Confessions of a CTV Publisher: How Much is the Cut?

As society adapts to new economic realities, businesses are returning to the ad marketplace more actively. According to a recent IAB (Interactive Advertising Bureau) survey of 148 ad buyers, 59% intend to increase their CTV/OTT budgets. It’s expected that the volume of “financial injection” into digital video advertising channels by agencies might be 46% higher than 2019, while brands are likely to limit themselves with a 32% rate.

Bold budgets sound promising, but we’re in a world where optimized spendings, not bloated ones, define the ultimate success of a campaign.

Speaking of ad budget efficiency, behemoth supply-side platforms (a.k.a. walled garden ecosystems) are the reason smaller publishers are on the way to creating their own first-party data pools. They want to offer an alternative to the demand-side that’s pondering becoming less dependent on Google, Amazon, Apple, and Facebook (GAFA).

But before taking a step away from a partnership with solid-siloed data providers that claim to be publishers’ advocates, advertisers need to consider changes within the industry community. What follows is theconfession of a CTV publisher who shares his concerns about pricing policies across the supply-side chain environment.

1 + 1 = 11

There’s a balance in digital TV advertising provided by demand and a supply side. Both complement each other. Publishers’ key pain point is suboptimal revenue rates, while advertisers are concerned with getting a fair price for impressions. Taking into account the great number of intermediaries, getting real figures here is a tough nut to crack.

However, the personal experience of our source made it possible to conduct concrete calculations. Based on his experiences, he assumes the following about the average SSP:

• Some SSPs employ mandatory traffic validation procedures, where they scan all of the publisher’s traffic along with IVT (Invalid Traffic) at an additional cost (~ 0.1$/CPM value).

• There are situations when a publisher has an agreement with one SSP that is connected via some kind of provider (let’s call it X platform). The agreed-upon is CPM $18, but via X platform they see only $12, meaning the platform is pocketing ~33% (!).

This doesn’t even include the fees that a tech vendor takes taking from the DSP, so altogether, the pricing is:

• For 1,000 impressions, the initial rate is $21 (at the demand-side platform [DSP] stage). Then an SSP cuts a 17% fee, so the rate value becomes $18, then the X-platform charges a direct connection fee of 33% and so the rate becomes $12, and the IVT tool fee adds an extra $0.3, so the final value is a paltry $11.7;

• The actual net CPM they’re getting is $11.7 from the initial $21 that the DSP is bidding, so overall, the middlemen are taking fees of 50% of the total.

As we can see, the state of play is quite clear. Most smaller-sized publishers who lack of leverage and/or knowledge/connections, and SSPs take advantage of it.

What’s Next?

The ongoing ad tech market transformation has given rise to different business models, so publishers have a great deal to choose from. Among the models, private marketplace (PMP) is a good alternative. This type of partnership has established itself as an efficient model for almost a decade. This is a one-on-one concept where advertisers and publishers interact directly. With this, advertisers can easily access premium inventory, while publishers are able to acquire better CPMs for such ad spots.

To interact like that, they need just one intermediary actor—a tech vendor that will host their deals. The main problem here is to find a vendor that only charges a flat fee, as some of them provide services on a non-fixed basis. With the rigid charge rate, ad tech players are insured against unexpected financial losses that are oftenthe case with SSPs services.

Takeaways

It’s a big challenge for both advertisers and publishers to make the most out of CTV advertising. Many players work with SSPs, as they are easily accessible. The main problem here is the large number of intermediary actors. As the example above shows, congestion within a supply chain may cost publishers up to 50% of their revenue. The good news is that there is an alternative, the direct partnership model. If advertisers and publishers make the effort to set up the partnership and work via tech vendors that offer flat-fee rates, they will address the issue completely.

This content was originally published on Streaming Media.