Curated Deals – the Future of Exchanges

09/13/2017 11:59 am ET

By Eric Berry, CEO & Co-Founder at TripleLift

Header bidding has commoditized traditional exchanges and supply side platforms (SSPs). It is now perceived that the main function is simply providing access to inventory. Fortunately, new technologies have emerged to create value for exchanges focused on providing value for both advertisers and publishers. Curated deals are a prime example of such a technology, where expert knowledge about the characteristics of inventory enable ecosystem to be more efficient.

Demand side platforms (DSPs) are experts in optimizing media buys. They often employ sophisticated machine learning and artificial intelligence to target their bids to attain the advertiser KPIs. That said, DSPs rarely maintain relationships with publishers themselves. Their knowledge about the publishers is either inferred from performance characteristics, data providers, or direct knowledge for a limited set.

For any campaign with a finite budget, it is effectively impossible for the DSP to identify the absolute best performing placements on the entire web and app ecosystems.

SSPs, on the other hand, have a deep knowledge about the publishers themselves. They have account management teams that work closely with most of the publishers on the platform and have a deeper understanding about the type of content that the publisher produces, as well as – for example – an understanding of the sorts of campaigns that the publisher’s sales team has sold that perform well versus those that perform poorly.

The set of all inventory that can be targeted by DSPs is enormous. For any campaign with a finite budget, it is effectively impossible for the DSP to identify the absolute best performing placements on the entire web and app ecosystems. Various shortcuts are taken that identify pools of highly effective inventory that ultimately hit the advertiser KPIs, but sometimes at the cost of missing the absolute best. Examples include optimizations at the exchange level, or dependent optimizations (meaning simultaneously optimizing on multiple factors without determining the relationship of those variables).

Historically, DSPs and SSPs have worked in a somewhat adversarial fashion. DSPs have an incentive to buy inventory at the lowest price possible, whereas SSPs want to charge the highest price. This inherently creates friction. In a world of header bidding, where both SSPs need to create unique value and DSPs are overloaded with bid requests and are often bidding against themselves, both sides have increased incentives to work together, and the most effective way is through curated deals.

Curated deals effectively require that the KPIs of the brand are known by the SSP, and thus there be some mechanism to communicate that information. That said, this can be as simple as email. The SSP, in turn, can analyze its inventory using its additional layers of knowledge to identify the pools – across all of its publishers – where it believes the KPIs will be best attained. This can be done on an impression-by-impression basis, such as including some users on a given app and not others. The curated deal information would be attached to the campaign at the DSP level, and when matching impressions are found, the DSP may apply its own logic to determine whether or not to bid.

The SSP has every incentive to act honestly. Curated deals are a genuine differentiator and credibility is earned through sustained performance. DSPs will either realize performance gains from SSPs that offer partnerships through curated deals – or they won’t. In the former case, collaboration can yield better results for all industry participants. The credibility that comes with curated deals can add further value by reducing the need for duplicative costs to verification and other non-media costs. Once trust is built, should the SSP, for example, create a high-viewability curated deal, the various players could simply rely on one viewability vendor’s fees, as opposed to publisher, SSP, DSP and brand all paying.

Ultimately, aligning all industry participants towards better outcomes can only yield good results. Curated deals are new, but represent a potential seismic shift in high the industry operates.

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