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Much ado about bid caching

· Ad Tech,Ad Exchanges,Digital Revenue,Programmatic,Advertising

Another week, another ad tech controversy -- this time courtesy of Index Exchange and their apparent widespread use of bid caching across display.

What’s bid caching and why should I care?
Put simply, it’s storing a bid that buyers think they’re making for specific inventory and reusing it for a subsequent auction on likely different inventory. It’s thinking you’re buying prime rib, definitely paying for prime rib, but instead getting a frozen pack of peas instead. Digiday wrote this great short explainer. While there may be some arguments in favor of this type of practice in environments where latency is a factor like mobile & video, the fact that this practice came as a surprise to buyers, sellers, and competitors alike is telling.

Wait, what?
You bid $20 for a lamp. You don’t win the lamp auction, but I cache your bid -- since you’re bidding on lighting clearly you’re in market for similar things and hey, presto your $20 now wins the auction for a lovely set of scented candles that are on their way to you. The candles would normally cost $10 but 1) the buyer thinks they won the auction and are getting a lamp, 2) the seller is happy to see more revenue, and 3) intermediaries are happy because more money flowing through their platform means more revenue. Doesn’t quite work with lamps and candles. Shouldn’t work with digital inventory either.

So will this blow over too?
It depends.

  1. Situations like this show that buyers really need to be hyper-vigilant of partners - even those that have earned trust in the past. It’s a complicated set of not-quite-aligned incentives. If you’re a media agency, do you flag this to your clients who may have been affected and risk relationship damage or do you quietly pivot away from Index to other partners? If you’re a seller, do you proactively lower your revenue projections or hope the usual Q4 will mask any negative effects?
  2. It’s unclear what the financial damage is therefore it’s a challenge to come up with specific remedies (other than acknowledging that this is at best an extremely questionable practice). Credits, makegoods, and fee discounts deployed proactively to key clients can go a long way to divert attention from more laborious investigations.
  3. Index have been a vocal proponent of transparency and quality: under those mantles they’ve successfully shephearded an industry-wide shift from 2nd-price to 1st-price auctions, experienced an awe-inducing leap in market presence, and garnered the accolades of publishers happy to see increased revenue from their own programmatic and header bidding efforts. It is almost out of character to see them fumble this way and a rather spectacular display of incompetence courtesy of their most senior product leadership. Some swift and decisive organizational changes on their end can help restore trust in the short term.

So what should I do?

  1. If you’re a buyer, you should adopt a trust but verify approach especially when your budgets translate to someone else’s margin. Investing a percentage of a client’s total media budget in supply chain verification and educating clients on the benefits of this approach are both good starting points.
  2. If you’re a seller, you should revisit your programmatic tech stack at least once a year. Vendors change focus, pivot into new areas, and on occasion adopt questionable practices that ultimately affect your bottom line. 
  3. As most things in adtech, this may appear as a single, one-off issue that can be fixed with a bandaid but it isn’t and it you’re unsure why or how to approach it, please get expert help. No matter where you sit in the ecosystem you need to look at your strategy holistically, revisit regularly and check-in with your partners. 

Till next week, when some other symptom of an opaquely constructed ecosystem will inevitably grab our attention and collective outrage.