Index Exchange came under scrutiny last week as it emerged it had been doing something called “bid caching”, where unsuccessful bids from advertisers are saved and then entered into later auctions on the same publisher’s site (e.g. a bit for an impression on the homepage might be cached and then used to bid on an impression on a sports page). Bid caching isn’t inherently bad, and perhaps it could indeed be a feature if it was offered to buyers in an open and transparent manner. But it wasn’t. And in the eyes of some, bid caching cynically exploits the fact that advertiser often make higher bids earlier in a user’s journey through a website, carrying those higher bids over for to pay for what are commonly regarded as less valuable impressions later on.
In an industry where fraud and opaque practices are common, how big a problem is bid caching? VAN asked industry experts for their opinions.
“Bid caching seems okay on the surface but only if the buyer and seller have both checked the box, literally or symbolically, knowing this is happening and is acceptable to both parties. Since price differences already exist today in standard audience extension products, reaching on or off property after the ideal behaviour, you would think there should be some discount for serving the ad after the behaviour was observed, even if only after a short while. In the worst case scenario though, this is another example of a lack of transparency with SSPs today, like double take rates or first-price auctions, where not every buyer and seller know the rules of the game before or even while playing.”
“On the face of it this is concerning as these actions appear non-transparent and not in the interest of buyers. Exchanges should not be making purchase decisions, that should always remain with the buyer with full disclosure and clarity in what they are buying and how they are buying it. Practices which take away control and decision making from buyers go against the principles of our Media Services Framework, designed to ensure alignment between advertisers through an open and transparent supply chain.
We would urge Index Exchange to fully explain to customers, above and beyond the blog post, the rationale behind this activity.”
“There aren’t any regulations or any frameworks anywhere that state that companies like Index are unable to cache bids and use those bids for other impressions. In many instances bid caching is beneficial for performance and for targeting audiences in environments such as mobile app, however, this practice goes against the spirit of cleaning up the supply chain. There have been steps made over the past year to make auction dynamics more transparent to buyers, to remove buy-side fees from exchanges and to reduce domain spoofing. All of these initiatives were conducted relatively openly with buyers/sellers and as such Index should have been clearer with their customers on the practice, and even in the follow up blog shouldn’t have used ad-caching in the OpenRTB spec as the excuse for doing it. I personally think this is poor from Index but hopefully others will have learnt from their mistake.”