How to better understand auction dynamics for video ad campaigns

SpotX senior director of demand facilitation Matthew Steffenson
By SpotX senior director of demand facilitation Matthew Steffenson | 26 September 2018

The nuances of programmatic video advertising are many and varied.

From different real-time auction types to buying from multiple marketplaces or exchanges simultaneously, advertisers need to consider a range of variables in order to maximise the effectiveness of their buys. With header bidding taking off in video, the mix of buying styles and auction types required to ensure a premium buy at the best price is changing.

The use of header bidding is growing as advertisers re-evaluate the best mix of bidding dynamics. Buys that were traditionally based on a second-price auction are now shifting, due to publisher preference or the technology they are using, and for header bidding to ensure a more competitive bidding environment. 

SpotX Auction Infographic

Second-price versus first-price auctions. In second-price auctions, buyers pay the next highest bid, so they pay less than what they originally bid. In a first-price auction, the highest bidder pays their full bid price.

Fixed vs Dynamic

Also complicating the issue is the option to run a fixed or dynamic auction, which is normally based on the type of inventory the publisher has and their relationship with the buyer. Dynamic is typically the default choice and allows for fluctuation in price, so buyers can bid and win at various price increments. Fixed is the more appropriate auction type if a publisher has already pre-negotiated a price with a buyer and is sold via a private marketplace. This means that the price is locked in.

The first-price revolution

First-price auctions offer an additional level of transparency that is attractive to buyers by introducing the concept of “you pay what you bid” and holding the seller accountable for charging the agreed upon price. However, the technique is still fairly new for video, and it will take time for some demand-side platforms (DSPs) and buyers to adjust their bidding strategies.

Needless to say, buyers need to understand what they’re bidding on and why. Some buyers aren’t aware of the different auction styles, so don’t know to ask for this granular level of transparency, and some DSPs can’t identify or ingest this level of information. It can mean transactions aren’t traceable for advertisers if they’re working with suppliers that have a missing link in their accountability chain.

Climbing the header bidding ladder

As an advertiser, you want to secure the best video placements on the best publisher sites, for the best price possible. With header bidding in video, advertisers are normally at the same priority as direct sold campaigns, giving programmatic buys the best opportunity to win the inventory they want. This is great for programmatic buyers as premium video inventory is often restricted in supply and being able to bid in a header bidding environment, enables them to compete, with direct sold campaigns within the publisher’s ad server. It is also important to know that some premium inventory is only available via a first-price auction, so some buyers could be missing pockets of inventory entirely, but really depends on the technology choice and publisher preference in terms of their set up.

Without clarity on pricing, buyers don’t know how to plan their buying strategy. It goes without saying, therefore, that advertisers should work with DSPs and supply-side platforms (SSPs) that pass auction type and the price floor for all first-price or second-price opportunities. SSPs can also offer unique data that a buyer’s DSP can’t offer, giving them more insight into their bidding strategy. If buyers aren’t directly working with SSPs, they are missing out on this data/reporting. Using this information, advertisers can then set the bid price at what they are willing to pay, if it’s first-price or if it’s second-price, they can bid more aggressively to win an impression with the knowledge that it should clear at a lower rate.

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SpotX senior director of demand facilitation Matthew Steffenson

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