Busting Bid Caching Myths

Post on August 20, 2018 by Kelvin Pichardo

Kelvin Pichardo Senior Director, Product Marketing

For the past week, the digital media ecosystem has been abuzz with conversations about bid caching: what it is, why it has been done, and what it means for both publishers and advertisers. At PubMatic, after speaking to a number of our major buyers about bid caching over time, we determined buyers are not comfortable with this approach for a variety of reasons. Because of this, we do not, and have never, engaged in bid caching.

Over the past few days, we have noticed a number of misconceptions that have infiltrated industry dialogue around bid caching technology. Here we will cover the most common misconceptions and the realities that led us to choose not to engage in bid caching at PubMatic.

Myth #1: Bid Caching Is Standard Practice, And Everyone Is Doing It

Drew Bradstock, SVP of product at Index Exchange (the SSP making headlines due to the news that they have been engaging in bid caching without disclosing it to their clients and partners)  told AdExchanger, “We thought this was an industry practice.”

In reality, it seems they are the only tier one SSP in the market that has been actively engaged in the practice. In addition to PubMatic, MoPub, OpenX, Rubicon Project and Telaria have made public statements that they have never engaged in bid caching.

Leveraging the technology without transparent disclosure creates a lack of fairness across SSPs competing in the header. Header bidding was created for the purposes of fair competition across demand sources, something PubMatic has been vocal about with regard to our OpenWrap solution. By utilizing bid caching, an SSP creates artificial competition within their auction for the purpose of helping them garner higher bids (and resulting share of wallet) from buyers.

Myth #2: Bid Caching Improves User Experience

In a blog post on their site, Index Exchange claimed bid caching allows them to improve user experience. However, multiple technical sources confirmed to AdExchanger that this claim is false and inaccurately conflates bid caching with ad caching:

“Ad caching allows an exchange to run an auction for a video ad to be shown immediately after a gamer completes a level, for example. Bid caching reuses price information until the impression finally wins, which benefits the exchange first, with secondary boosts to a publisher’s CPMs and the buyer’s win rates – but also the price paid.”

In reality, despite the cached bid from a single SSP, an auction for subsequent impressions is still held with the same time window applied in a wrapper. The result is that bid caching does little to improve user experience in a header bidding environment. Bid caching actually contributes to inefficiencies in the ecosystem, such as increased timeouts (e.g., if the user takes too long to get to the ad unit).

Myth #3: Bid Caching Maximizes A Buyer’s Chances of Winning

The argument has circulated that buyers benefit from bid caching technology by maximizing the opportunities to increase win rate for their target audiences. However, this does not accurately account for how buyers calculate bid value. An advertiser frequently determines valuation based on audience, context, and point in time (among many other variables). By bid caching, an SSP or exchange misappropriates both context and point in time and ultimately removes the value proposition of “real time.”

The technology in question ultimately results in advertisers losing control over their marketing spend. Buyers can potentially pay higher prices, as they are competing in auctions with artificially more competition. Additionally, by caching bids for high value ad placements (i.e. a site’s homepage or early in a user session) and misappropriating them for use in auctions for lower value placements (i.e. non homepage inventory or deeper in a user session), buyers end up overpaying. Bid caching can also prevent a DSP’s pacing algorithm from operating properly, creating inconsistencies and challenges affecting frequency capping for advertisers who may have bid on another impression while their initial ad was sitting in the cache.

Additionally, and perhaps most importantly, bid caching could have significant brand safety risks for marketers. A bid can be cached and ultimately used on a page that is outside of the safety parameters of the marketer as the SSP is often unaware of the specifics these requirements. Therefore, any potential win rate benefits are vastly outweighed by the risks buyers face with bid caching.

Myth #4: Bid Caching Is Supported By OpenRTB Standard

Index Exchange pointed to OpenRTB 2.5, section 7.2 as justification for the technology, claiming that “bid caching is used in latency constrained environments to allow a buyer to win a bid they otherwise have little chance to participate in.”

However, this documentation provides guidance on billing notices in environments when ad caching (as opposed to bid caching) occurs, such as a video interstitial impression on a mobile app that is prefetched during gameplay so it can be shown after the current game level ends. The OpenRTB standard does not mention bid caching at all and does not cover the use case that Index Exchange referred to.

Myth #5: Buyers Had Choice Through Header Bidding To Determine The Optimal Supply Path

As we have all seen from supply path optimization (SPO) announcements from buyers over the past 12 months, one of the benefits of the swift adoption of header bidding has been the opportunity for buyers to choose their preferred path to supply. This has been supported by our industry’s drive toward creating a more open and transparent ecosystem. However, through black box auction gamesmanship like bid caching, that control and transparency has been threatened.

In reality, buyers were unaware that bid caching technology was being used for over a year, without any data being shared with them about the benefits. Buyers’ control was stripped from them, artificially inflating the performance of a single black box SSP and hindering the buyer’s ability to make informed choices. Our industry should be demanding transparency when it comes to programmatic auctions. Open source solutions must be part of the path forward, particularly as the industry moves towards greater adoption server-side wrappers.

At PubMatic, we believe that transparency is critically important in the digital advertising industry. We’ve taken a number of steps to ensure that we are open and transparency in both our pricing agreements with clients and in how our auctions work. It is imperative that buyers and publishers alike ask questions of their technology partners to ensure that they understand how their auctions work and what it means for their performance and control.