When Waffle House restaurants begin to close, bad weather is likely approaching. An impending international catastrophe may be signaled by an increase in pizza orders near the Pentagon.
Additionally, an increase in the size of Ads.txt files is a strong indicator of an increase in bid duplication.
Since 2020, the quantity of approved Ads.txt entries has tripled, according to Jounce Media. Approximately 30 million ad auctions are started by web publishers every second, and media sellers typically collaborate with 24 SSPs, more than half of which take part in resale auctions. (Who even knows the names of 24 SSPs off-hand?)
As crazy as that may sound, publishers are truly acting rationally, according to Chris Kane, CEO and founder of Jounce, who made this statement last week in NYC during AdExchanger’s Programmatic I/O event.
Publishers are making every effort to increase their portion of the market.
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But most of these requests are never seen by purchasers.
“Chaos of all kinds”
DSPs aren’t necessarily listening to more bids just because publishers start more auctions.
Since bandwidth expenses pile up, most DSPs are actually attempting to listen to less bid requests, according to Kane.
According to Kane, “there isn’t a single DSP that receives and processes 30 million bid requests every second.” Therefore, higher auction densities don’t genuinely result in higher profits. A DSP typically receives only about 3 million inquiries per second (QPS).
Another example of buyers acting rationally in the face of widespread bid repetition is capping QPS. Furthermore, frequent bid duplication is a reasonable response to volume bias.
Everyone is therefore behaving logically. Publishers are only trying to make ends meet; buyers are defending themselves.
However, Kane stated that this “creates all sorts of chaos in the supply chain” because all of this sensible conduct is a reaction to an unreasonable and irrational dynamic.
Congestion in the bidstream
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Algorithmic issues are another issue.
DSP algorithms frequently exhibit a volume bias, which means that they prioritize publishers offering more impressions for sale under the presumption that since these publishers are bigger, their inventory is more valuable.
One of the key justifications for publishers holding numerous duplicate auctions is this. It’s an effort to appeal to the algorithm in order to increase their volume and get more bids.
However, DSPs aren’t responding by raising their QPS.
According to Kane, this leads to “a crowding out effect,” in which publishers engage in intense competition with one another only to have their work made available to DSPs.
According to Chris Kane, publishers are starting an increasing number of auctions, but it doesn’t mean DSPs are accepting more bids.This situation, dubbed “bidsteam congestion” by Kane, is problematic since it encourages bid repetition and hurts publishers who are trying to reduce waste.
Publishers that disable rebroadcast auctions—that is, resold auctions with superfluous hops—face exodus.
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What you eat shapes who you are.
DSPs, meantime, are left with a skewed perception of the supply chain.
A DSP sees just supplier networks that correspond with their current purchasing patterns unless they listen to the whole bidstream, which is neither practical nor realistic.
Supply-side platforms filter the bidstream to select which subset of bid requests to deliver to each DSP because DSPs intentionally limit their QPS. SSPs “try to figure out the characteristics of supply that each DSPs seems to like,” according to Kane, in order to help steer them.
Put differently, he stated that SSPs “feed DSPs what they eat.”
SSPs will cater to a DSP’s inclination to buy app inventory by displaying a preponderance of mobile app placements. This also applies to web supply. That makes sense. However, the crowding-out effect is exacerbated when the same “you are what you eat” reasoning is applied to other kinds of supply.
Certain DSPs, for instance, don’t purchase resold auctions. Once SSPs understand that, they cease submitting those kinds of requests. It is also true in the other way. Resold inventory accumulates in the eyes of DSPs who purchase a significant number of resold auctions.
According to Kane, publishers that have disabled rebroadcasting are “completely crowded out of this DSP.”
As a result, publishers must battle it out to be viewed by DSPs, and customers are only given a distorted and constrained picture of what is available.
“Fat pipes” against “skinny pipes”
According to Kane, one solution to break out of this deadly cycle of repetitive programmatic bidding would be for DSPs to switch from employing so-called “skinny pipes” to a smaller number of “fat pipes.”
A typical mid-market DSP would assign about 100,000 QPS to each of its SSP partners if it has integrations with, say, 30 SSPs and caps itself at 3 million QPS, which is a common configuration by today’s standards.
In such case, it would be as though the DSP was controlling thirty thin, constrained pipelines, each of which had a limited view of the bidstream.
For a more comprehensive view of the bidstream, Kane stated that it would be “much, much better” for the DSP to assign significantly more capacity to a small number of SSP integrations, perhaps 1 million QPS apiece across three “fat pipes.” It is able to achieve this without raising its overall QPS.
In Kane’s opinion, “this is where market forces are going to pull the industry” if DSPs start functioning in this manner, it will deter inefficient reselling methods.
“The same amount of money will leave DSPs as they rip out inefficient broadcasting supply chains and as they listen to the entire bidstream through efficient supply chains,” Kane said. “More of that money will go toward publisher payments, with supply-chain fees taking up less of it.”
It is appealing, but not to everyone. According to Kane, DSPs that don’t disable rebroadcast auctions would eventually go out of business.
It’s not an easy challenge to tackle, and many smaller and mid-market DSPs are “understaffed and poorly managed,” meaning they don’t fully understand the impact this has on their business, according to Kane. Ultimately, they are forced to listen to a plethora of identical proposals that hardly scratch the surface of the available supply.
Therefore, it should come as no surprise if more marketers decide to allocate their funds to bigger omnichannel DSPs like The Trade Desk, who do not accept bids from resold auctions.
Kane stated, “I believe it’s already happening.”
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