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Going, Going, Gone: Auction dynamics go under the microscope

If 2018 was the year publisher and marketer tolerance of ad auction-dynamics manipulation was tested, 2019 will be the year when it’s truly smoked out.

There is a reason this hasn’t happened sooner, and it comes down to how much visibility publishers or media buyers, have of the ad auction. The answer: to date, not enough.

But that’s changing. More publishers are getting savvier about the fact they need oversight of log-file auction data. Armed with this level of transactional data, they can see what mechanics are driving the price of winning bids. That means they will no longer be flying blind on any kind of undisclosed auction-dynamic changes. It also means they can more clearly see how much of an advertiser’s media dollar is being chipped away by ad tech intermediaries. At least, in theory.

The snag is that this level of data has typically been held by ad tech vendors, and the majority of them have been unwilling to give it up. One ad tech vendor source was pretty candid about why they’re not incentivized to cough up the data unless contractually obliged: They don’t want to find publishers circumvent them and go directly to the advertiser. In reality, that’s happening regardless.

Publishers like The Guardian have worked hard to unravel what has until now been hidden from them in their digital ad supply chain. That began in 2017 when the publisher sued Rubicon Project over hidden fees, a lawsuit that has now reached a settlement. Today the publisher is aggressively upfront about what it expects from vendor partners, and transaction data is top of the list.

“Legacy SSPs and exchanges have built their businesses around the bundling of low-cost utility with high-margin ‘services’; the latter which are of questionable value to the publisher or advertiser,” says Danny Spears, programmatic director at Guardian News and Media. These high-margin services are what Spears believes the crux of auction manipulation. “The extent of this issue has been brought to light through the exposure of buy-side fees, wrapper bias and bid-caching.”

Although Spears agrees that large programmatic publishers have already made good progress in re-establishing control of their digital ad supply chains, concerns remain around how SSPs continue to diversify with new buy-side services. Case in point: To mollify ad buyers who hate having to suddenly pay more for impressions because of the shift from second-price to first-price auctions, vendors have come up with a new method of establishing an in-between cost: bid shading. The gripe for publishers is that with bid shading it’s the vendors that determine the value of the bid.

In August 2018, it was the buy side’s turn to be furious. Index Exchange drew the wrath of buyers and rival independent vendors for its use of bid-caching — a technique in which a lost bid from one auction is used to fill a subsequent auction, which it never disclosed to either publishers or media buyers.

Those that think bid-caching was the first and final openly exposed example of undisclosed auction manipulation, had better think again. An inconvenient truth is that due to the extent to which supply-side platforms have been commoditized, for some SSPs survival may have to continue finding ways to leverage auctions in their favor to offset other pressures.

“Auction bias will continue to happen,” says Andrew Buckman, managing director for Europe, the Middle East and Africa, for ad tech vendor Sublime. “SSPs are being squeezed into such a position that they have to do all they can to generate a response to a bid request because they’re being commoditized and there isn’t much differentiation between them. A publisher will always press them for who can provide the highest yields, performance, and best anti-fraud tools, and how much will they slow down latency.”

Nevertheless, the stakes will be higher in 2019 for anyone who attempts it, as agencies, publishers and vendors scrutinize for any foul play. Agencies want to reassure advertiser clients who are demanding more transparency, that they can police such things, while publishers look to own more of the ad tech stack via joint collaborations like Ozone, and independent vendors themselves try to oust bad actors rather than risk further reputational damage to ad tech.

Vendors are already showing signs of self-regulation. Not long after the bid-caching scandal, six exchanges came together to pledge their commitment to a standardized set of rules around ethical, transparent, auction dynamics behaviors. Although there is skepticism from some publishers who prefer evidence of good practice over open letters, it is still an indication of vendors’ attempts to self-regulate to a certain extent.

Some vendors are also cognizant, and even welcoming of the change in the status quo. The fact that publishers and advertisers are using fewer ad tech vendors, is good news for the big players because less money will flow to lower-quality exchanges, according to Gavin Stirrat, vp for European partner services at OpenX.

“There has been pressure for a long time from the buy side to increase quality, including everything from more transparent auction mechanics to ensuring partners are in compliance with the latest industry standards,” says Stirrat. “2018 has felt like the year the pressure was born on the supply side, and next year things will be even more turbulent as things get shaken out.”

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