What Publishers Need to Know About Unified Ad Auctions

Unified ad auctions have been around for as long as programmatic advertising has existed. However, a recent decision by Google to add them to its ad server is likely to make them mainstream. The change was accompanied by the decision to shift from second to first-price bidding for impressions.

What are unified ad auctions?

Unified ad action is a system where several ad exchanges access a publisher’s inventory and bid at the same. The unified system replaces the hierarchical waterfall model where Google had first access to bids followed by next DSP in the queue. The inventory rejected by vendors would be passed to the first SSP until all the stock was exhausted. Unified auctions work to the publishers‘ advantage because more bidders have access to the pot at the same time increasing the prices on offer.

Unified auctions now dominate the impression market

Unified auctions have gained currency in recent years, especially in the European and US markets. Indeed, the Rubicon Project estimates that 90 percent of the desktop inventory is sold under this system with waterfall taking only 10 percent. The same trend is evident at the global level with unified taking 70 percent while waterfall holds the remaining 30 percent.

Unified auctions emanated from header bidding

In the past, publishers would put JavaScript code on headers and send wrapped ad calls to exchanges and SSPs such that all of them would be bidding at the same time. However, this system would cause page latency, which negatively impacted the user experience. Header bidding was a hack created to compensate for the weaknesses of the waterfall system and improve the prospects of ad tech agencies that ranked poorly in the waterfall model. The system improved publisher revenue and provoked Google to introduce Exchange Bidding that used the header mechanism.

Unified auctions and the ad server

Since the majority of publishers sell their inventory on Google Ad Manager, the new system will force DSPs to bid for space on Google’s ad server instead of going to an exchange. Header bidding allows exchanges to access inventory and auction it before any ad can load on the publisher’s site. Several auctions run simultaneously before being combined to pick the best.

The bids are then sent to the ad server to compete with those from other parties. The rationale for letting the ad server make decisions is that it is the fairest system because all the bids meet there, including programmatic and direct deals from publishers. The aim of directing all bids to the ad server is to reduce the scope for haggling because only one auction takes place.

Effect on buyers and publishers

The second-price auction gave buyers the liberty to place unrealistic bids knowing that they would only pay a little bit above the second price. The shift to first-price auctions has profound ramifications for buyers because they will now have to make a first bid that results in a fair price. The unified auction system will come in handy because they will not need to engage in the header bidding. Similarly, publishers have been saved the trouble of making header bidding wrappers because all their auctions will run on the Google Ad Manager. However, some publishers are hesitant to rely on Google’s tools for their sales and may develop their own ad servers or partner with independent auctions.

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Martech is a complex topic where technology and processes are constantly evolving. I’ve tried to make sense of this complex industry by explaining ideas in an unbiased way, looking at events and technologies holistically, and shining a light on participants and practices when warranted.

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