Publishers worry that, as curation moves to the sell side, SSPs are taking an even larger cut of ad revenue than DSPs did.
As it turns out, however, most sell-side curation deals appear in line with typical SSP take rates. In fact, some of these fee structures resemble how publishers have long done business with their supply-side partners.
Which raises the question: Is the shift to sell-side curation an opportunity for publishers to collect a greater share of ad revenue, or has the trend simply shifted the same old ad tech taxes to different hops in the supply chain?
The disappearing open auction
In March, programmatic consultancy Jounce Media analyzed 1.5 billion bid requests sent from 44 ad exchanges.
The bid requests that SSPs send to DSPs can contain multiple ways to bid on an impression, including a mix of open auction and curated deals.
Curated deals show up in bid requests as deal IDs. It’s up to DSPs to decide how they want to bid on an impression – via open auction or by using one of the curated deal IDs. Some bid requests carry dozens of deal IDs, according to Jounce. The average bid request now includes an open auction, as well as 3.5 different deal IDs.
Just 18.6% of the bidding opportunities analyzed by Jounce were pure open auction non-curated deals.
It’s mind-blowing “how little of the open internet is open auction,” said Scott Messer, founder of publisher consultancy Messer Media, reacting to Jounce’s findings.
Meanwhile, 73% of the bidding opportunities analyzed were multi-seller curated deals, whereby a curator or SSP curates inventory from multiple publishers.
The remaining 8.7% were single-seller deals that include inventory from only one publisher. These fall in line with traditional private marketplaces (PMPs), which Jounce does not count in the curation bucket.
Still, the fact that nearly three-quarters of the bidstream is now comprised of curated deals demonstrates how the sell side is “trying hard to take control of buyer relationships,” Jounce Media Founder Chris Kane said during a webinar about the report last month.
Sales competition
This struggle for control among SSPs has implications for publisher ad sales.
Consider the pressure on individual publishers that sell their own PMPs, Messer said. The disparity between single-seller and multi-seller deals proves that publisher sales teams face a significant challenge.
“If your strategy is to lean into publisher-sold PMPs, I don’t think anyone realized how big the headwind of SSP-generated deal IDs was,” he said. However, he added, “if you’re an open-market publisher and you don’t have much of a sales team, this is good news.”
Even so, publishers lack transparency into multi-seller deals, said Linda Chen, senior director of ad strategy and operations at online learning publisher Chegg.
“My issue with multi-pub deals is that I have no way of knowing why certain budgets are coming to me, and I have no way of having that conversation with buyers and improving performance,” Chen said.
Multi-seller deals also don’t represent guaranteed revenue over time for individual publishers, she added.
Plus, multi-seller deals are replacing the open market, which spells trouble for publishers that aren’t included. “Open auction used to be a significantly larger portion [of programmatic],” Chen said, “and now the budgets are being shifted into these multi-pub deals.”
The real benefit to publishers, according to Messer, would be if curation could extract some of the ad spend that goes to walled gardens rather than just reallocating open-market spend, but this has yet to come to fruition.
Zero fees, zero worries
Macro market trends aside, whether sell-side curation benefits publishers also depends on how much revenue they lose thanks to associated fees.
Curators and SSPs factor their curation fees into the floor price passed to DSPs in each bid request. Bid requests can contain multiple floor prices associated with different deal IDs.
By examining bid request data, Jounce identified four distinct curation fee structures.
Roughly half of all curated deal IDs carry no curation-related fees, according to Jounce. These zero-fee deals only include the SSP’s standard take rate for open auction deals. The open auction bid request CPM is the same as the CPM for the deal ID.
Zero-fee deals are associated with two curation strategies, according to Jounce. One is buyer-curated inventory, in which a brand or agency works with SSPs to create always-on deal IDs that only include trusted publishers.
The other represents SSPs that proactively package inventory for buyers as a value-add for publishers. This type of zero-fee deal has long been offered by SSPs, Chen said, and because they’re nothing new and this sort of service is table stakes for demand partners, SSPs can’t really justify charging extra.
But although such SSP-led deals are favorable to publishers, they’ve reached an oversaturation point, Messer said. There are hundreds of thousands of these deal IDs active at any given time and they’re not meaningfully optimized, he added.
There is also plenty of redundancy in the publishers included in most deals, he said, noting that large DSPs see more than 1,000 eligible deal IDs for a single impression – and they can only bid on one.
Taking on take rates
It’s important to note, however, that although half of sell-side curation deals don’t include extra fees, the other half does.
The only difference in sell-side curation is that an SSP accrues and pays the curator’s fee, rather than the DSP, Kane told AdExchanger. Ultimately, publishers still end up with the same cut they’d get if the deal was curated via a DSP. And, he added, while a rare subset of deals have egregious take rates, curation does not appear to be inflating supply chain costs.
Around 34% of curated deals carry margin-based fees, in which the curator collects a percentage of the total transaction. For example, if an impression clears at $2, a 10% fee for the curator translates to $0.20. The DSP would take its usual platform fee – say, 15% or $0.30 – and the publisher and SSP would then do their usual revenue share on the remaining $1.50.
According to Jounce, the median margin-based fee is 14%, and nearly 40% of margin-based deals have between a 5% and 10% fee.
For video inventory, some curators take particularly large cuts of margin-based fees, Messer said. A 25% fee on a $20 video impression would net the curator $5, which feels like a lot, he said. But if a publisher wasn’t able to sell an impression at $15, and the curator got a buyer to pay $20, maybe a large cut is justified, he added.
Publishers could request a cap on margin-based fees, Messer said. But then they wouldn’t be incentivizing curators to drive the highest price for their inventory.
Instead of margin-based fees, roughly 10% of curated deals apply a standard CPM cost for each impression.
Under the standard CPM model, curators are either taking too much or too little, depending on the inventory’s clearing price, Messer said.
For example, say a buyer pays $0.45 for an impression that clears at $0.20 but carries a $0.25 curation fee. The curator’s fee represents 55% of the total winning bid, which a publisher might consider excessive, according to Jounce. However, the same $0.25 fee on an impression that clears for $3.00 might undervalue the curator’s contribution.
Therefore, a standard CPM model would be “easier to stomach” for publishers that tend to net high CPMs as opposed to a margin-based approach, Chen said.
Less easy to stomach is what Jounce refers to as “static price curation.” These deals, which account for roughly 7% of curated deals, declare the same floor price no matter what the publisher’s open auction floor is. This results in curators guiding DSPs to bid much higher for an impression than they would in an open auction.
A curator, for instance, might declare a $15 static CPM for a deal ID. But consider the implications if a publisher declares a $4 open auction floor for inventory that’s included in that deal ID. If a DSP bids $15, where does that $11 go?
Not even Jounce knows.
“We don’t know how much of it is retained by the exchange, versus data providers, versus curators, versus passed on to the publisher,” Kane said during the webinar. He added that “this is a model that feels value extracting” on the part of curators, but it’s unclear just how much value they’re actually extracting.
That lack of clarity persists whether curation is happening on the buy side or the sell side, Messer said. And, currently, neither the buy-side nor the sell-side approach appears more advantageous to publishers overall.
“At the end of the day, the net amount to the publisher is roughly the same, and the gross amount that the marketer paid is roughly the same,” Messer said. “It’s all middle vendors taking their fees out, and it doesn’t really change what the publisher gets.”
