Episode 03: Ari Paparo (Beeswax)
Ok I’ll admit it, I’m never going to write show notes. There, I said it. It doesn’t matter though because if you’ve made it to this page you know deep down, in your heart of hearts, you’re gonna listen to this thing anyway. Well you trust is well placed, this is a fantastic conversation. It’s pretty dense though so I recommend it with either a full cup of coffee or sippy cup of JD. Or both.
This week. I do a dumb thing. I also talk to Ari Paparo the CEO of Beeswax. We discuss the drilling on my land for oil problem, the tragedy of the commons problem, and what game theory says about infinite repeated games. And that’s just the first 5 minutes.
There’s a lot to unpack from this talk and I wish I had had the presence of mind at the time to ask better follow up questions but a) I’m new and still very bad at this and b) I was a bit rattled by screwing up the recording.
Anyway here are some points that Ari brought up that I feel merit further discussion:
When he went on his rant about how raising floors on specific buyers/DSPs is “immoral” Ari implicitly admits that this is both a profitable strategy for publishers and that the dumber DSPs don’t really have any way to prevent this from happening.
First this seems to imply that Ari believes this happens or actually sees this happening with some bit of regularity, otherwise it wouldn’t get his irish up. Since this is an inefficient method for publishers (too many exchanges plugged into the header, going through and individually flooring specific buyers would require a lot of operational overhead) I’m guessing he’s directing his rage at exchanges.
It’s also interesting that in that same exchange he gives a candy store owner example and sort of implicitly admits that some DSPs are too dumb to notice you’re flooring them at a different rate, hence why it’s immoral (it’s like charging a dumb kid double for his snickers).
So this leads me to wonder:
- Which exchanges are doing this individual flooring? If they’re doing it successfully why wouldn’t they tell their publishers about how they’re doing this? If this is actually occurring wouldn’t it be something for them to crow about?
- Why hasn’t anyone made a product that does this for publishers? Adomik is kind of a start but not production ready (no offense to them).
- Who are the dumb DSPs and who are the smart ones? As a publisher how can I take advantage of this “immoral” situation.
Auction Mechanic Shenanigans
Another point I find interesting is that he really hammers on exchanges for what he says they’re doing to the auction. He says that every exchange has access to the same DSPs and same demand so the only reason a publisher sees an increase in revenue by adding one more partner to their header is that exchange is doing something to “screw with the auction mechanics”.
- That feels like a semi-serious charge, does he (or any DSP for that matter) have any way to back that up?
- How are exchanges screwing with auctions? Is it by flooring specific buyers like he mentioned above? What other levers are available to an exchange to screw with an auction?
He a little later casually mentions that some exchanges work like first price auctions and that buyers have adjusted their strategies accordingly.
So which exchanges are using first price? And do they say that to the buyer up front or is this a result of something like “soft floors”?
The Ad Tax Man
This last part I found really interesting and almost didn’t notice it. When I asked Ari what happens if by moving to server side header bidding publishers start to disintermediate the exchanges and instead go straight to the DSPs. His response is that it would be great for the buy side. That they would finally get a true second price auction (somewhat obvious) but that in the end publishers would get less money.
That last part kind of blew me away. I keep reading about how bad the ad tax is and how it’s costing publishers money. I sat in conferences recently where a big player in the buy side told a group of publishers how they would love to get each of us a larger share of the money. That cutting the ad tax was in all of our best interest, and I have to admit, I took the bait. I bought in to that theory. But now when I hear Ari talk about it his way makes much more sense.
The ad tax is actually costing the buy side more than it’s costing publishers. If we took away every intermediary between pubs and the buyers tomorrow you know what would happen? Buyers would save a fuckton of money while pubs would see about the same as before give or take 5–10%. We have to be kidding ourselves to believe that buyers would maintain their CPMs if they didn’t have to to buy the same thing.
So… is the ad tax good for publishers? Does it actually help us having these exchanges willing to do the dirty work and fuck with auction mechanics while we’re none the wiser? Should publishers be the ones suing exchanges and ssps a la The Guardian?
Anyway there was plenty more we talked about. Please listen to the episode and if you have something to contribute or a comment check out the reddit post. I’ll be there commenting all day (or as long as my boss doesn’t notice).
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I’ll be in SF next week at Programmatic IO. If you’re gonna be there let me know. I hear word there will be 🌯🌯🌯.
Episode 4 : MSG and Andrew Casale