Thought Leadership

Six Months of Lower Costs and High Efficiency: Where Are We Now?

May 23, 2018
By Allyse Slocum with head of Rubicon Project’s global buyer team, Adam Soroca

In 2017, Rubicon Project made some bold business moves, effectively shifting our model to one of lower cost and high efficiency. We also made a commitment to operating the most fair, transparent, and neutral marketplace that would result in our partners’ long-term success. Our primary moves were to reduce our total take rate and to offer buyers a choice with auction dynamics.

Our clients have voted with their dollars. The outcomes Rubicon Project provides on our exchange are yielding stronger results than ever. Advertisers are paying lower media prices and publishers are earning proper payouts for their inventory.

So how exactly has this impacted our standing with buyers? To get more insight, we spoke with the head of our global buyer team, Adam Soroca.

Why did Rubicon Project transition to this model? What makes the need for a cost-effective, high-efficiency solution so urgent for buyers today?

Adam Soroca (AS):

It was pretty clear to Rubicon Project that inventory access was well on its way to being democratized. With supply access no longer a differentiator, Rubicon Project made a substantial commitment to build deeper partnerships with brands, agencies and DSPs to understand their needs. Building off our scale and platform capabilities, we focused on making our exchange more attractive and empowering buyers to achieve superior outcomes.

The rise of header bidding surfaced a clear need for a cost-effective, high-efficiency solution for buyers. Suddenly, multiple options emerged for buyers to bid on and purchase the same inventory. With this choice, we see buyers gravitate to supply paths that perform best.

Naturally, the media clearing price plays a significant factor. In a first price auction era, our EMR algorithms (when buyers enable) reduce the price buyers pay and our low total take rate delivers winning prices to the publishers.

Do you feel the work is paying off? How so?

AS: Based on the numbers, our buyers are getting better outcomes and shifting spend to us as a result.

But there are other factors that contribute to our demand customers’ successes. For example, we invested heavily in building out a team dedicated to meeting the needs of DSPs, agencies, and brands. That team focuses on day-to-day account needs, but also deeply partners to understand buyers’ strategies to ensure we deliver the right products to market.

Our Estimated Market Rate (EMR) tool, for instance, was designed by working closely with buying platforms to help them compete in a first price environment without overpaying.

We quickly surfaced that market conditions shifted quickly such that not all were prepared for first priced auctions.  And, the data was very clear that those without bid shading algorithms were overpaying for impressions on other first price exchanges.

So, as Rubicon Project made the shift to first price for header bidding auctions, we provided buyers with choice in their auction dynamics. They could either use their own algorithms or rely on our EMR tech that reduces the clear price in a first price auction without material sacrifice to win rate.  EMR is proving significant savings for our buyers and we’re now seeing it enabled as a compliment to other bid shading algorithms. Simply put, buyers are paying the market rate versus a full first price, resulting in lower effective CPMs and stronger KPIs.

It’s great to hear that this move has helped drive value for buyers. What has the impact been on our relationships with buyers?

AS: Taking this approach deepened our relationship with buyers since it clearly demonstrated we were looking out for their interests. Whether you talk to DSPs, brands, or agencies, the overall message is the same—they’re getting more wins, more efficiently. But more important than that, we’ve established their trust. Buyers have mentioned that this is the closest they’ve ever been with Rubicon Project.

To further help traders transact effectively in first price auctions, we’ve been delivering a curriculum that provides buyers with bidding strategies and insights.

And we’ve never been closer with our clients in understanding their roadmaps and the services they’ll need to be successful. This allows us to be true partners and, together, proactively navigate the constant flux in the industry.

Over the past six months, what type of progress do you feel the rest of the industry has made to improve efficiency and provide transparency?

AS: The move to first price auctions may very well be the right answer for our industry for a variety of reasons.  But, the way it was brought to market by others — without notifying and offering transition times — resulted in buyers paying too much for inventory.  CPMs spiked on some buyers and now they are, rightfully, upset. I expect a push back coming on this front.

Understanding the exchange total take rate is another area that is starting to pick up industry momentum. We are completely open with our take rates. This is in contrast to other exchanges who do not provide the same level of transparency. Buyers have learned to ask exchanges what their total take rate is, and most exchanges aren’t providing a straight answer. Take rate matters since it directly affects the how much of the advertisers’ dollars make it to working media.

And, of course auction dynamics and total take rate go hand-in-hand.  Buyers are getting better outcomes on our inventory versus first pricers taking more out of the transaction.  We can lower the price that the inventory clears at (EMR) while submitting more into the downstream auction (low TTR).  This is what leads to better buyer outcomes on Rubicon Project.

So what should buyers do to continue to surface the issue and drive action?

AS: Buying platform models adjust bids according to value, but cannot yet determine the relative weighting of where those dollars should be allocated in real time. Therefore, it’s so important for buyers to understand the auction dynamics and the total take rate of all their exchanges. Since many exchanges are skirting the issue, this should be a major warning sign.

Simply put, if buyers are not getting the answers they want, they can—and should—shut down those channels and funnel their money through exchanges that offer better, fully transparent outcomes.

For more information on our buyer solutions, reach out to us at contact@rubiconproject.com.


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