Step-by-step guide: How to test ad exchanges for performance

As pandemic-related shifts in buying behavior squeeze brands’ revenue, advertising ROI is more critical than ever. But even before the current era, marketers have often neglected to take basic housecleaning steps to strengthen their investments — or they’ve assumed those steps were already being taken, and haven’t comprehensively audited their supply path in some time.

Achieving better results takes renewed attention to things like exchanges and resellers — the pathways that impact performance and drive revenue. It’s not enough for marketers to check only the average performance across a mix of inventory. If they can de-average across exchanges and re-seller paths, then new vectors for performance start to emerge.

There are five steps that marketers can take to achieve this goal, each helping to ensure that ad spend generates maximum revenue. 

1. Pull performance data by exchange in the DSP

Buyers need to analyze performance on an exchange-by-exchange basis to understand how to optimize at the exchange level. DSPs — surprisingly — don’t tend to optimize by exchange (since, historically, banner performance didn’t vary by exchange). But this is a powerful step that buyers can take manually. 

Looking at a typical campaign result set, the volume of spend often doesn’t go to the best-performing exchanges. In our analysis, we’ve seen that typical campaigns can see as much as 60 percent of display allocation heading to environments with lower-performing click-through rates. (Google, for instance, has a click-through-rate just north of 0.1 percent —  significantly lower than several other exchanges.) In many campaigns, only 8–10 percent of spend goes to exchanges with click-through-rates higher than 0.6 percent. Meanwhile, an exchange overperforming at nearly 1-percent CTR might be getting the lowest allocation of display spend overall.

When marketers miss these outcomes, it’s often simply because they haven’t taken a close enough look at how their exchanges have been performing. Here’s how to pull performance by exchange in The Trade Desk, DV360 and Xandr.

2. Run small tests

When buyers are stuck with old or insufficient data from past campaigns, or when there are concerns that existing data won’t be applicable, it’s always an option to run small-dollar, broadly targeted tests to understand performance by exchange. The most effective method is to run tests for the creative format the buyer actually plans to use (banner, video or native), and on roughly the site list, if there is one, that they plan to use. During these tests, it’s best to leave exchange targeting wide open (or, at most, to block specific unwanted exchanges). Whether running a PSA or — ideally — a potential or past creative asset, a $1,000 buy will yield enough data for an effective first test. Once finished, return to the first step, above, to look at the results.

3. Path optimize at the exchange level 

Once buyers have assessed performance by exchange, they can use that data to think further about what to do with their ad spend. One effective option is simply shutting off their worst-performing exchanges, particularly if they aren’t critical to the advertiser’s ability to scale. 

On the other hand, as buyers consider some of their larger but poorer-performing exchanges, they may find the best tactic is not to turn them off entirely, but simply to deliver more budget to higher-performing exchanges. The techniques for this option vary by DSP, with some platforms like The Trade Desk offering a way to prioritize spend to some exchanges but still spill over to others if needed for scale. Here’s how to do it in The Trade Desk, DV360 and Xandr.

4. Be smart about resellers

When buyers assess performance by exchange, their data will bundle both resale and direct relationships from those exchanges — and almost every exchange has a mix of both. At a high level, buyers can simply let the overall performance serve as a guide and not worry about the downstream path from the exchange. However, they may have an opportunity to increase the performance of the exchange even more by looking beyond the first hop. Unfortunately, right now, this isn’t easy to do with most DSPs. But that is changing fast due to new supply transparency initiatives.  

For exchanges on which buyers intend to heavy-up spend, it may be worthwhile to ask DSPs, or the exchange itself, to provide information about performance, divided by direct pubs and each reseller. If some paths have poor performance, it’s wise to ask the exchange to remove those from a PMP the buyer intends to spend on, or else to speak with the DSP about the possibility of disabling those paths.

5. Buy direct

After determining which supply sources are performing best, it’s a good idea to set up a direct buying relationship with those exchanges via a PMP. Of course, there are many approaches to buying on a PMP, so buying through ones that seem similar from multiple supply sources is likely still worthwhile. 

For instance, PMPs are especially effective when the inventory is selected and included by the exchange at the placement level. This approach enables buyers to assess performance at the exchange level, gain critical insights into each individual placement, and develop a rich understanding of which tactics and partners meet a campaign’s performance goals. Direct buyers that work with such exchanges often see dramatic increases in click-through-rate (sometimes as much as 100 percent) and they tend to see steep declines in cost-per-click as compared to open exchange buys. 

Advertisers have no margin for error

Digital advertisers have never faced a more precarious moment. Revenue streams are shrinking, and even many successful brands are narrowly clinging to profitability. Yet the vast majority of advertisers are leaving money on the table, neglecting to take simple steps to make sure their investments are achieving maximum ROI. 

Advertisers simply need to take a look under the hood — sometimes as little as once a week — and assess which of their exchanges and resellers are actually their top performers. It’s no more onerous than flossing or maintaining a healthy diet. Yet in a time of upheaval for brands, it can mean the difference between success and failure.    

https://digiday.com/?p=373357