To Floor Or Not To Floor?

“The Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Phil Bohn, senior vice president of sales and revenue for Mediavine.

Flooring is one of publishers’ most important yet least-discussed programmatic revenue strategies.

Open auctions fill a large amount of ad inventory for almost all publishers. Pricing floors for these impressions are one of the few things publishers can control in programmatic advertising and can result in a significant revenue increase.

In the context of auction bidding, the floor is the minimum a publisher will accept for an impression. Publishers can set floors in two ways:

1. At the exchange level, at which point they will not receive bids before that level;

2. During the bid request, which is passed to different ad exchanges, which won’t send any bids below the floor.

Some exchanges will also send the floor to the demand-side platform (DSP) to help buyers make an accurate bid on their end.

Publishers often receive advice about lowering floors or eliminating them altogether, especially in a first-price auction world.

But floors matter – and they can have a dramatic impact.

When discussing this philosophy with skeptics, I ask them to name another market or product where there is no floor or base price for the product.

Outside of a few restaurant concepts or the garage sale-level clutter you might get rid of on Craigslist, there aren’t many – and a business offering billions of ad impressions per month certainly isn’t among them.

Programmatic advertising has given publishers access to some of the most amazing pricing data in history. You can sell millions of impressions with precise data on the average unit cost and adjust floors by product, daily.

Running dozens, or potentially hundreds of reports to understand the value of a publisher’s products may not sound exciting, but it’s an exercise that can significantly boost earnings with time and effort.

The data is there, but like all things programmatic, floors require extensive testing – whether it’s by segmenting video impressions, desktop vs. mobile, iOS vs. Android, different content types and more.

Food and parenting sites offer different value to advertisers than travel and finance sites, to the point that they warrant separate flooring, just as you’d assign separate floors to different devices or geos.

Generally, the floor price is a fraction of the average winning price of impressions.

Flooring is not a strategy to gouge buyers, rather to help publishers earn the fairest prices for the least valuable impressions by product.

Some publishers’ monetization strategies place too much emphasis on fill rates, especially on the last ad units on a page with low viewability.

In such cases, it may be worthwhile to nix an ad averaging a $.10 CPM and 100% fill rate to raise overall viewability and page speed.

On the flip side, a publisher who tests floors regularly recently told me “nothing good happens below $1.” That sums up his flooring approach. Meanwhile, plenty of publishers fit somewhere in the middle of these two strategies.

Customizing a flooring strategy may result in different supply-side platforms (SSPs) asking why floors are set so high. Even in Q4, when many publishers are essentially 100% sold out of US desktop impressions (their most valuable), this question isn’t uncommon.

Pricing rules would dictate that such robust demand would lead to floors being raised. Publishers that do so are simply pricing their inventory based on what the market dictates and trying to hit internal fill rate and eCPM goals.

Because SSPs only have insight into a single auction (there could be five to 10 auctions happening for an impression simultaneously), it makes sense to ask this question. Doing so should only help both sides understand one another’s perspectives.

Therein lies the key takeaway from all of this. As a publisher, I want to be a good partner to advertisers, the SSPs and DSPs.

There should be more conversations about win rates and supply-path optimization to keep costs at levels to meet sell-side needs. In return, publishers should expect their floors to be received and respected in the bid response.

By understanding what DSPs do with these floors and what publishers are trying to achieve by optimizing them, we can all become more efficient businesses and collectively improve this complex, interconnected ecosystem.

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This post was syndicated from Ad Exchanger.