A Tale of Two Cities

Hello All,

I’ve got a bit of catching up to do – I originally wrote this post up on Monday, and while I feel like a lifetime has transpired since then, I think it’s still worthwhile to respond to a few great articles that came out in the last week.

The first I’d like to explore is a post from Scott Messer that got great engagement – https://www.linkedin.com/posts/smesser_programmatic-adtech-curation-activity-7383464041798623232-7iNT?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAOyvR8BP2jkp5oV9vvOrVvzgEItupNdUsc - on Friday, after the podcast, Scott pinged me with a thought – that Prebid would be for SSPs and OpenAds would be for DSPs – and I said you need to post that right now. It’s a very interesting thought.

I cheekily withheld from him why I thought it was interesting. It’s an interesting premise because when I reflect upon the reasons that Jeff outlined as his justifications for their creating OpenAds, I realized none of them materially affect SSPs. This alone, without transaction ID, is indicative enough of the diverging interests of legacy SSPs and legacy DSPs to justify separate auction mechanisms to satisfy their unique requirements. Let’s dig in.

Last friday on the show Jeff outlined three reasons to create OpenAds – Obfuscation, Duplication, and Sometimes Lying. People have been up in arms about these characterizations, but broadly speaking, I think they’re objectively true. Without re-explaining them for the 1000th time, I came to the realization that SSPs overwhelmingly benefit from these behaviors while DSPs optimizing to performance are actively hurt by them.

SSPs benefit from them in numerous ways.

Obfuscation? They would be the ones doing the obfuscating, so they’re always aware of it. And if an SSP is choosing to obfuscate, it means they’re doing it because they think the DSP is going to bid more money with less information. It’s a tool in the SSP kit. I can’t say it’s my favorite, but hey, until literally the past 2-3 months DSPs haven’t seemed to care so who am I to judge.

Duplication? From a curation perspective, SSPs are immune to lots of duplication – if anyone is duplicating things, it’s either happening on a page where they ostensibly can see it (and would take the time to), or they would be the ones doing it. They can also work with vendors like Gamera to gain powerful optics into on-page stuff, and a few SSPs do (we work with a couple of curation platforms – as always, hit me up to learn more). From a non-curation perspective, where SSPs have a different job – to just get the right user IDs in front of DSPs as many times as humanly possible - duplication is so effective that it has become a business model unto itself.

Sometimes Lying? I think this is a nod to ID bridging, but there are plenty of other forms of fraud. ID bridging satisfies the unsophisticated DSPs insatiable thirst for User IDs – this, like duplication, has literally become a business model unto itself.

All of this being said, assuming these things are problems for buyers, in the current DSP SSP paradigm, curation actually solves all three of these problems pretty darn well. This is because SSPs aren’t shackled with the sins of the father, namely, they’re not expected to be a “neutral ad purchaser from all SSPs.” In my estimation, most of these problems are only really issues if you can’t buy directly from publishers, and by virtue of the fact that curation gets to just buy from within an SSP, curation is essentially each SSP building their own version of OpenPath (which is brilliant, and certainly good for buyers who use it – as long as competition exists).

What makes this whole debacle 5-D chess is that the SSPs get to have their cake and eat it too. By manipulating the auction infrastructure to support the three sins, and also offering curation, they get to create the disease while also innocently selling the cure. DSPs, meanwhile, look selfish when they roll out their own version of direct to publisher technology, and for certain unsophisticated buyers (folks just trying to deliver against UserID lists), buying across the three sins actually performs better (later in this article on bad incentives fucking up our whole ecosystem). Hats off to the SSPs for majestically satisfying both ends of the performance and brand spectrum simultaneously.

So yes, I think Scott’s description is interesting – because we now know that Prebid is largely built by SSPs for SSPs, and OpenAds was built to solve problems that SSPs don’t have! We’ll see if other DSPs get the memo and actually try to create efficiency and performance for their clients the way that TTD is. Is OpenAds the only solution to this? No, I think not. I think people will come up with other creative ones, there will be iteration, and there will be improvement. But did we need a catalyst for change? Yes, we certainly did.

Another closing thought for this one – with the Google remedies coming up, there will be a proliferation of Adservers that offer meta-auction management and direct sales management that are super cheap. If I were a prebid management company, I’d be building this, like, yesterday. Ping me if you’d like some advice!

The other article I’d like to address is my buddy Rob Webster’s https://www.linkedin.com/pulse/saving-open-web-why-we-need-stop-selling-programmatic-robert-webster-sdhoe/?trackingId=8BAH2wLgQtyq778WOrwE5A%3D%3D who is a buy side guy doing a lovely job of getting the message out that Programmatic doesn’t perform and some heads need to roll about it (shout out to Jana as well).

Rob captures a lot of things very well and I generally love this piece (especially his vision of the future, which I can get behind), but I want to dig into this because I think it’s a refrain that goes unexamined :

“This is the structural rot at the heart of the open exchange. It’s not that people are evil; it’s that the incentives are backwards. As Matthew Prince of Cloudflare puts it, traffic has never been a good proxy for value, yet we built an entire industry around maximizing it. Publishers were caught in a system designed to fail them.”

The question I’d like to ask is which incentives and why. Mr. Prince seems to say that publishers were just “incentivized to get traffic,” but I don’t think he digs deeper. And then Rob digs into quality and exchanges – but I think this is wrong, or at least, incomplete. And I think it’s because as an industry, we’ve become confused (or even worse, hoodwinked) about what open web programmatic is for. Once again, a reminder, facebook is generating meaningful CPMs for UGC content, and we can’t seem to get high prices for new yorker essays about luxury vehicles. There must be more to this story.

I, for many years, believed I worked in a business designed to deliver effective digital advertising for buyers.

We might not.

There is a nonzero chance that to date none of us in programmatic have worked in a business built to deliver effective digital ads.

The ugly reality might be that the primary consumers and clients of programmatic to date have been Agencies primarily concerned with a way to capture more margin. Making ads work as well as possible was simply not their priority. The job of DSPs (on behalf of many of these agencies) has been to :

1. Deliver ads to a list of User IDs
2. Facilitate kickbacks at every point in the value chain in order for agencies to recapture margin downstream that they’re not allowed to put in their initial proposal. DSP, SSP, Sales House – you name it, they were all in on it and getting squeezed.

People keep painting the commoditization of publisher inventory as technological or structural, and blaming programmatic for it as a tool. In reality, it’s not the tool that did it, it’s the users of the tool – the target audience – and that audience consisted of buyers that don’t give a shit if their ads perform or not. How on god’s green earth do we expect publishers to be able to charge anything if buyers don’t care about performance?

That’s what’s been causing the race to the bottom. It’s actually not even the user-based buying in and of itself – it’s user based buying with a complete disregard for post-delivery outcomes. How could publisher inventory be worth anything or be at all differentiated if the buyers aren’t optimizing? And I think we’re finding out now that lots of buyers haven’t been. Now, I don’t mean to paint with too broad of a brush – I’m sure there are plenty of buyers who just stopped buying programmatic because it didn’t work, and maybe even some who want to do the right thing – but there were enough of these “unsophisticated buyers” to line the pockets of ad tech companies for about 20 years.

So don’t blame OpenRTB. Don’t blame the structure. Blame the fact that we’ve built an industry to serve a set of clients that will never pay more than bottom of the barrel rates because they have absolutely no reason to – they don’t care if the ads work or not, they just want to hit a userID as cheaply as humanly (or machinely) possible without serving to something that lands them on the front page of adweek in a negative way (cue our two billion dollar cover your ass publicly traded companies).

That being said, things are changing. Chalice does case studies about buying at super high CPMs for advertisers actually concerned with outcomes. The Trade Desk, much to my boyish delight, has decided to actually build infrastructure that is dedicated to making advertising campaigns perform better, and even though all of you keep giving them shit for it, they barrel forward undeterred. It is from actors like this that the new future will flow forth, and their inevitable competitors. This is why I’ve started a company dedicated to making the web perform better by helping create high-value metadata and analytics in this new efficient ecosystem.

In response to Rob’s article I will go back to my refrain – Facebook average CPMs are between $10 and $25. This means that advertisers, at times, are willing to pay $25 CPMs for banners because the post-click CPAs are so competitive.

That world can exist on the open web. Even if we have DSPs and an “Auction Management Company” charging 30% across the two of them (I can dream can’t I?), that’s $7-$17.5 net to publishers. Can you imagine how the internet would look if that’s what website CPMs were? Hell, can you imagine how the global economy would look? And even if open web CPMs were 50% of that, we would be in a magnificently superior place to where we are now. Thank goodness a few companies are trying to make it happen.