FAQ
The Auction
How do you auction off advertising impressions in real time?
The auction is at the heart of the AdECN exchange — any exchange, really.
Publishers, through their members, place their ad spot inventory in the exchange, defining the format, acceptable content, and maybe (if they wish) a minimum price.
Advertisers, through their members, specify in advance the targeting they want, and how much they are willing to pay when such an opportunity comes up. That's their bid.
The action starts when a viewer lands on a website page. That triggers a single-pass auction among all of the interested advertisers. In about 12 milliseconds — as the page is loading — we run the auction, the highest bidder wins, and we show that ad.
Why an auction for every impression? Isn't a fixed rate for a set number of impressions simpler?
Simpler, yes -- but incredibly wasteful. Nobody benefits.
For example, when selling inventory off a fixed rate card, you miss the chance to sell some of it for more than the highest rate on the card. More often, a lot of your inventory goes unsold because no one wanted to pay the lowest number on your rate card. So you've limited your upside on some inventory and guaranteed zero dollars on other inventory. Whether you are this publisher or his ad network, this is bad business.
With a real-time auction, each and every impression is sold to the highest bidder. The publisher always gets the highest price anyone wants to pay for every impression. Sometimes this is higher than the highest tier on a rate card, but more importantly it applies to ALL impressions, meaning he sells all of his inventory for at least something. This latter effect about doubles the total revenues ad networks can collect for their publishers.
From the advertiser's side, a real-time auction gives him visibility and control over what he is buying. Bids are based on some level of targeting, and an ad is only run and paid for when the targeting is met; he therefore knows exactly what he paid for. He can get what he wants when he wants it by raising his bid; or he can root out deals by lowering his bid and taking more time. But the important thing is that he keeps his ROI up where it needs to be.
So is the auction being run on a CPM basis?
Yes. On the AdECN exchange, the auction is always a CPM, highest bidder wins auction.
You have to compare apples to apples. You can't mix CPM, CPC, and CPA bids in the same auction.
Why not run a pure CPC or a pure CPA auction?
We could, but CPC or CPA auctions don't work for branding campaigns because the search engine or network won't show the ad if it doesn't get enough clicks or actions.
Worse, if you try to optimize the CPC or CPA bid by multiplying it by a probability factor, no one except the exchange knows why a certain bid won. Who wants to trade on an exchange if they don't know why a bid won or lost?
Finally, with any CPC or CPA auction publishers do not get paid for a lot of their inventory. Maybe they make it up in higher C or A payments, but why put that in the hands of someone else's black box when you can simply accept the highest price anyone wants to pay at that moment for that impression?
Does that mean the AdECN exchange is limited to CPM ads, or can advertisers run CPC and CPA campaigns?
The exchange can handle any pricing model, though the actual auction is purely CPM. It's up to the member what model(s) it wants to work with. Any member can buy inventory on the exchange on a low CPM basis and get paid on a higher CPC or CPA basis. We call that arbitrage.
For example, if an advertiser wants to pay a 25-cent CPC every time his ad is clicked, the member can accept that, and then run that ad only on sites where the cost of the impression, on a CPM basis to the publisher, is less than the revenues to the member from the advertiser's payments. It may take the member a hundred dollars or so to figure out where the ad can run profitably, but we give the members the arbitrage tools and the data, and they can earn a very worthwhile insurance premium.
The actual auction is on a CPM basis, the member has just backed the CPC or CPA campaign into a CPM and is making extra money. So the performance advertiser is happy with his reduced risk, the member is happy with his additional profit, and the publisher is happy because he got paid the most for every impression.
In a CPC or CPA transaction, does the publisher still get paid on a CPM basis?
The member who sold the inventory gets paid on a CPM basis. How he chooses to pay his publishers is up to him.
If an advertiser can win an auction just by bidding the most, won't big advertisers get their ads run and small advertisers won't?
No. P&G doesn't buy all of the ad space on the internet or in the press today.
If the highest bidder wins, what happens in a tie?
In a tie — which actually rarely happens — our system picks one of the winners at random.
Can a member manipulate the system to raise his competitors' prices?
No. A member can set minimums for the inventory he offers on the exchange, but there is no way to force another member to pay a certain price — if the minimums are too high, no one will bid.
