{"id":34002,"date":"2024-09-13T17:19:31","date_gmt":"2024-09-13T17:19:31","guid":{"rendered":"https:\/\/radiantmedia.io\/?p=34002"},"modified":"2024-09-13T17:19:33","modified_gmt":"2024-09-13T17:19:33","slug":"unraveling-the-mystery-of-pubmatics-5-million-loss-from-a-first-price-auction-switch","status":"publish","type":"post","link":"http:\/\/34.197.49.85\/?p=34002","title":{"rendered":"Unraveling The Mystery Of PubMatic’s $5 Million Loss From A “First-Price Auction Switch”"},"content":{"rendered":"\n

What’s causing PubMatic’s $5 million revenue drop in 2024?<\/strong><\/h2>\n\n\n\n

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In its Q2 earnings report in August, the SSP scaled down its revenue prediction for the year, citing deficiencies from an undisclosed DSP partner’s transition to first-price auctions in May.<\/p>\n\n\n\n

A PubMatic spokeswoman confirmed to AdExchanger that the unknown DSP was Google DV 360.<\/p>\n\n\n\n

Until earlier this year, DV360 had a bidding logic that upped its bid somewhat when an SSP marked their bid requests as second-price auctions, according to two SSP sources who talked with AdExchanger but asked to remain anonymous. PubMatic won additional auctions from the DSP by marking them as second-price to DV360, according to the sources.<\/p>\n\n\n\n

READ MORE: Roblox Partners With Ad Tech Provider PubMatic To Enhance Video Ad Revenue<\/a><\/strong><\/p>\n\n\n\n

Google acknowledged that DV360 altered its prediction and bidding mechanism earlier this year, with the change affecting all SSPs. The puzzle is why one SSP, PubMatic, will lose $5 million this year due to the move.<\/p>\n\n\n\n

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According to a Google spokesman, its DSP performs both first- and second-price auctions and relies on SSPs to accurately signal which auction to run.<\/p>\n\n\n\n

“DV360 participates in both first- and second-price auctions, and the SSP chooses which type of auction to run,” a Google spokeswoman told AdExchanger. “We always recommend exchange partners send requested OpenRTB signals for every impression to help DV360 accurately assess and optimize bidding for available inventory.”<\/p>\n\n\n\n

However, if DV360 accepts bids from both first-price accounts and second-price auctions, it appears to contradict PubMatic’s claim in its results call that it lost revenue due to a DSP partner forcing a switch to first-price auctions.<\/p>\n\n\n\n

READ MORE: Ad Tech Company\u00a0PubMatic\u00a0Said It Made A Deal With Dish Media That Lets Sling TV Tap Into Pubmatic\u2019s Programmatic Demand Via Private Marketplace Deals<\/a><\/strong><\/p>\n\n\n\n

Furthermore, most SSPs, including PubMatic, claimed to have migrated to first-price auctions many years ago. In a blog post from 2018, PubMatic CRO Kyle Dozeman stated that the SSP “now runs first-price programmatic auctions on all multi-level inventory (i.e., header bidding).” All major SSPs, including Google Ad Manager, have been conducting first-price auctions since 2019.<\/p>\n\n\n\n

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It’s evident that PubMatic was still conducting second-price auctions long after the industry was supposed to have switched to a first-price auction model. But how can a modification in this structure result in a $5 million income shortfall?<\/p>\n\n\n\n

Prior to May, PubMatic identified their bid requests to DV360 as second-price auctions. Other SSPs most likely employed a first-price auction flag.<\/p>\n\n\n\n

DSPs utilize a different bidding logic for second-price auctions than for first-price auctions. In second-price auctions, bidders typically bid higher because the clearing price is lower, only a penny higher than the next offer. This dynamic could explain why PubMatic was able to win more impressions (and possibly at higher prices) by employing the second-price auction flag.<\/p>\n\n\n

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However, removing that advantage would reduce PubMatic’s win rate. And the $5 million would be transferred to other exchanges.<\/p>\n\n\n\n

“Marketer budgets don’t just fly out the window because you change your auction type,” said one SSP insider who requested anonymity. “So, where has the $5 million gone? It did not quit the market. It has just been redistributed to the competition.<\/p>\n\n\n\n

The SSP source also stated that their SSP experienced an increase in revenue in May after DV360 applied the change required to stop honoring second-price bid requests.<\/p>\n\n\n\n

Even experienced ad tech experts were surprised by PubMatic’s use of second-price auctions seven years after the industry transitioned to transparent first-price auctions en masse in 2017.<\/p>\n\n\n\n

So, despite the dominant myth, it appears that second-hand auctions are not wholly obsolete.<\/p>\n\n\n\n

Source<\/a><\/p>\n\n\n\n

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