Ad Tech Transformation: The Trade Desk's Price Floor Shift

How Publishers Can Take Advantage of The Trade Desk’s Transformation in Price Floor Policy

The Trade Desk definitely seems to be on a course to try and change the makeup of the ad tech ecosystem. The demand-side platform, which left Google’s Open Bidding platform and launched its own competing product early last year, announced last week that it was making a change to how it would place bids for inventory with supply-side platforms (SSPs): starting in September, it will ignore price floors when making bids

Per the quotes in that Business Insider article I linked to above, The Trade Desk is framing this policy change as a way to reclaim balance in the market from SSPs who “manipulate or create unfair auctions,” because “different SSPs charge a wide spectrum of different fees,” and as a result, “these [publisher price] floors are inaccurate or do not truly represent what the minimum bid is to win.” Previously, The Trade Desk wouldn’t bid on inventory they considered to be overpriced, but with this change, “publishers will see more bids for their ads.” Their hope is that “other demand-side platforms follow suit,” with the end result of “publishers better understand[ing] how much their ads are really worth.” 

I love this framing: it sets The Trade Desk up as a champion of the open marketplace, giving publishers access to demand that – thanks to the high fees charged by SSPs – they wouldn’t have gotten otherwise, while allowing The Trade Desk to tell their advertiser clients that they’re getting the “real” value of the supply. It’s a brighter, better world where publishers and advertisers, the two poles of the ad tech world, both win.

The reality, of course, is much different. First off, whether or not the fees that SSPs charge are too high is a matter of debate (and probably case by case), but fees are how SSPs support their businesses, so they aren’t inherently obscuring the true price of the inventory so much as they are a part of doing business. You can eliminate the SSPs, of course – and clearly both the launch of OpenPath and the policy of ignoring price floors are ways for The Trade Desk to make that reality possible – but that’s just as much a matter of shifting power from one group to another. 

Secondly, and more importantly, is the question of the tradeoff that The Trade Desk is now offering publishers: publishers will get access to more demand, which will add price pressure to the auction, but they’ll only get that demand if they lower their price floors everywhere, which will lower the pressure in turn. Arguably, that’s what The Trade Desk really wants: advertisers pay less for supply and publishers – who certainly know what their inventory is worth, because they know the margins they need to hit in order to stay in business – get stuck with the bill. In the process, The Trade Desk reduces their costs and picks up a few clients; they get more publishers to use OpenPath; perhaps they force a few of the weaker SSPs to shut down or consolidate, and – if they really start a revolution and get other DSPs to ignore price floors – they change the structure of the supply side of the business entirely to their benefit.

So what should advertising-reliant publishers do? Well, there’s an out here: because price floors are such blunt instruments, publishers can actually take advantage of the new policy by finding the price floor that’s low enough that The Trade Desk will submit bids, but not so low that the overall price drops. Simple enough in theory, but more complex in practice, of course: publishers will need to set a different price floor for each SSP for each demand source (Prebid, Open Bidding/AdX, Amazon TAM, etc.) and update them on a regular basis to keep up with shifts in demand, seasonality, audience, etc. That’s potentially a big commitment of data science and engineering resources, but by working with technology partners and conducting focused experimentation, publishers may be able to come out ahead.