Ep. 2 | The Duplication Challenge in our Entire Ecosystem | DPO Mastery

Summary

The transcript explores the dynamics between Supply-Side Platforms (SSPs), Demand-Side Platforms (DSPs), and publishers in digital advertising. It highlights the complexities of auction bidding, deduplication challenges, and QPS (Queries Per Second) limits. SSPs are incentivized to generate higher bids, often through duplicated requests, but this creates inefficiencies and crowding-out effects. The discussion delves into how SSPs' actions impact publishers' revenue and the broader ecosystem, emphasizing that while SSPs may profit, deduplication could potentially improve the market. A key point is whether publishers would benefit if SSPs focused on monetizing medium-value impressions instead of high-density inventory.

Takeaways

• 😀 SSPs generate revenue by outperforming the next highest bid, even by a small margin (e.g., 1 cent), and they profit from the full bid amount, not just the difference.
• 😀 Publishers are more concerned with generating incremental bids rather than focusing on small bid differences like the 1 cent advantage that benefits SSPs.
• 😀 The crowding-out effect occurs when multiple SSPs send duplicate requests, reducing the availability of inventory for other potential bidders or SSPs.
• 😀 SSPs intentionally send duplicate requests to maximize their chances of securing high-value impressions, but this leads to inefficiencies and reduced opportunities for other players in the market.
• 😀 Deduplication, though technically possible, is avoided by SSPs as it introduces delays that reduce the chances of winning a bid, which they can't afford due to competition.
• 😀 Publishers can solve deduplication by cleaning up duplicate requests themselves, but doing so could lower their revenue since they might miss out on some higher bids.
• 😀 The fragmented approach to SSP partnerships is driven by publishers' incentives to leverage multiple SSPs for better revenue, even though consolidating to one SSP might yield better terms.
• 😀 QPS (Queries Per Second) caps limit the number of requests that can be processed by DSPs, creating a competitive bottleneck that affects the efficiency of bidding.
• 😀 SSPs' strategies of submitting duplicate requests to DSPs are driven by their need to maximize revenue, but this creates systemic inefficiencies and raises the issue of market inflation.
• 😀 There's an ongoing debate about whether focusing on medium-value impressions instead of high-density impressions would result in higher revenue for publishers, despite lowering SSP profits.

Q & A

Why does an SSP make money by outbidding the next highest bid by just 1 cent?

An SSP makes money by outbidding the next highest bid because the revenue is calculated based on the full amount of the winning bid, not just the difference. Even a small 1-cent difference increases the overall bid amount, which is beneficial to the SSP.

How does the publisher's perspective differ from that of the SSP when it comes to bidding?

From a publisher's perspective, the focus is not on the 1-cent difference but on obtaining more bids with greater incrementality. Publishers are more interested in volume and competitive bids rather than small price improvements.

What is the 'crowding out' effect in the context of SSPs and DSPs?

The 'crowding out' effect occurs when multiple duplicate requests are sent by SSPs to a DSP for the same impression, reducing the overall availability of bids and creating inefficiency in the bidding process. It can also lead to reduced response rates due to the competition between duplicate requests.

How did the concept of crowding out evolve in the market?

Historically, the approach was 'more is more,' where integrating multiple SSPs meant more volume of requests, which increased the chance of receiving bids. However, due to QPS (queries per second) caps on DSPs, there is now a crowding-out effect as more duplicate requests from SSPs limit the DSP's ability to respond.

Why do SSPs continue to send duplicate requests despite the inefficiency it creates?

SSPs send duplicate requests to maximize their chances of receiving a high bid. Since the SSP's revenue depends on winning bids, they are willing to sacrifice sending fewer requests to ensure that high-value impressions have a better chance of being bid on.

What is the potential opportunity for an SSP to focus on mid-level inventory?

Focusing on mid-level inventory could offer SSPs a higher win rate and better take rates. Mid-level inventory typically faces less competition, allowing SSPs to take a higher percentage of the bid revenue compared to higher-demand inventory.

What is the technical challenge with deduplication in real-time bidding?

The technical challenge of deduplication lies in the potential delay it would cause. Real-time bidding requires fast, low-latency processing, and any delay in deduplication could cause an SSP to miss the chance to win a bid, as another SSP might get there first.

Why haven't SSPs and publishers solved the deduplication issue despite its technical feasibility?

While deduplication is technically possible, SSPs and publishers haven't solved the problem because it's not in their immediate financial interest. Publishers and SSPs are incentivized to maximize their revenue, and deduplication could reduce the number of bids, affecting their earnings.

What is the consequence of duplicate requests on the DSP side?

Duplicate requests lead to inefficiency for the DSP. As multiple requests from different SSPs crowd the DSP’s queue, it may limit the DSP’s ability to properly evaluate and respond to each request, ultimately reducing the value of the auction and potentially increasing costs.

Would publishers make more money if they worked with a single SSP?

Yes, theoretically, if all publishers worked with a single SSP, they could leverage their collective bargaining power to negotiate lower take rates and ensure higher payouts. This would create a price war among SSPs, leading to better financial outcomes for publishers.