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What Publishers Need to Know About Google Optimized Pricing

The Sell Sideris a column written by the sell side of the digital media community.

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Today’s column is written by Kean Wang, VP of Product and Strategy at Intowow.

Google has officially announced that on June 5, 2022, it will add the Optimized Pricing feature to its current ad inventory pricing model, Unified Pricing Rules (UPR), for all publishers.

What does that mean ? To take a step back, Unified Pricing Rules is an enhanced floor pricing feature on Google Ad Manager that allows publishers to configure and unify floor prices for all programmatic requests on GAM. Optimized pricing complements unified pricing rules and helps publishers protect inventory value. In other words, it prevents buyers from buying it for less than it’s worth.

With optimized pricing, when Google’s algorithm detects when the floors are too low, it automatically increases them. This sets up a stop sign and informs buyers to stop shading their auctions below certain price levels. In short, Google helps publishers increase clearing prices by working against buy-side bid shading algorithms.

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But two questions arise. On its buy-side platforms, Google also offers to “optimize” auction prices (ie media costs) for buyers. Yes, an auction shading feature. So how does Google’s optimized pricing trade with its own auction shading algorithm? And how will Google determine the value of inventory when providing services to publishers and buyers?

How does optimized pricing benefit publishers? Let’s explore.

Protected inventory

Using a mechanism called Dynamic Allocation, Google Ad Manager included the most competitive remaining CPM signals (on Prebid winning bids, third-party ad networks, and bulk line items) in its bid requests to Google. Ad Exchange, and see if Authorized Buyers could offer a better price.

But now that Google has removed that “last look” benefit, only the Temporary CPMs (or the highest applicable UPR stage) are included in the bid requests. This means that buyers behind Google Ad Exchange and Open Bidding can only rely on publisher floors (which are often too low) to make bidding decisions without insight into real-time competitive dynamics across all request channels. And often, without the benefit of last look, Google’s auction prices were too shady and appeared less competitive.

With optimized pricing helping publishers raise the floor and protect fair inventory value, buyers behind Google Ad Exchange and Open Bidding are also better informed about the competition and can offer higher bids that compete for printing opportunities with other demand channels.

On the other hand, Prebid auctions currently take place before and outside of GAM, so UPR signals are not propagated to Prebid bidders. Only Google Ad Exchange buyers and Open Bidding bidders are directly informed by the optimized floors.

Publishers need to be on their toes

Although optimized pricing works automatically, it only raises floor prices; it will not lower floors when placed too high. So, as a publisher, it’s always very important to manage your UPR structure and leave enough room for Google’s optimized pricing to work like magic.

On top of that, Optimized Pricing is a network-level optimization feature and is not A/B testable, so performance can only be assessed before and after. Publishers should also keep an eye on its overall revenue impact. Once activated, you have no control over the extent to which higher optimized pricing may increase the floor on top of existing UPRs, so there is potential risk of holistic over-pricing which could impact programmatic revenue third or more unsold prints.

Google also released a new “Let Google optimize floor prices” UPR price option. This allows publishers to use Google’s machine learning algorithms to dynamically set floor prices per bid request. This feature is still in beta and can be A/B tested, but once enabled, Google-provided floors will override any overlapping publisher UPRs (other than advertiser-specific floors).

In June, we’ll all get a better look at whether Google is really helping publishers get a better slice of the overall media dollars.

Follow Intowow (@IntowowOps) and AdExchanger (@adexchanger) on Twitter.

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