Advanced Mediation: The Road to Adoption in 2019
Just because you’re in a professional environment doesn’t mean you think rationally 100% of the time. Say, for instance, you fear losing revenue from a lost deal. You still want to take some action, so you complete the deal despite the numbers, letting your fear drive the decision. Younger generations call this sort of decision-making “FOMO,” the fear of missing out. What would happen if fear, or any other emotion, was removed from your decisions? Will that always result in a better deal? If a machine or algorithm was making your buying decisions (e.g., advanced bidding), would it create more revenue or less? Wouldn’t we all love to know…
Who benefits from advanced bidding?
Bringing order and rationality to digital advertising through advanced bidding (also known as advanced mediation or real-time bidding — it goes by many names) sounds good in theory, but does it actually maximize revenue? The answer is worth exploring. First, let’s look at it from the publisher POV.
For hotly contested supply, competition is not governed by a strict set of rules. In fact, certain titles that are fought over today might not even be worth buying, but human emotion drives the decision to bid on them, and at a higher price. It feels good to have your ads showing in a Top 100 App Store title, right? That’s because we assume that these titles must be popular for a reason, and subsequently have a valuable audience. As a result of this assumption, you might deliver $15 to the publisher, but when someone else delivers $17, you decide to deliver $18, or, at the other end, bow out. Caught in this cycle, in many cases, you wind up paying more than the inventory is worth.
Now think about everyone else: the vast majority of mobile apps that work primarily with mid- and long-tail campaigns, which are less competitive but still have a significant amount of value. Traditional mediation methods, such as waterfalls, could potentially be a disservice to these players. In an RTB-automated world, the machines making all the decisions should, in theory, apply the real values to each title’s inventory at the impression level.
For instance, assuming a 10% margin, if the value is calculated to be X, you’d bid X+10%, or Y, and thereby assign a real value to every impression. Would that deliver more revenue to these apps? That formula sounds much fairer than current mediation practices, doesn’t it? Whether you’re an ad network or a publisher, it is clear that fairness and transparency are worth striving for.
Not yet 100% reality
In theory, everyone would benefit from transparently bidding on and assigning a real value to every impression; for that reason, everyone would be on board. Right? We at AdColony have embraced this method, as have many other platforms, and it continues to gain traction and interest. But in the practical sense, we’re not there yet – it’s still in beta test mode. No publisher has 100% adopted advanced mediation yet, and in many cases, are only testing with a single app in their library in a “wait and see” strategy.
Ad networks, too, are in a bifurcated system. Some networks are bidding, and others are having the mediator approximate their bids based on historical experience. In that way, they are technically participating, but not with a 100% unbiased approach. Moreover, there are technical challenges that everyone faces – and the trouble is that all companies do not have equal execution ability and generally operate differently.
Let’s look at this from the network POV. One clear reason for the hesitation to switch completely over to advanced mediation is about risk, especially because a large portion of our industry still operates on a CPI basis. Advertisers are relating to networks through CPI, yet this new way of transacting ultimately requires an actual CPM bid. It also requires knowing the value of the inventory and then paying what it’s worth. Translating CPI into CPM is a risky business, which the networks have to bear in this new system. Simply put, the transfer of risk, in this case, is something with which many are not comfortable.
The need for clear examples to follow
Whether you are a network or a publisher, the only surefire way to get people to accept the risk associated with header bidding and overcome uncertainty of the unknown is by presenting confirmed results. We need a number of successful tests to get more ad networks and publishers to adopt this new way of transacting. Due to a lack of successful tests, we now look to other parallel areas (online) to see how it worked in these settings. Header bidding (advanced mediation) has so far been massively successful in the online space, with CPMs increasing by as much as 30-40%. While it’s possible such adoption might take place in mobile, only time will ultimately tell.
Unlike other verticals, gaming is not a great analogue to what happened in the online space, because the gaming ecosystem operates in a very different way and with its own unique set of characteristics. For example, SDKs play a particularly important role and drive real value to all parties. In the mobile gaming space, however, marketers must rely on their own results and data.
But, speaking of results…
We spend quite some time talking about “results” in the aggregate sense – that is, all data points collected into one meaningful insight. However, this information is directional at best. We must dive in and fully understand each individual data point, each example, by examining our raw data.
Every publisher will have apps that respond differently to an advanced mediation system because each one is unique, with varying high-value user bases and regions, ad types, and advertisers. All of these factors will dictate how successful advanced mediation will be for a publisher. Therefore, rather than taking a macro look at performance, we must look at the commonalities among those that do perform well using this system.
Change may be slow, but change is coming
Advanced mediation (in all its forms and different monikers) makes sense up and down the industry; it simplifies everything. It means less time talking to ad networks, and more time focusing on business. But this won’t happen overnight. Some players are developing their own homegrown solutions, while others will see it in action through third party vendors. By the middle of 2019, it would be surprising if we don’t see an increase in meaningful results from one, or more, of those solutions. What would be even more surprising, though, is if – assuming the results are positive – adoption does not follow.