Within the programmatic ad industry, supply side revenue (that of networks, SSPs and exchanges) is directly connected to the amount of traffic that passes through their space, as they get a percentage of the CPM on every transaction. This correlation between traffic volume and revenue is hard to ignore and it has also helped to drive an unfounded fear among some sell siders that any reduction of volume will negatively affect the bottom line. Not true.
In today’s digital ad environment blocking fraudulent impressions does not mean an automatic reduction of profits (e.g., blocking 20 percent of impressions because they are at high risk of being fake does not mean revenue will automatically be slashed by 20 percent as well).
The truth is that fraudulent traffic is often very cheap, cents on the dollar, and generates little revenue. Even if a supply-side company blocks 20 percent of the traffic flowing into its space because it’s suspicious, the revenue that would have been generated from that 20 percent may only account for a fraction of a percent of the company’s overall transaction revenue.
While some may argue that ANY loss of revenue is a tough pill to swallow, companies need to consider what may be harder to measure: how much business are they losing due to poor traffic quality? And what kind of reputation are they creating for themselves by allowing fraudulent traffic to transact freely within their space?
AppNexus' 2015 Platform Purge
One very public example of a platform cleanup was Appnexus' 2015 inventory purge that resulted in their average CPMs skyrocking by 500 percent, from less than 20 cents in January of 2015 to a $1.40 in September. But what's more telling was an additional 18 percent Q4 rise of CPMs after that inititial jump.
Said AppNexus Chief Data Scientist Catherine Williams, “The first slope was due to cutting out a bunch of low-value impressions – CPMs will obviously rise. That second lift in December is really about buyers perceiving the market differently, and shows an increased confidence to pour their big holiday budgets into our system.” (Read the full story here.)
S&W Media On the Importance of Quality Inventory
To further dive into issue of quality over quantity, we spoke to Joey Winshman, Co-Founder of S&W Media Group, which operates an SSP and DSP, about combatting ad fraud from the supply side and blocking fake impressions. Winshman stressed the importance of quality ad inventory and estimates they block 10-15 percent of the traffic coming into their space.
“Better quality increases your relationship with your clients...Demand partners trust you. It opens doors to other opportunities.”
Joey Winshman, S&W Media Group
“Clients demand it [clean inventory] and expect it. It’s imperative to combat ad fraud,” Winshman said and explained that even though they may have less traffic after blocking, it’s better quality. He told us that partners regularly inquire about what sort of fraud protection they use and expect S&W Media to use something. Fraud monitoring has become standard.
“Ad fraud is something that you always have to be proactive about," said Winshman, "With the amount of it that’s been found in our industry it’s inevitable that you’ll stumble on it. You have to protect your clients.”
Beyond good business practice, Winshman added that supplying clean inventory helped them to build trust among their demand partners. “Better quality increases your relationship with your clients...Demand partners trust you. It opens doors to other opportunities.”
Buyers are Demanding Clean Inventory
Programmatic is evolving from the bottom up as buyers increasingly arm themselves with data to tell them what’s real and what’s not and fraud-free inventory will increasingly become the standard - not just a value-added. If a supply-side party can offer quality inventory from the get-go, it only adds value to the company and the bottom line, not to mention buyer trust and lasting partnerships.