On last week’s episode of “If You Didn’t Work in AdTech You’d Think This Was Illegal”, Digiday outlined how “shady” SSPs steal funds from programmatic transactions – without buyers or sellers knowing.
While practically caused by the proliferation of header bidding and the economic delta inherent in second-price auctions, Digiday notes that:
This practice persists because neither the publisher nor the ad buyer has complete access to all the data involved in the transaction, so unless they get together and compare their data, publishers and buyers won’t know for sure who their vendor is ripping off.
What would buyers and sellers see if they had “full economic transparency”? How can publishers, in particular, achieve it so they can guide buyers and preserve yield? Let’s take a look, using some simple math.
How Much Is Being Stolen?
First, a quick reminder of the case that Digiday outlined:
Let’s expand this example, to get a better sense of the alarming gap between what the buyer is paying, and what the publisher is actually receiving (assuming a 20% contracted take rate between the SSP and publisher).
The honest case is straightforward, with the SSP simply taking their 20% cut of the $10.01 clearing price and passing the remaining $8.01 to the publisher:
In the nefarious case, the $19 clearing price includes an extra $8.99 margin above the $10.01 honest clearing price. The shady SSP must use some of that cash to outbid its competitors and secure the publisher’s inventory, so let’s assume it keeps half, and passes the other half to the publisher in the form of a $14.51 ($10.01 + $4.50) “shady clearing price”:
Remember, the buyer actually paid $19 for this media and assumes the publisher is probably receiving somewhere around $15. What they’d learn, if both had full economic transparency is that the SSP is ultimately pocketing nearly 40% of the transaction:
Why It Matters for Publishers
Despite the slight CPM bump they receive in the scenario above, savvy publishers know that they have far more to lose over the long term by allowing situations like these to persist unchecked.
As media properties continue to face intense downward pressure on revenue, they can no longer afford to ignore the fact that without full economic transparency 1. They’ll be saddled with inflated performance and ROI expectations tied to the $19 price paid for their inventory while 2. Only receiving a mere $11.60 on that buy.
How could this impact even a moderately-sized publisher?
What could this publisher do with an extra $2M in their pocket? Could they invest in video or tech? Could they offset revenue lost to the user experience debate? Could they fund more great storytelling, the key asset needed to maintain that great user experience?
How to Attain Full Economic Transparency
As described above, to gain “full economic transparency”, publishers need to understand the full picture of their transactions. Here are the top three tactics folks I’m speaking with are using to evaluate the integrity of their supply chain:
1. Ask Your SSP
Ask your SSPs for a simple “Money In / Money Out” report – which details the aggregate gross revenues collected by the SSP from buyers for your inventory (money in) and the aggregate revenue passed by the SSP to you, the publisher (money out). For example:
2. 3rd Party Audit
As Marc Pritchard called out in his now-famous IAB speech in January, standing in the way of the full economic transparency discussed here are “too many players grading their own homework.” As such, work with your SSP partners to utilize an independent 3rd party to verify the necessary economic data.
3. Just Buy It
The most ambitious publishers are taking the steps above even further – they’re actively working with DSPs to buy their own inventory to see value attrition firsthand. (Last year, The Guardian performed perhaps the most widely known experiment of this type). While incredibly enlightening, this procedure does require incremental time and mindshare, presenting a significant hurdle to publishers who are already slammed with other time-intensive initiatives.
This post should not be taken as a call to arms against SSPs, but rather, quite the opposite. The best SSPs are amazing companies building valuable technologies that help publishers maximize yield, and will likely be more than willing to sit down and discuss these key topics. The media landscape is evolving at an incredibly rapid pace; the status quo of blind assumptions and partial data is no longer good enough. The stakes are high, and for the innovative souls pursuing full economic transparency, so too are the potential rewards.