The ad tech world is in flux.

From moves to restrict tracking cookies to Google’s massive change to pressure from advertisers to eliminate unnecessary intermediaries, ad tech players are busy retooling their approaches. Here’s a look at some of the challenges.

Shift to the first-price auction world
The shift away from second-price to first-price auctions is a trend that’s been documented for the best part of two years. However, until Google made the move to drop second-price and move entirely to first-price auctions in March, the fate of auction dynamics wasn’t sealed. During the window in which Google remained second-price, independent ad exchanges enjoyed a decent revenue bump — around 15% in some cases — according to ad tech sources.

“Exchanges running first-price auctions a while ago were able to beat [Google] AdX on second-price,” said Ari Lewine, co-founder and chief strategy officer of ad exchange TripleLift. “But once this change is made, that advantage will be lost. Anyone over this last two-year period that won first-price would have had a jump in demand or revenue — that will be neutralized.”

Bid-shading trouble
Some DSPs have gotten rich off the shift to first-price auctions by offering bid shading — an algorithmic tool designed to calculate a happy medium between first and second price, to help buyers transition. But there are many in ad tech who believe that bid shading has a short shelf life and will only last until the complete shift to first-price has occurred. That could have major ramifications for DSPs that have charged high fees for bid shading, according to ad tech sources.

“Bid shading has an expiry date, and there will likely be big ramifications for demand suppliers which make good margins from that,” said an ad tech executive who spoke on condition of anonymity.

Pressure on resellers
There are some in ad tech that believe resellers are going the way of the dodo. Many publishers have backed off using them in order to rid themselves of dead weight. But there are other reasons too, starting with tools the IAB Tech Lab has introduced to stunt fraudulent reselling and opaque ad tech models. The two tools expected to cause the most havoc to resellers in the next six months are Sellers.jason and Supply Chain Object. Whereas Ads.txt was the earlier tool released to deal with the unauthorized selling of publisher ad inventory, and domain spoofing, it was really just a precursor. Even authorized reselling is opaque by default due to how the ad tech ecosystem is set up. A publisher’s knowledge of who is reselling its inventory may go as deep as two companies who have bought the inventory from their first authorized reseller — but after that, it’s anyone’s guess who may have bought and resold it from them.

“Sellers.json and SCO are like ads.txt on steroids,” said Lewine. “It will mean every impression will no longer like the first impression.”

Data privacy scrutiny
Data protection regulators in Europe are yet to come down hard on businesses with concrete fines. The exception is French regulator CNIL’s attempt to fine Google €50 million ($57 million) — which may be peanuts to Google but would cripple any other ad tech business. But they’re starting to turn up the heat on the ad tech sector specifically, after a torrent of complaints by privacy activists lambasting how personal data is being misused within the bid requests of ads traded programmatically on the open marketplace. U.K. DPA, the ICO, issued a warning shot to ad tech on June 20, and plans to issue further guidance on the use of cookies under GDPR law this week. French and Irish DPAs are also scrutinizing ad tech more closely. CNIL has reportedly said it will conduct inspections to check that cookies aren’t being dropped before consent is collected.

“[Regulators] are shooting across our bow, telling us they’re looking closely at us,” said Andrew Buckman, COO of ad tech vendor Sublime. “If anyone is arrogant enough to ignore something like that being published, they’re in for a nasty surprise.”

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