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What Is the Bid Caching Controversy?

November 8th, 2018   ||    by Charlene Weisler

Ever heard of bid caching? It’s a technique that extends the life of bids in programmatic ad auctions, as Digiday describes it, which loosely translates into an effort where unsold inventory is shifted to other auctions. OKO Digital Limited defines it as “the process of keeping a bid when a buyer fails to win an impression and then applying that bid to a later ad-request.” Its purpose is to reduce latency and serve ads faster. However, it can also increase CPMs and may result in buyers getting a different impression than they thought they were buying.

For advertisers, it lacks transparency, but for platforms, it facilitates the sale of previously unsold inventory. Some say it is a ‘bait and switch,’ while others call it an ‘innovation.’ It has been halted almost as fast as it was implemented, but not before a heated controversy erupted.

Industry Background

In the early days of programmatic, inventory was more siloed with private marketplaces offering unique, specialized inventory. Now marketplaces have opened up and more freely allow their inventory to be sold across multiple marketplace platforms. There is more inventory ubiquity and more pressure to differentiate.

As Digiday explains, “tweaking auction dynamics to gain a competitive edge is nothing new in ad tech.” Although many find the lack of transparency unacceptable, bid caching demonstrates the efforts vendors are willing to take to stand out in a competitive marketplace.

Industry Opinion

Industry reaction was swift and, depending on whether you were supply or demand, positive or negative.

Some placed blame on legacy metrics. Jon Bond, chairman at SITO Mobile, states, “The problem is we are still buying CPMs and impressions and not results. When you buy based on outcomes, transparency is irrelevant. Stuff that works gets bid up and stuff that doesn’t gets canned. You are immune to scams.”

George Pappachen, board director of BiScience, sees the benefits of the method, but also believes there are some darker, preventable aspects. “In theory, bid caching can be efficient for both sides,” he suggested. “Advertiser bids are pursued more persistently and publisher inventory is monetized faster.” But the lack of transparency is “detrimental to competitors’ interests and possibly the ecosystem as well.”

Some avoid auction methods, believing transparency and maintaining the value of inventory is essential. “In general Videa is not affected,” explained Brad Smith, senior vice president of revenue and operations at Videa. “We primarily are engaged in selling TV advertising and doing so in a forward reserve PM/direct marketplace. We don’t engage in auction models for our valued customers’ inventory and allow the buyer to purchase transparently in terms of the TV inventory they are accessing. The added transparency we bring to both sides around performance tracking and campaign management helps to ensure that buyers get what they paid for.”

It doesn’t matter if bid caching is reinstated with a more transparent framework or some other methodology is developed to help facilitate the sale of inventory. The lesson learned is that it must be transparent, good for both buyers and sellers, and a generally accepted industry process.

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