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WTF is dynamic allocation?

April 14, 2016
Aaron Polmeer

By Garett Sloane

Google’s biggest ad tech rivals, the companies that compete with the search giant serving ads to websites, have always feared it was too powerful. Its hold over so much buying and selling power in online advertising meant it could set the rules under which websites and advertisers would operate.

Google has been accused of bundling ad tech services and other potentially monopolistic practices. So, yesterday, it made a grand gesture: Google is opening up what it calls “dynamic allocation” to allow all bidders, including itself, to compete evenly for ad inventory on websites.

If opening dynamic allocation works as promised, it could eliminate the need for header bidding, a tactic used by Google’s top competitors to reclaim power in the auctions. So with all these changing rules, and shifting power balances, it’s important to take a look at dynamic allocation in Google auctions and what it means for advertisers and publishers.

What is dynamic allocation?
Dynamic allocation had been a way for Google to offer advertisers on its exchange a way to swoop into auctions for ad space and buy the best inventory if they could beat the going market rate. Publishers would benefit because they technically got a higher price from an advertiser through Google than if they had sold the inventory to a rival exchange. However, this method of selling inventory may not have always yielded the best prices.

“Dynamic allocation allowed Google’s exchange to cherry-pick the best ad impressions as they came through the Google-owned ad server, DFP,” said Alex Magnin, CRO of Thought Catalog, a new media publisher.

Google would beat any bid based on the average rate that exchanges like The Rubicon Project or Open X would offer. If the average rate on Rubicon was $2, Google could top that and win the inventory at $2.01, even if Rubicon might have paid $5 for the same inventory based on the value of the consumer on the other end, not its average rate. Basically, DoubleClick for Publishers was dynamic for AdX, but dumb for other exchanges that couldn’t bid in real time.

“Google had an informational advantage to buying the best impressions, and the informational advantage came from the fact that they own the ad server,” Magnin said.

So what’s changing?
Google said it’s testing opening up dynamic allocation to rival exchanges, which will be able to see the same information as Google’s Ad Exchange and bid accordingly. Giving publishers a clean, open auction process to maximize the price on inventory.

“It’s a gutsy call from Google putting the interest of publishers first. The pain here was all on the publisher’s side, and doing this improves the publisher side at the expense of AdX,” said Ari Paparo, CEO of ad tech startup Beeswax. “It’s a solid move for them.”

It’s still only in the test phase and many ad tech players remain cautions. Publishers in the test include Hearts, Zillow and Meredith, and ad platforms Index Exchange and Rubicon, according to AdExchanger, which first reported on the new bidding test.

“Exchange bidding in Dynamic …read more

Source:: Digiday