Dynamic allocation is one of the biggest reasons why some of the most optimized publishers use DFP. Dynamic allocation is the connection between DFP and Ad Exchange that allows DFP to predict what CPM Ad Exchange will serve at. This allows DFP to compete Ad Exchange against third-party ad networks in real-time. Dynamic allocation ensures that Ad Exchange only serves when it is the highest bidding demand source assuming your third-party ad networks are accurately priced. This is very powerful because Ad Exchange is the best performing demand source in the world when considering CPM and fill rate.
How does DFP predict Ad Exchange’s CPMs?
Since Google owns DFP and Ad Exchange, they were able to integrate the two technologies at a high level. The Google engine predicts the CPMs served via dynamic allocation from a combination of past CTR stats, keyword, placement, and interest targeting bids. With this, you can calculate the predicted CPM (CPM = CTR * CPC * 1,000). It is this predictive calculation that can dramatically increase your ad revenues with dynamic allocation implemented optimally.
Related Read: 5 DFP Strategies to Maximize ROI
Your ad optimization strategy should be based on dynamic allocation. Since you want to increase the competition against Ad Exchange:
- You should run as many high fill campaigns with competitive CPMs via DFP using price priority settings.
- Sometimes it’s worth running a low fill campaign if the CPMs are high enough.
- You should try to also run an ad network that has a guaranteed 100% fill. These usually get low CPMs but are still worth running. They push Ad Exchange from the bottom.
Say you ran a 100% ad network that only got $0.03 CPM. If you set this in DFP with a $0.03 CPM and no frequency cap, this would act as a minimum CPM for Ad Exchange. Ad Exchange will no longer serve any ads less than $0.04 CPM which will increase the average CPM. The higher that you can get the bottom barrel CPM, the higher you’ll increase Ad Exchange’s performance. Ideally, you should have ad networks that monetize low, medium and high-value portions of the inventory to increase the Ad Exchange CPM via higher competition and the overall ad inventory CPMs.