift comes from partners who can monetize impressions that other don't want (ex. Safari), not just those who provides a higher CPM.
• Advanced: Examine auction logs to see how many bids were "behind" the winning bid. If a source is clearing large swaths of bids, where there were either few backup bids or substantially above the next highest bid, then it is likely an incremental demand source.

However, a deal or source clearing at a seemingly low eCPM might still be beneficial because it generates revenue that would not have been realized otherwise.

• Example: If your average eCPM in the open auction is $2, a private auction deal clearing at $1 might not be inherently "bad." That deal cleared an impression in the open at price priority for net $1 and beat out all other demand sources. This deal paid more money net-to-publisher than any other buyer response.??
• But would a buyer have paid more if there had been more competition?? Definitely- buyers have a max price they'd be willing to spend on a user/impression. This is known as “consumer surplus” - the difference between what a buyer would pay and actually paid.?

I don’t think that more revenue would trickle down to a publisher if there was less middleware, as long as a DSP is involved at all.? DSPs not only seek lower cost inventory, but they also protect (and extract for themselves) the buyer’s consumer surplus.

• Remember bid shading algorithms that absorb/remove consumer surplus from auctions? Or how about Open Path?? I don't foresee TTD spending 10% more on CPMs in Open Path (ie the rev share they’re not taking) when they know and will compete at your actual clearing price?

Doing Yield

A Yield Manager’s job is to defend and improve the market clearing average.? Typically this is accomplished in two ways:

• Top Down: Secure higher CPMs upstream before the bids go to auction (sales).
• Bottoms Up: Push up the clearing price by introducing differentiated demand to compete for impressions (partnerships).?

In both cases, the Yield Manager is applying auction pressure throughout the yield curve with the help of their sales team and a variety of partners and demand sources.

Here’s the rub: New types of technology and vendors spring up routinely and alter how programmatic inventory is bought and sold. Yield Managers are in a constant battle to understand, interpret, and adjust their strategies accordingly.

For example, Supply Side Curation is proliferating and opening new flanks that must be monitored and managed.? Note: I will dive into this more in my next post.

The Price at What Cost?

But programmatic isn’t always an efficient marketplace, and information asymmetry drives advantage (and margin) for all of the players. While immediate revenue is a key metric, publishers also need to consider the broader implications of their monetization decisions.

In the short term, channel conflict is a primary concern.? Will accepting certain demand or deals negatively impact your direct sales efforts??

If you have a large direct sales business with a meaningful data and deals program, then perhaps yes you want to curtail these deals and go the DIY route.? FWIW, I am all about publisher empowerment here and think that publishers should use all means necessary to protect and improve their businesses.

Channel conflict in digital advertising occurs when different sales channels, such as direct sales and programmatic deals, compete for the same ad inventory, potentially undercutting each other's pricing and market position.

• Example: Imagine a publisher with a strong direct sales team that has secured a premium advertising campaign at a high CPM. If a programmatic deal, running simultaneously, offers the same inventory at a lower price, it could undermine the value proposition of the direct sales effort. Advertisers might be incentivized to bypass the direct sales channel and access the inventory through the cheaper programmatic route.
• Note: Buyers will use their DSP to access any inventory that they want and at the price they want. DSPs have fairly sophisticated “tools” to find their targets. The onus is on the publisher to merchandise their inventory carefully here.

To effectively manage channel conflict, publishers need a hawk-like view of how their inventory is presented to the market. This includes:

• Monitoring Programmatic Demand Sources: Regularly audit programmatic partners and deals to ensure they align with your overall revenue strategy.
• Establishing Clear Business Rules: Define pricing floors and inventory allocation strategies that prevent programmatic deals from cannibalizing your own direct sales efforts.
• Transparency and Communication: Foster open communication with your supply platforms and ensure that they are helping to follow your business rules.

On a longer horizon, we must consider the Power Dynamic in Media Decisioning and how it affects publishers. It makes me wonder if certain deal types are undermining a publisher's market influence– their ability to command inventory pricing.?

Red Pill, Blue Pill?

Commanding inventory price is very difficult, and DSPs have commoditized inventory value through 3rd party cookie targeting.? As the cookie crumbles, publishers have the opportunity to regain some of that lost influence.??

I will always talk about building differentiation and value with your media, but I will also be completely honest about where a company is in that journey.

We should be striving for solutions that ultimately sway influence towards publishers, and we can benefit from ones that loosen the DSPs grasp on market influence too.

Trigger Alert: contentious rhetorical question ahead

How much influence can publisher’s realistically regain when DSPs still command programmatic marketplaces, when publisher-led solutions are fragmented to the point of being unusable, and when inventory supply is highly undifferentiated???

Well, that really depends on you, on us - publishers.

I do believe publishers can and will regain ground in the market of influence, but it will take collaboration and unifying solutions that buyers can realistically adopt.? I would love to see more solutions that look like publisher co-ops of inventory and packaging, including data signals and identity.?

At the end of the day, publishers must strategically evaluate every supply partner and demand source, focusing on incremental value and understanding the nuances of what everyone else is doing with their inventory.??

On the Horizon

Stay tuned, up next we’ll look at the landscape of deals and priorities in a publisher’s stack.?

Best,

Scott