OnDemand WTP Pricing Research

Dynamic Price Floors: A Call For Standardization | AdExchanger

Although programmatic advertising is approaching critical mass, the industry has failed to standardize auction pricing, and the debate continues over hard-price floors, soft-price floors and everything in between.

Dynamic price floors are widely considered to be the answer to this problem, but without standards, they further complicate the matter. As the industry matures and faces greater regulation, we must come together and agree on a transparent, mutually beneficial model for making dynamic price floors an industry standard.

The Problem

Among most supply-side platforms and exchanges, second-price auctions, where the winning bid pays one cent more than the second highest bidder, are generally accepted as the most effective auction format.

While some have contested its benefits, second-price auctions are more widely preferred because they encourage buyers to bid the exact value they think the impression is worth and they provide buyers with incremental value, as they end up paying a discount on what they were willing to pay. Second-price auctions also benefit publishers by allowing buyers to bid more aggressively, ultimately driving up prices in the auction.

Second-price auctions do, however, perpetuate price inefficiencies by creating large gaps between the buyer’s winning bid and the price they actually pay. In some instances, gaps as high as 70% have been found between the first- and second-price bid. A lack of competition for each impression – also known as low bid density – further exacerbates the issue, causing most impressions to clear at the floor.

Read complete article here:

Dynamic Price Floors: A Call For Standardization | AdExchanger.

Post a Comment

WP-SpamFree by Pole Position Marketing