Things you should know about SSP/Exchange auctions, today.

Lots has been written & debated recently about the auction mechanics of SSP's & Exchanges. This overview via my personal opinions & observations should provide a recap of where we are today & what each of the main vendors are communicating post Exchange Wire ATS in London, Dmexco in Germany & AdWeek in NYC.

Before we start to review, If you are still trying to get your head around why the industry is having the 1st V 2nd price auction debate, this piece I had published explains in detail: https://www.exchangewire.com/blog/2017/04/19/second-place-just-first-loser-time-readdress-first-price-auction-debate/

So, lets look at some of the tier 1 vendors:

• AppNexus

AppNexus will signal to all bidders (This change was due by the end of September) what kind of auction they’re in, either first-price or second-price & this will be displayed via a '1' or '2' passed in the action type field of OpenRTB bid requests they send to their connected DSP partners.

AppNexus are also recommending to their buyers that for soft floor auctions (hybrid of 1st & 2nd price auction) that they bid like a 1st price auction. AppNexus will be/is passing the '1' flag to buyers in soft floor auctions.

PR & white board session from AppNexus talking to their logic on auction mechanics: https://blog.appnexus.com/2017/transparent-auctions-our-latest-move-to-bring-transparency-to-digital-advertising/

• The Rubicon Project

Believing that both 1st & 2nd price clearing models still play a crucial role in a healthy marketplace, Rubicon are releasing a ‘Dual Auction Model'

This is the first time Rubicon has adopted a dual auction model approach. It has traditionally favoured the 2nd price auction model.

According to coverage in The Drum, The new auction dynamic has been dubbed 'Modified First Price', and will be offered in conjunction with its 'Modified Second Price' model.

“The programme will see the adtech outfit use machine learning to determine the value of ad requests and then automatically select what type of auction is appropriate for each ad impression”

Ok, but what does this actually mean? My interpretation is that via their recent acquisition of nToggle, they are going to pre filter bid/ad requests and send to their connected demand partners the auction type they think that best meets that buyers individual requirements, this could be either a 1st or 2nd price auction. A smart play that enables them to address the needs of their DSP seats while buying time to figure out the best implementation to adopt long term, 1st or 2nd price, assuming they don’t remain with the hybrid model.

Recent coverage by The Drum: https://www.thedrum.com/news/2017/09/08/rubicon-project-promises-end-black-box-era-it-tests-new-auction-dynamics

• OpenX

OpenX developed its first-price auction solution with the belief that all buyers should be empowered with complete transparency and control over the type of auction in which they compete. I happen to agree with them...

"OpenX’s first-price auction technology provides buyers with full transparency into the auction type, via a unique identifier in the request, while offering unparalleled insights and control to optimize bidding strategies."

OpenX’s first-price auction technology leverages two separate OpenRTB standard parameters in the bid request. These signals enable their DSPs to know which type of auction they are competing in, similar to the model rolled out by AppNexus.

PR: https://www.openx.com/uk_en/company/press-releases/openx-launches-industrys-first-transparent-first-price-auction-programmatic-buying/

• Index Exchange

No official announcements yet but as a vendor that continues to champion best practices in header bidding, server side innovations & Ads.txt, I would expect PR from this camp at some point soon..

• Google AdX

Correct me if I am wrong, but no official announcements as of yet. Their header bidding model also works a little differently from other SSP’s as they can pass bids directly into DFP via EBDA (Exchange Bidding in Dynamic Allocation) without the need to run through a 3rd party wrapper. If the majority of SSP's & Exchanges who compete with AdX roll out a 1st price standard, i would expect Google to react pretty quickly in the same way EBDA was opened up & deployed to compete with header bidding solutions in play.

•  PubMatic

No official announcement as of yet, however, from conversations I have had with their team via Twitter, it sounds like they are rolling out the passing of flags in the OpenRTB auction type field to indicate if a 1st or 2nd price clearing model will be applied to both PMP & open exchange originating impressions. They also plan to indicate who will be closing the auction of said ad/bid request. I am also expecting PR from their camp as they are championing sell side transparency at the moment with their 'Let's Be clear' narrative & marketing.

To summarize...

Clearly, there are lots of other exchanges & SSP’s inc video & mobile specialists looking at auction mechanics that i have not included. However, the adoption of header bidding in video & mobile is happening at a much slower rate (In App there is no header & video has complications Re fragmented protocols & player sizes etc) and the need to address the debate has not been as urgent as we have seen originate from the desktop ecosystem where emerging buying models like header bidding have illustrated examples of wide spread 'bid compression' where publishers have been short changed as those willing to bid the most, are not always those winning the auction. Take rate has been another spotlight for auction mechanics with many saying the 2nd price clearing model has been a safe haven for opaque take, many moot a transition to 1st price would eradicate this practice completely.

Whatever camp you sit in, 1st, 2nd or a hybrid model, the rules are changing and buyers need to be aware of what auction they are participating in. If i walked into a rock & pop sale at Bonhams or Christies, i always want to know prior how much their fees are for me as a buyer so i can bid accordingly, this logic also stands true for buyers participating in programmatic auctions today.

I suspect we will continue to see this debate play out in the trade press & at AdTech events over the coming months as many on the sell side continue to try and differentiate & auction mechanics can at times be a quick win (in a world with increased focus on buy side SPO) for those that don't have M&A war chests. Dependent on where we land, this could all have a massive impact on those in the value chain.

• It could result in less money for SSPs/Exchange (1st price model removes any areas of ambiguity around take)
• More money for publishers (Would mean the buyer prepared to pay the most actually wins the auction).
• A complete reconfiguration of most DSP's bidding logic. (Bidders leverage years worth of 2nd price log level insights/outputs that sit under machine learning models and these would need to be re-calibrated back end for most DSP's if an industry norm of 1st price was to take a hold).
• Last and not least, there would be the human impact & each of the first gen traders who have honed their skills of buying in a 2nd price frame of mind, would have to get used to a 1st price standard of bidding.

I hope this short overview helps, as always, please feel free to shout if any points need to be corrected or updated. Bottom line, buyers need to know what type of auction they are participating in & publishers can no longer afford to leave money on the table. The reason we are asking this question now? Header bidding, it has changed everything!