In a post-GDPR and header-bidding world, the relationship between buyers and sellers of inventory in the region will be increasingly complex. For the second half of 2018, IAB Singapore’s Programmatic committee highlights the following trends and best practices that all participants in the ecosystem will need to be mindful of.
1. Changes in auction mechanics
Buyers and sellers need to adjust to new types of bidding auctions. Second-price auctions, where a winning buyer pays one cent more than the second-highest bid, are slowly being replaced by first-price auctions, oftentimes in opaque ways.
According to Emarketer, non-second-price auctions now represent the majority of US impressions traded, with a 9X increase from Q4 2017 to first half of 2018. We expect a similar trend in APAC, with header bidding being inherently first price, as adoption increases. Buyers who are used to overbidding at start of campaigns are starting to see an increase in CPMs because they are not aware of the SSP or publisher auction models.
What is a first-price auction?
|Auction type||First bidder||Second bidder||Payout to publisher|
Buyers should ask their DSPs, SSPs and publishers how they handle first-price auctions and whether they have a hybrid approach planned. Gone are the days of reckless bidding and trying to game the algorithms. It will behoove all parties in the long run to be transparent on auction-mechanic types and have these conversations now—before budgets and campaigns are affected.
In this new world, direct relationships between agencies and publishers are more important than ever. Understanding inventory availability and priority, users, and interplay of market forces is pivotal.
2. Header bidding expanding from display to video to apps
Header bidding (HB) is one of the key market forces that pushes for first-price bidding, and serves as one of the new access points giving advertisers visibility on all users for the first time. It shows strong early results for publishers on web and also gives them full visibility into the bid landscape and an increase in competition for inventory.
Many assume that server-to-server (S2S) HB, in which auctions take place in the cloud instead of the browser, will be the next frontier, because it reduces latency of page load. However, as Digiday reported, pure S2S HB can result in a 25% to 30% drop in revenue due to a lower user match from the DSP and, consequently, a lower inventory fill rate as a user is unidentified when the auction is occuring. Global trends are finding a hybrid approach to S2S, and client-side is best for publishers to maximise yield depending on the demand, inventory type and connection speeds.
As the technology evolves, we expect to see HB impacting video and mobile-app supply. To tackle latency and identity issues, we are seeing collaboration between adtech companies to share resources, especially for video supply, such as Brightcove working with Appnexus and JW Player working with spotX. For mobile supply, the number of SDKs makes header bidding a challenge due to a weight of multiple solutions, but expect more unification into this through the year, as an opportunity exists for this supply to be accessed with more demand sources: for example, via prebid, exchange bidding or mediation layers.
3. Video to elevate the landscape
While technology advancements for yield are ongoing and evolving, the basics of supply and demand are also in play. For example, many publishers have experienced demand outstripping supply, which has led them to integrate outstream video, augmenting current preroll supply to meet buyer demand. Further development of outstream in header bidding will scale this movement in the second half of the year.
Despite a seismic shift from social platforms de-prioritising publisher content at the start of the year, and headwinds such as Chrome’s autoplay update, video is booming. We can also expect new mediums for video, through OTT and CTV, where mature markets like Australia lead the charge. SEA is keeping pace with a gradual shift of consumption habits for content, which corresponds with an increase in broadband speeds and new local OTT providers.
Adoption of VAST 4.1 will introduce new creative options specifically tailored to mobile vertical video experiences. Brands will benefit from mobile-friendly innovations that add new interactive elements for feedback and measurement.
Increased measurability brings new transparency to the space in the form of measurement metrics with viewability, engagement and completeness. This evolution has the potential to resolve the issues with VPAID, where players had high error rates and timeouts that prevented tracking whether videos were finished or even shown. With these improvements to establish a baseline of trust, we see this paving the way for more video spend in-market across all mediums.
4. Growth of programmatic-guaranteed and role in APAC
Another growing method of buying and selling a publisher's inventory is programmatic-guaranteed. This is a method that allows a buyer specific access to a publisher's audience they would like to target for a campaign on a more automated basis. The publisher is guaranteed a certain level of spend commitment, typically higher than open-auction buying, while a buyer could negotiate access to higher quality of supply based on specific goals and brand-safety standards.
Research from the Boston Consulting Group shows that programmatic-guaranteed can drive efficiency improvements of 50% for publishers and almost 30% for advertisers and agencies. RTB is still making up the majority of spend, but the market is shifting, with programmatic-guaranteed predicted to double in APAC from 6% to 11% (2017-2020). While APAC is currently slower off the blocks compared to more mature markets like EMEA and US, this type of buying is showing signs of growth, especially in markets like Australia, India, China and Singapore.
As with header bidding, there has been movement from tag-based and IO buying to programmatic-guaranteed as buyers are looking for more brand-safe, premium impressions as well as predictability in delivery. Advertisers and publishers are able to capitalise on this with operational efficiency, easier forecasting and automated billing and collections.
Similar to header-bidding, programmatic-guaranteed isn’t an easy selling mechanism to implement, due to the need to align a publisher and an agency’s DMP in order to perform cookie or device-ID matching, but it is a great way to drive premium budgets in programmatic while leveraging first- and second-party data.
For advertisers, programmatic-guaranteed allows an agency or brand to precisely identify the correct mix of media, as all methods of buying, be they IO campaigns or open auctions, are visible in one place. An agency is also able to lock in premium inventory through reservations directly piping into the publisher.
Programmatic-guaranteed is also a large driver in reducing operational inefficiencies. Less work is needed to manage tag-based or PMP lists, and more time can be spent analysing data, consolidating media buying, managing reach and frequency, and optimising campaigns for better delivery.
Conclusion: The shift to holistic yield
Header bidding laid a stepping-stone toward holistic yield management by shaking up the conventional ad server setup. Though the initial focus was on adding multiple partners and maximising open marketplace returns, publishers are now focusing on prioritising high-value bids within their ad stack with equal consideration.
There’s some optimisation to consider for partners bidding through first-price and second-price mechanisms. However opaque selling and buying hampers true growth. Leveraging first-price auctions means not leaving money on the table. Publishers should prepare and plan for plateauing CPMs as buyers will adjust bidding strategies over time and penalise bad actors.
It is time to look at programmatic as a ‘premium’ revenue stream and place more resources and strategies on it in conjunction with wider advertising sales. Programmatic-guaranteed is a good start to the conversation, because it removes some of the friction of private deals, but may not be right for every buyer and seller, depending on their unique needs.
Video also drives the premium conversation, and server-side header bidding (SSHB), is one of the opportunities we’ll see explored in the second half of the year. SSHB is still largely inefficient for audience buys on desktop, but in video, where addressing latency is a major focus area, SSHB has value to deliver. There may also be opportunity in apps, where cookies are replaced by device ID, thereby addressing match-rate issues that hampered desktop adoption.
Even in an increasingly complex programmatic landscape, strong buy side-sell side relationships are more important than ever. With the adoption of ads.txt and DoubleCLick for Publishers' Funding Choices, the importance of having a few trusted partners that drive unique value will be at the heart of innovation for the remainder of the year.
This piece was written and contributed by IAB Singapore’s Programmatic Committee:
- Eimear O’Rourke, business development manager of Criteo Singapore
- Eric Tan, head of digital product innovation and pricing at Singapore Press Holdings
- Niraj Nagpal, director of business development, APAC at IPONWEB
- Yogesh Sehgal, regional manager of Asia at Rubicon Project
- Toby Williams, head of exchanges, Asia, at Oath