Bid Caching: Breaking Down the Facts

Is bid caching beneficial or deceiving as a programmatic auction technique? Over the last few weeks, the digital advertising industry – from ad trades to exchanges and supply-side platforms (SSPs) – has been deliberating this previously unknown practice. The catalyst? An article published by AdExchanger calling out the SSP Index Exchange (IX) for bid caching.

What is Bid Caching?
Bid caching is the practice of utilizing a lost bid from one programmatic auction to fill a subsequent auction for the same user. This process transfers bids from one auction to another with the goal of boosting publisher yield. For example, an advertiser’s bid for a homepage ad impression might be used to fill an impression on an article page later in that user’s session.

How is it Done?
Best practice dictates that SSPs share the entire bid request URL, which discloses the type of content the ad serves alongside it. IX was not sharing the entire URL, just the top-level domain name. Bid caching was not enabled for video, though – it was limited to display. IX defended the practice by claiming it reduced latency, particularly in ad environments that are highly sensitive to this, such as slideshows, mobile articles spread across multiple pages, and responsive web design.

IX confirmed that they had been practicing bid caching for over a year. Research by Jounce Media indicates this may have accounted for up to 50% of the impressions filled for some publishers. And while IX initially defended the practice, on August 17, 2018, they discontinued bid caching due to industry backlash and expressed regret about their lack of transparency.

How Common is Bid Caching?
In early August of 2018, Jounce Media conducted a series of bidding tests through a major demand-side platform (DSP) with the goal of identifying incidents of bid caching. Their test campaign delivered over 1.7 million impressions across nine ad exchanges, illustrating that only IX was utilizing bid caching.

What are the Implications?
Supply-side platforms have been under increasing pressure to decrease latency and increase publisher yield. With ad tech advancements such as header bidding, it’s harder than ever for exchanges to have access to exclusive publisher inventory. Bid caching gave IX a competitive advantage by allowing them to conduct auctions with DSPs faster and return bids to the header bidding auction with increased speed. Unsanctioned processes like these are common in the industry, though, and it is no surprise that the competition would be quick to point out IX’s use of bid caching to distract from their own nontransparent practices.

360i’s Take
While IX should have been transparent about their use of bid caching, most of the press coverage has taken an alarmist view. Initial findings suggest that this did not significantly affect CPMs or mislead buyers, since they were only bidding on top level domains in the first place. Concerns that buyers lost control over brand safety, frequency caps, or targeting appear to be false because the same targeting from the initial bid was applied to the cached bid on the same publisher for the same user session.

In the age of transparency, these types of practices must be communicated to both buyers and sellers, and IX has taken full responsibility for their lack of transparency. In our review of the data, we determined that the impact on impressions of IX’s bid caching is minimal to insignificant and does not warrant panic. We don’t recommend that marketers pull their spend from IX.

The post Bid Caching: Breaking Down the Facts appeared first on 360i Digital Agency Blog.

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