‘Variable fees’ complicate programmatic transparency push
Ad buyers face a moving target in trying to nail down the fees that supply-side platforms charge publishers for the ads that SSPs place on their sites. Not only do those fees vary by SSP and by the publisher within a single SSP, but they can even vary by the individual impression for a single publisher within a single SSP.
Google’s SSP and OpenX each feature so-called variable fees, in which the percentage of an advertiser’s bid price that the SSPs deduct can be higher or lower than the amount agreed upon by the SSP and publisher, according to three publishing executives with knowledge of the matter. It’s not clear when Google and OpenX implemented these variable fees or their adoption rate among publishers. For both companies, the variable fees are said to be optional for publishers, and while the fees may vary for individual impressions, in aggregate they average out to the agreed-upon percentage, according to the execs. Google and OpenX did not respond to requests for comment.
These optional variable fees are not considered to be, in and of themselves, problematic. Publishers, as well as ad buyers, speculated that the variable fees could give SSPs more flexibility with how they manage advertiser demand for publishers’ inventory. However, it can unclear to publishers and ad buyers when these variable fees are being employed and to what end. As a result, the variable fees are seen as a black box at a time when both ad buyers and publishers are seeking to shed more light on where the dollars flow across the programmatic supply chain.
If SSPs are able to justify the value of the variable fees for publishers and advertisers and the fees only fluctuate by a few percentage points, then the fees are considered to be less of an issue. “It’s when there’s games being played with CPMs that we don’t know about that that’s where it becomes more of an issue on the buy side,” said Liane Nadeau, vp and director of programmatic at Digitas.
“From a publisher standpoint, a lot of folks should be concerned because are there cases where [the SSPs] increase their margins because they know they can, so are we getting the most value from the marketplace that we know we should? Without knowing the why, it leaves a lot of questions unanswered,” said a publisher who asked to remain anonymous.
The variable fees are believed to be a competitive tactic at a time when SSPs are seen as commoditized by publishers and ad buyers. With many publishers selling their inventory through multiple SSPs, the differentiating factors are often the price that SSPs can deliver to publishers and the inventory volume they can offer to advertisers. By adjusting their fees on the fly, SSPs can lower their fees on certain impressions in order to increase their win rates and corresponding value to publishers and advertisers, and at other times they can raise their fees to make up for that money and protect their margins. “That’s how I saw it being used,” said a former ad tech exec.
For example, an SSP with variable fees enabled by a publisher could reduce its fee for ads that are part of a campaign that needs to be fulfilled by a certain date because the lower fee could keep the advertiser’s bid high to win the impression. And in other instances, a campaign may be pacing ahead of schedule so raising the SSP’s fee could keep that campaign in check and back on schedule and free up inventory to be filled by other advertisers at potentially higher revenue for the publisher.
Any advantages to having a variable fee can be overshadowed by the complication of communicating to publishers and ad buyers how those fees are being applied to individual impressions, and the corresponding lack of transparency, or at least limited transparency, could scare off advertisers sensitive to programmatic advertising’s hidden fees. Because of those transparency concerns, AppNexus, Index Exchange, PubMatic and Rubicon Project do not offer variable fees, according to the companies.
Publishers may find themselves hard-pressed to enable SSPs’ variable fees because it would compromise their ability to share their SSP fees with ad buyers. For example, Dotdash sells its inventory through Google’s SSP and Openx but sticks to a flat fee for each of the SSPs it uses, which enables the publication to be open with ad buyers about what its SSP fees are, said Sara Badler, head of programmatic revenue and strategy at Dotdash.
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