Reflecting On 2024 – Expert Insights on the Programmatic Industry
As the digital advertising landscape continues to evolve, programmatic advertising remains at the forefront of innovation, shaping the way brands…
Every commodity has its sellable price. Looking at Programmatic Advertising from the perspective of Publishers and pricing, the commodities they sell are advertising space, or more precisely – ad impressions. So how do we address the questions: “Is the price of my commodity an optimal price?”, and “What are the factors influencing this price?”?
As we know, Programmatic Advertising was initially based solely on the Auction Model. In this model, the price was shaped by the so-called AUCTION PRESSURE of bidding buyers (Advertisers). This took place as a part of an Open Auction, one where any buyer who had adequate access to the right tools (DSP) could participate in the auction.
In such a “pure environment” where the Publisher issued Programmatic on a given inventory, the final price was arrived at by auction pressure on the part of Advertisers (in other words: by their willingness to pay), and it was also possible to influence its final value by applying minimum prices.
At the time of “the Second Price Auction”, which ended at the end of September 2019, the Advertiser who won the auction paid as much for the page view as the price offered by the second highest bidder + $ 0.01. Therefore, by efficiently managing the minimum prices, it was possible to increase this price by placing it somewhere between the bids offered by the auction winner and the second highest bidder.
In the “First Price” model, the management of minimum prices, as a rule, has the same goal, i.e. selling page views at a rate that would obtain the highest possible revenue (while maintaining the highest value of the space).
Before we move on to more complicated factors that influence the final value of the advertising space, it is worth pointing to the “softer” determinants that we can observe in the “pure environment of an Open Auction”.
The final bid for 1000 impressions may vary depending on:
1) Scale of traffic (demand – supply).
2) The geographic area of the website concerned.
3) Time of year.
4) Advertising product: display, video, in-app.
5) The category of the device from which users enter the site.
6) Indirectly the content of the website – groups of users interested in the content.
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Scale of traffic (demand – supply).
A situation in which the volume of traffic (page views or ad requests) increases at a given moment with the other factors unchanged. Then we can expect that the greater supply of a commodity will cause its price to fall, in accordance with the theory of supply and demand. So the greater the volume of traffic – the lower the price.
The geographic area of the website concerned.
(With some exceptions) any website can be accessed regardless of what region of the world we find ourselves in. Depending on the structure of the traffic which a given website has, the value of its average eCPM level (value of goods in Programmatic Pricing) will be different.
Table 1. Examples of rates per GEO
The data shows that pages with the majority of users from the US will have an average value higher than, for example, pages with users from Belarus, Russia or Mexico. This reflects the potential purchasing value of a given user in the eyes of Advertisers.
The size of a given advertising market may also be important. So, for example, GEO US websites are entered by US users and mostly Advertisers who also come from the US market. On the other hand, on Polish websites, where there are users from Poland, Polish Advertisers are displayed. We can assume that the tendency to bid higher or the potential of the broadly understood US market is higher than the Polish market; therefore the final rates may differ.
Time of year.
Some periods of the year, month or even day, are specific in terms of digital advertising demand. We can easily guess that, for example, just before Christmas, Advertisers are willing to spend more than, for example, in August, and so the rate for views increases. Of course, any period can be a period of increased demand depending on the Advertising industry – but let’s look at seasonality from a broader perspective.
Graph. Examples of average eCPM rates broken down on a monthly basis.
As an example, we give the very specific, pandemic year of 2020. We can very clearly see a number of things in this data. Namely, every year January is a month that sees a low level of rates. Most advertising campaigns end with Christmas and before new budgets are agreed and approved, there is low demand, meaning low rates in the market. This demand, as a rule, usually increases over the course of the year, but in March 2020, a global pandemic and lockdown broke out and most Advertisers suspended their spending, which reduced the auction pressure (additionally, we were looking at a demand-supply effect, namely the internet traffic increased significantly, which also contributed to the decline in rates). As we can see with the following months (as the data for subsequent months indicates), the rates started to rise, reaching their peak in November (Black Friday and the already high-paying pre-holiday campaigns).
This seasonality of the rate is also observed on a daily and hourly basis.
Advertising product: display, video, in-app.
The most common advertising on the Internet is display advertising, i.e. an advertising banner with a given creation. But in the Programmatic ecosystem, video advertising, in-app advertising, and in-game advertising are gaining in importance (not to mention new engaging formats that are being constanty developed and successively released). Each of these forms of advertising is specific and this specificity determines its price.
Table 2. Examples of Ad eCPM rates by product
Video advertising is the most expensive – this is the result of the fact that such advertising engages the user the most (this is a strong analogy to classic TV advertising). Advertisements in applications or games, which also have a relatively high price, are, in turn, advertisements usually associated with an engaged, specific user, which may also affect its effectiveness. Display advertising, the most common, typical and perhaps the most anonymous, has the lowest eCPM rate.
The category of the device from which users enter the site.
The valuation of the ad page view by buyers in Programmatic Pricing also depends on the type of device used by a given user.
Graph. Examples of Ad eCPM rates by device type
In this case, the factor determining the average value of the page view is, undoubtedly, the size of the device, and thus the hypothetical effectiveness of the ad. It is assumed that the larger the format, the easier it is to attract the user’s attention.
Content of the website.
In the case of website content, the level of the average rate is indirectly the result of the purchasing potential of users visiting this website. It can be assumed that websites concerning, for example, audio equipment may attract users who are more willing to make any purchase, and thus more attractive to advertisers, than, for example, websites with purely entertainment content, where the user’s motives are less “specific”. But in this case, the content approach for bid optimization is something for the not too distant future.
The above-mentioned factors, excluding the management of minimum rates, are somewhat less dependent on Publishers, and may be considered as “purchased”.
However, in Programmatic Pricing there are mechanisms 100% dependent on the Publishers that can increase the value of the rate by increasing the auction pressure – we will come back to this issue in the next part of the article.
