The Impact of Multi-Bid: Decreasing Deadweight Loss

Andrew Baron, Director of RTB and Revenue Operations

Andrew Baron, Director of RTB and Revenue Operations

Last year, we unveiled “multi-bid,” a forward-thinking protocol that improves performance on the buy and sell-side of the ad ecosystem by increasing the volume of bids in the marketplace. We projected the effects, but now we have the data to prove impact as well as lessons learned. The key takeaway is that multi-bid decreases marketplace frictions, which in turn creates efficiency. Said more dramatically (and while wearing a pocket protector), multi-bid decreases deadweight loss.

First a quick review. How does multi-bid work? PubMatic first sends the bid request to DSPs describing the potential impression and DSPs then respond with multiple bids, each of which has a description for potential creative. PubMatic’s system then evaluates these bids against publisher settings and other bids and selects the winner.

Buy-Side Benefits

In a multi-bid environment, advertisers and agencies first benefit from increased inventory exposure or access. We saw buyers increase their participation rate by 40-100%. With this increase in participation, we saw a subsequent increase in the buyer’s importance to the publisher’s business: a 115-130% growth in the buyer’s share of the publisher’s advertising revenue.

From the technology provider’s (read: DSP’s) perspective, multi-bid increases response effectiveness and business intelligence. The best efficiency metric that we can measure on behalf of a DSP is its throughput, as defined by media spend/QPS, which grew 10-15%. The primary driver here is an improved win rate, which grew 45-100%. It’s important to note that a growing win-rate does not just deliver short term ROI benefits, but also increases the DSP’s business predictability. While foresight is a critical piece of building business intelligence, another is learning from past experiences; through multi-bid, DSPs have increased their auction results feedback by 30-40%.

Sell-Side Benefits

With regard to multi-bid, publishers are primarily focused on increased marketplace liquidity. Bid density grew 40-100%, which drove 5-10% growth in fill rates, the end result being a 10-15% increase in publisher advertising revenue. Premium publishers accrued a disproportionate share of value. DSPs used multi-bid to go after higher valued audiences in higher valued contexts, evidenced by a 20-70% price difference between impressions attracting multiple bids and those attracting single bids. Lastly, publishers grew their lost opportunity insights by 30-40%, which is valuable in effectively managing a healthy discretionary revenue channel.

What We Have Learned

How was multi-bid effective? It helped reduce publisher imposed frictions (read: brand controls). In an environment where more bids are available, advertiser blocklists, advertiser category blocks, and even advertiser whitelists could continue delivering strategic value without sacrificing as much revenue. Premium publishers tend to use these brand controls most heavily, and DSPs are aptly concentrating their multi-bid efforts on these high-valued contexts and audiences. Multi-bid value accrues to the industry’s head.

We’ve seen both successful and less successful tactics in avoiding brand control frictions. DSPs should submit a variety of advertisers and advertiser categories in each multi-bid response—in other words, don’t submit multiple bids from the same advertiser and don’t submit multiple bids on behalf of advertisers all from the same vertical, for example.

Multi-bid has proven to be the most efficient means to securing the most valuable content and users. In the absence of multi-bid, a buyer depends on a feedback loop of past actions to achieve future successes. Since publisher brand controls are dynamic, and not always transparent, the aforementioned feedback loops repeat, iterations multiply, and direction forward may not be clear. People and infrastructure costs consequently increase. Multi-bid allows buyers to realize efficiencies ahead of these feedback loops – it’s like learning to fish while eating a salmon dinner.

In conclusion, it’s early days for multi-bidders. It’s still a buyer’s market where early adopters and power users are capturing much of the value created. As adoption and usage continue to grow, we expect to find an efficiency plateau at some point in the future, but we aren’t there yet. Win-rates continue to increase—and do so at an increasing rate—with each additional bid submitted. Said differently, the eradication of deadweight losses is accelerating!

 

To read more about the advantages of a multi-bid RTB environment, you can download our whitepaper: “The Advantages to Publishers, Advertisers and the Ecosystem of a Multi-Bid RTB Environment (Q4 2012).”

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