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Price Floor Optimization
Ad Technologies

Unveiling the Secrets of Profitable Floor Pricing in Digital Ads for Publishers

1
Abhilasha Sandilya
March 1, 2024
May 21, 2024

The Trade Desk is ignoring floor pricing - another testament to the uneven programmatic landscape. The reason they cited - the artificially high and distorted floor price set by SSPs and publishers and the supremacy of its own algorithmic prediction. As per The Trade Desk, their algorithms can better determine the appropriate bid for an impression. 

Can publishers do the same - ignore the bid of DSPs? I believe the strategic and algorithmic advantage of the buy-side often forces the sell-side to be a pushover and adjust. But don’t you think this is the time for publishers to reassess their strategies? It’s time to innovate rather than accommodate. 

So, today, we will be reassessing the current setup that most publishers use in terms of floor pricing. This might help us find out the reason you’re not seeing the numbers you want. And then, we will look for the ideal setup you must explore.

Understanding Floor Price

A floor price is the minimum acceptable price a publisher is willing to accept from the advertiser for the ad inventory. Any bid below the threshold is just ignored. 

This way, publishers ensure that their inventory/impression is sold at the best market rate. It's a crucial component in the programmatic ecosystem, balancing the scales between maximizing revenue and filling ad inventory efficiently.

Price flooring is not a new concept in programmatics. However, the methods for setting these prices, ranging from static and manual to dynamic and automated, have evolved.

When to Call Your Flooring Under-Optimized

When it comes to setting the right floor price, publishers often find themselves navigating through a minefield of common pitfalls. These, in turn, can significantly impact their ad revenue and overall profitability. Let’s dig into some of these:

  • Lack of market adaptability: Failure to adapt to market conditions can push your flooring strategy and, ultimately, revenue off the cliff. It’s basic maths - set your price too high in a less competitive market, the uninterested DSPs won’t bid, and your fill rate will plummet. Set it too low in an over-competitive market and see the lost revenue going down the drain. 
  • One-size-does-not-fit-all: Mobile, desktop, video, and display ads each have their own demand curves and value propositions. Treating them uniformly ignores the nuances of each format's performance and market demand, often resulting in suboptimal pricing and inventory underutilization.
  • Relying solely on historical data: Market conditions evolve, and what worked in the past may not necessarily apply moving forward. Historical data is undoubtedly a valuable resource for predicting trends and setting initial floor prices. However, ignoring the current and future market dynamics can lead to misaligned floor prices and underperformance of inventories. 
  • Overlooking users and content context: Ads placed in high-engagement environments or alongside premium content can command higher prices. Failing to adjust floor prices to reflect this leaves money on the table, as advertisers are often willing to pay a premium for well-placed, contextually relevant ads.
  • Ignoring the innovation: The underutilization of technology is a significant pitfall. Today's ad tech ecosystem offers sophisticated tools for dynamic floor pricing, yet some publishers either aren’t aware of these tools or hesitate to adopt them due to perceived complexity or cost. By not leveraging technology to automate and optimize floor pricing, publishers are missing out on the benefits of real-time data analysis and decision-making, leading to inefficiencies and decreased ad revenues.
  • Using traditional floor price setup: Though easy to implement, it’s the most inefficient flooring mechanism. In the long run, this practice will lead to loss of revenue, undervalued inventory, lower quality ads (as anyone will be bidding), and brand safety risks. This setup often includes pricing models like:
    • Soft floor price: You set a minimum price, but bids that are even slightly below it can still win the bid. Although the model is good for achieving a healthy fill rate, at what cost? The setup is resource and time-intensive as you will need support and expertise to analyze and accept bids below the floors. It also makes your inventory vulnerable to low-quality ads, lower CPMs, and reduced control. 
    • Hard floor price: You set a fixed, inflexible minimum floor price for your inventory. Any bid below the threshold is eliminated from the game. The model helps you get your expected revenue, but only when the bidders agree with you. Setting hard floors can risk unsold inventories and can discourage your demand partners in the long run. 

Dynamic Floor Pricing: The Game Changer

Dynamic flooring is something that helps publishers overcome most of the pitfalls and go beyond the limitations of the static and manual setup. Factors like real-time data, historical bid data, impression characteristics, estimated conversion potential, etc., are all analyzed. Based on this analysis, the algorithm dynamically sets a minimum bid acceptable for each impression, often in real-time.

Dynamic floor pricing:

  • Captures higher CPMs when demand is high and avoids low bids. 
  • Attracts more bids, as everything here stands on the stronger base of data and algorithm. 
  • The automated process eliminates the need for constant manual adjustments.
  • Brings better results by eliminating the guesswork. 

Changing Dynamics of Dynamic Flooring

Dynamic flooring has evolved a lot over time. With the advancement of technologies and data, you can now set up floorings at different levels to get the best CPM from all the platforms you use.

SSP Level (Prebid):

Using the Prebid floor price module, publishers can now enable dynamic flooring for all SSPs within the Prebid framework. 

For example, we will consider Mile’s Dynamic Flooring. Our AI Powered Flooring Module works in the prebid environment, allowing you to interact with a broader range of bidders in a competitive auction environment. 

The module uses machine learning algorithms to analyze your granular historical and real-time data to set up the floors. Once initiated, the algorithm sets the floor, and the feedback loop starts. This further enriches the module with 15 minutes of real-time data that analyzes bidder acceptance and the floor price performance. The flooring module automatically updates the floor as per the market need so that you always end up getting the best CPM for your inventory without betting on your fill rate. 

This level of responsiveness is critical in a market where ad demand can fluctuate significantly in short periods. Also, the SSP-level adjustment is particularly powerful because it operates before the auction reaches the server level, priming the bidding process for maximum efficiency.

Feather to the cap is A/B testing. Saving up your time and effort, the module applies the floor by dividing your traffic into controlled and floored groups. The module will skip floors for a set amount of traffic and will apply floors for the rest. The difference in the revenue generated from both groups will be crucial in analyzing the effectiveness. 

*Interested to learn more about our AI Powered Flooring? Contact us today or book your demo for a preview. 

Server Level:

Google Ad Manager is one of the most widely used ad servers by publishers. Setting floor prices in GAM involves using either UPR or individual ad unit settings to dictate the minimum price at which inventory is sold. Here, we will be talking about UPR (Unified Pricing Rule). As is evident from the name, UPR is a policy aimed at standardizing ad serving and pricing across Google’s ad exchanges. 

UPR enables publishers to manage prices centrally and set your floor pricing rules according to your unique requirements like ad format, placement, geo, device, etc. It ensures consistency and stability in how inventory is valued across direct deals, programmatic direct, and open auctions managed through GAM.

Setting Price Flooring in GAM 

  1. Log into your GAM account.
  2. In the GAM interface, go to the "Pricing” section under the "Inventory" tab. Here, you can create rules that include floor pricing.
  3. Click on “New protection” and select “Pricing rules” for display and video inventory. 
  4. Specify which ad units, placements, or inventory types the rule applies to. You can target specific inventory or apply the rule across your entire network.
  5. Enter the minimum CPM rate you’re willing to accept for your inventory in the “Floor price” field. This is a critical step; consider market demand, historical data, and the value of your inventory. You can choose Target CPM or Hard Floors based on your revenue goals.
  6. You can set different floor prices based on geographic location and device type, allowing for more refined control over your inventory pricing.
  7. Once you’ve configured your settings, review them for accuracy, then save the protection. It will now be applied to the targeted inventory.

Points to remember:

  1. UPR doesn’t apply to the programmatic direct deals.
  2. Unlike the transparent Prebid flooring module, Google never discloses the algorithm module used to select the winning bid based on the rules you selected.
  3. You can set max. 200 UPRs. So, plan wisely. 

Price Floor in Amazon TAM and UAM

While we are here, and I know that Prebid and GAM are not enough for you, so let’s explore how things work for another whale of the ocean - Amazon TAM and UAM.

Just like GAM’s UPR, Amazon TAM and UAM have their own floor price setup. However, they do not have a direct interface for publishers to set the floors manually. You can, however, discuss your pricing strategy with your Amazon account manager and adjust it further based on performance. 

5 Best Strategies to Optimize Price Floors

  1. Dynamic floor pricing - It’s the call of the time, and you must embrace it. The advanced algorithms here help you bring balance to the programmatic landscape and reclaim your lost control over pricing. Implementing tools like Mile's Dynamic Flooring allows publishers to respond instantaneously to market fluctuations, maximizing revenue opportunities without manual intervention.
  1. Integrating contextual and behavioral data - Enhance your floor pricing strategy by integrating contextual and behavioral data into your pricing model. Understanding the context in which ads are served (such as the content they're placed next to) and the behavior of users interacting with your site (like engagement patterns) can provide valuable insights into what inventory is more valuable. Adjusting floor prices based on these insights can lead to higher CPMs for premium contexts and engaged audiences.
  1. Tiered pricing model - A tiered pricing model sets different floor prices for various segments of inventory based on their value. For example, you can segment and set higher floor prices for premium content or highly engaged audiences and lower floors for less desirable inventory. By segmenting inventory in this way, you can keep your pricing close to the market value. This will further enhance your revenue from high-value inventory while still monetizing lower-value spots effectively.
  1. A/B testing - A/B testing for floor prices involves experimenting with different floor pricing strategies for similar inventory segments to determine which approach generates the highest revenue. This way, you can empirically test the impact of various floor prices on revenue and fill rates and refine your pricing strategy based on actual performance data. 
  1. Competitor benchmarking - Use competitor benchmarking to inform your floor pricing strategy. This will help you understand your position in the market and help you adjust your pricing strategy accordingly. By comparing with peers, you can identify pricing trends and opportunities to set your own competitive floors, attract advertisers, and enhance revenue without undercutting the market.  

The Path Forward

Floor pricing isn’t just a set-it-and-forget-it part of your ad strategy; it’s a critical lever that, when pulled correctly, can open up a stream of revenue that you might not have realized was possible.

Publishers need to take contrl of flooring

For too long, the industry has leaned heavily on static and manual flooring methods, and while they've had their place, it's time for a shift. To reclaim your control, you will need to remain agile and join hands with innovative solutions. The path forward is where you make efficient use of data, technology, and strategic insights, leading you toward efficiency, transparency, and profitability.

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