Ad Exchange Price Floors Explained & Optimization Tips

Ad Exchange Price Floors Explained & Optimization Tips

If you’re reading this article, then you should be more or less familiar with Google Ad Exchange. Publishers running Ad Exchange (AdX) will most likely already know that it is one of the best ad partners to have in a site’s ad stack.

However, a lot of networks and exchanges (including Google ) use second price auctions to determine the winning price for each impression.

The winning bidder in the auction pays 1 cent more than the second highest bidder.

Consider the example below:

Bid A = $2.30

Bid B = $1.20

Bid C = $.75

Winning Bid ( Bidder A ) will only pay $1.21, which is one cent higher than Bidder B’s bid.

This is where price floors come into play. If the price floor set is at $2.00, then Bidder A would close out the price at $2.01. Applied effectively, this would result in considerable gains to a publisher’s revenue.

You can set up pricing floors in a few different ways, all depending on your strategy or how you want them implemented on the site’s ad inventory.

Setting pricing floors according to geographical locations, device types or even per individual ad unit is possible if that is what you prefer.

There is a catch though. While this would mean an increase of CPM/revenue in the auction where the winning bid is above the price floor and the second winning bid is below it, price floors also serve as a barrier.

Every single bid that cannot reach the price floor, even if it was the highest, would be ignored. While undeniably useful in increasing ad revenues, price floor application is a strategy that requires attention and can be very costly if not managed well.

Setting pricing/blocking for specific buyers or advertisers

In Open Auction Pricing rules, publishers can block an advertiser/buyer from serving on their sites or a for particular ad inventory.

For example:

  1. The publisher can block the advertiser ‘A’ from serving ads on their travel page URL.
  2. Publishers can also set a specific floor price for a specific advertiser/buyer.

For example, publisher A has a deal with advertiser B to buy inventory at $3 CPM as a campaign in DFP but sees advertiser B purchase impressions at $1.50 through AdX.

Branding and the types available in AdX:

Branding enables publishers to set different minimum CPMs for their inventory. When a publisher sets up a branded minimum CPM, buyers who are targeting their domains need to bid at least that minimum CPM to compete in the auction for their inventory.

Buyers bidding less than the minimum CPMs are ineligible to win that impression.

There are three branding types. Each type of branding option provides various levels of information to buyers. This information is included in the bid request.

  • Branded: Buyers see the complete path/URL of the publisher’s domain where their ad will be displayed. Example: https://weather.com/en-IN/weather/radar/interactive/
  • Semi-transparent: Buyers will see the top-level domain of the publisher’s site. The exact location, where their ad will be served is not revealed. Example: https://weather.com/
  • Anonymous: Buyers will not have any information as to where their ads are going to be served.

Selective pricing (option to block a specific advertiser or a buyer):

Before we dive into the topic of pricing, let’s understand what do the terms advertiser, buyer, and brand signify in the context of Ad Exchange:

  • Advertiser:  These are the entities that buy the publisher’s inventory to display their ads.
  • Brand: Each advertiser (parent company) may have diversified portfolios with many small verticals or subsidiaries.
  • Buyer: These entities represent/partner with advertisers to mediate the buying of various publisher’s inventory.

There are two ways of setting up a pricing rule:

Set pricing and blocking for everyone

  • Publishers can enable this if they want to sell inventory at the same price to all advertisers and buyers.
  • This approach can also be used to block all ads from serving on specific inventory, by blocking all of the branding types.

Set pricing and blocking for specific buyers, advertisers, and brands

  • Publishers can enable this if they want to sell his inventory at a different price to one or a set of advertisers and buyers.
  • This approach can also be used to block all ads from one or set of advertisers/buyers from serving on specific inventory, by blocking all of the branding types.

Prioritization:

Rules which follow prioritization are:

  •  Open Auction Pricing Rule
  •  First Look Pricing
  •  Flexible Sizes
  •  Ad Styles and Backup Ads

What is prioritization?

If we have multiple rules created in an Open Auction Pricing rule targeting the same inventory, the ad request will serve through the first rule and will not even check the following rules, even with the same targeting.

For example, a publisher reported that ads for advertiser A are showing up on their sites, despite blocking the advertiser in Open Auction Pricing Rule. What might have gone wrong here?

Firstly, confirm if the publisher has blocked advertiser A in the first rule in Open Auction pricing rules.

If the Publisher has blocked advertiser A and placed this rule at position 5, where he has many other rules created, there is a possibility that advertiser A’s ads are serving through any of the rules from 1 to 4, which does not have “A” blocked. To ensure Advertiser A does not display on the publisher’s site, the 5th rule’s priority should be set to 1.

If priorities are correctly set, check if “A” is blocked to serve through “All Buyers” in the priority 1 Open Auction rule.

If the publisher blocks “A” coming through a specific buyer example”DBM,” there is a chance for advertiser A to come through other buyers.

Tips on setting up Pricing rules:

  • Always try to keep the pricing rules setup minimal, as a complex rule hierarchy is difficult to manage and optimize.
  • Try not to change the floor prices drastically, always increase/ decrease them gradually and give sufficient buffer time to analyze the impact of the change.
  • The floor prices in the “Default rule” should not be very high, as this will be the last chance to monetize a request.
  • Segment inventory (desktop, mobile, geographical location, viewability score, etc.) based on historical performance and set pricing for each section of your inventory based on its perceived value.
  • If there are multiple rules created with the same targeting, the ad will serve through the rule which has the topmost priority.
  • Blocking too many advertisers will cause a drop in matched requests.
  • Instead of blocking, the floor price for these Advertisers can be set to a high value.
  • If the floor price is set very high, advertisers may refrain from bidding and may result in a lesser coverage or fill. The publisher will end up with no ads serving on his sites. The key is to find that balance that gives you a solid amount of coverage while maintaining ideal or high prices.

If Ad Exchange is set to Dynamic allocation in DFP and there are other third-party ad networks running on the same ad units, these third-party ad networks will compete for the remaining impressions, which AdX was not able to fill.

  • You can create price floors and broaden its targeting by using specific geographical location or devices (very useful if you have a lot of ad units) or you can create a floor for every individual ad unit in your inventory. This requires a bit more manual work especially if your site contains multiple ad units or placements.
  • Granular inventory targeting should be prioritized, and general targeting should be at the bottom.
  • When your pricing rules are targeted per ad unit, focus on the best-performing ones or the ones bringing in the highest number of impressions when adjusting the floors.

Tips on setting up of Blocking rules:

  • Avoid blocking entire top-level categories, if possible, block subcategories to have a minimal drop in available demand.
  • It’s a better approach to always block the advertiser URLs rather than using category blocks.
  • For wider blocks remove any prefixes from the top-level domain (E.g., abc.com instead of www.abc.com)
  • When allowing sensitive categories, which are blocked by default, ensure compliance with the geographical location where your ads might serve.

Ad Exchange Optimization Feature:

This is a feature which helps the publisher optimize their revenue by using Opportunities and Experiments.

  • Opportunities: are projections based on the previous seven days of data for your network. When you apply a change of a given blocking or pricing rule, the suggested changes are implemented right away.
  • Experiments: let you apply the suggested changes to a fixed portion of your traffic and compare the results to a control group where the rule changes haven’t been used. You can view the impact on your revenue without changing all of your inventory.

Conclusion

Start by implementing our optimization tips and optimizing your Ad Exchange price floors as we recommend in this article. If you’d also like input from our team of ad optimization experts, go ahead and fill out your details here so we can help you with your price floor strategy.

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Kean Graham

CEO and Founder at MonetizeMore

Kean is the resident expert in Ad Optimization covering areas like Adsense Optimization, DFP Management, and third-party ad network partnerships. Kean believes in the supremacy of direct publisher deals and holistic optimization as keys to effective and consistent ad revenue increases.

1 Comment

  1. wow,
    Very nice one useful and great one article.
    Thanks to publishing such great lesson..

    Reply

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