Price floor optimization tips and best practices for publishers

The online advertising landscape is often prone to dramatic shifts, leaving publishers with complex revenue optimization decisions to make.

One of these decisions involves the use of price floors—a strategy to establish the minimum price an advertiser needs to pay for an ad impression. A well-executed price floor strategy can significantly bolster revenue, but it requires careful and continual optimization.

This article will delve into the intricacies of price floor optimization for publishers, providing practical tips, seasonal adjustment strategies, and guidance for Google Ad Manager and Prebid setup.

What are price floors?

A price floor is the minimum price set by a publisher that an advertiser must meet or exceed with their bid to be considered in the ad auction. Essentially, it is the lowest price at which a publisher is willing to sell their ad inventory.

These floors are an important part of a publisher’s revenue strategy because they provide a level of control over how inventory is valued and sold. Without price floors, advertisers could potentially purchase ad impressions at very low prices, undervaluing the publisher’s inventory. By setting a price floor, publishers can ensure they receive a minimum revenue for each ad impression sold.

Understanding price floors is the first step in any optimization effort. By effectively managing these minimum prices, publishers can significantly influence their advertising revenue and profitability.

Types of price floors

Price floors can be broadly classified into three categories:

1. Static price floors: The simplest form, a static price floor is a fixed minimum bid value that is the same for all auctions.
2. Tiered price floors: With this model, price floors are grouped into different categories based on varying attributes like geographic location or device type.
3. Dynamic price floors: The most complex, dynamic price floors automatically adjust in real-time based on historical data and performance metrics. They utilize machine learning algorithms to maximize revenue.

Tips for price floor optimization

1. Monitor market trends closely: In the fast-paced world of online advertising, market trends can change rapidly. It’s crucial to keep an eye on these shifts in demand, as well as changing consumer behavior and wider industry developments. This will ensure your pricing strategy aligns with the market, helping you to maximize revenue.
2. Thoroughly understand your inventory: The value of your inventory goes beyond just quantitative metrics. It includes factors such as user demographics, behavioral attributes, and the type of content being consumed. This information allows you to tailor your price floors for different segments of your inventory, optimizing each impression’s value.
3. Keep track of fill rates and win rates: These metrics are critical indicators of your price floor strategy’s effectiveness. If you notice a significant decrease in fill or win rates, it may signal that your price floors are set too high and are deterring potential advertisers. Regular monitoring allows for prompt adjustments to keep your strategy effective.
4. Employ A/B testing: Testing different price floor strategies on similar inventory segments can yield valuable insights. By comparing the results of different approaches, you can identify the most profitable strategy for your inventory. Remember, what works for one segment might not work for another, so individualized testing is key.
5. Consider the value of lower bids: Higher-priced impressions may seem more appealing, but don’t disregard the potential value of lower bids. In some cases, securing a larger volume of lower-priced impressions can yield greater overall revenue. Therefore, it’s worth assessing the balance between bid price and volume in your strategy.
6. Understand advertisers’ objectives: Advertisers are more likely to increase their bids if they believe your inventory aligns with their campaign goals. Therefore, understanding and accommodating advertisers’ objectives in your pricing strategy can boost win rates and overall revenue. This includes factors like the type of user they are targeting, the geographical region they are interested in, and the ad formats they prefer.
7. Leverage dynamic price floors: If available, dynamic price floors can be a valuable tool. By adjusting in real-time based on data and performance metrics, they can help optimize your revenue for each ad impression. However, they require sophisticated algorithms and are not a one-size-fits-all solution. Hence, careful management and monitoring are needed to ensure their effectiveness.
8. Consider QPS (Queries per Second) limitations: Your bid requests should not exceed the QPS limits of the Demand Side Platforms (DSPs). Too many requests can lead to throttling or even banning. Therefore, it’s crucial to optimize your price floors in a way that maximizes revenue without overwhelming the DSPs.
9. Implement tiered pricing: Tiered pricing allows you to set different price floors for various attributes like geographic location, device type, or ad formats. By taking into account the different value that these attributes hold for advertisers, tiered pricing can help optimize revenue from each impression.
10. Monitor and adjust regularly: Finally, price floor optimization is not a set-it-and-forget-it task. Continuous monitoring of performance metrics and regular adjustments are necessary to keep your strategy effective. As market trends shift and new data becomes available, your price floors should adapt accordingly. This iterative process will ensure your pricing strategy stays optimal over time.

Seasonal shifts in ad spend

Price floors should be adaptive to seasonal changes in the ad spend.

For instance, let’s consider the retail sector during the Q4 holiday season. Many retailers increase their advertising spend significantly during this period to capitalize on holiday shopping. They’re keen to reach potential customers, and competition for ad slots becomes fierce.

During this high-demand period, publishers can raise their price floors. Advertisers will be more likely to pay a premium to ensure their ads reach their target audience during the critical shopping period. For example, if the typical price floor is $1.00 CPM, a publisher might raise it to $1.20 or $1.50 during the holiday season, capitalizing on the increased demand and potentially earning more revenue.

However, it’s crucial to monitor the fill rates closely during these periods. If fill rates start to drop significantly, it may mean the price floor has been raised too much and is discouraging bidders. In that case, some adjustment might be required to find the right balance.

Conversely, during periods of lower demand such as Q1—when many companies cut back on their ad spend after the holidays—lowering the price floor can help maintain fill rates and prevent a steep decline in revenue. It’s better to sell an impression at a lower price than not at all.

To implement these seasonal adjustments effectively, publishers should analyze their historical data and track market trends closely. But it’s important to remember that seasonality can vary significantly based on factors like industry, geographical region, and audience behavior. This is where a deeper understanding of your specific inventory becomes invaluable.

How to set up price floors in GAM

In Google Ad Manager, you can create Unified Pricing Rules (UPR) to set price floors. UPR allows you to set pricing rules across multiple channels and platforms, including programmatic and traditional direct-sold deals. These rules take precedence over rules set in Ad Exchange.

Here are the steps:

1. Sign in to your Google Ad Manager account.
2. Click on ‘Inventory’ and then ‘Rules’.
3. Choose ‘Unified Pricing Rules’ and click on ‘+New Unified Pricing Rule’.
4. Input a rule name that will help you recognize it later.
5. Choose your targeting criteria. You can target based on many different parameters like ad unit, geography, device category, and more.
6. Set the minimum CPM, which is your price floor. This is the minimum amount you’re willing to accept for an ad impression that meets your targeting criteria.
7. Once you’ve input your desired settings, click ‘Save’.

Google Ad Manager provides options to create different rules for different conditions. Therefore, it might be beneficial to set up different pricing rules for different geographies, ad units, or device types, among other factors.

How to set up price floors in Prebid

In Prebid, you can use the setConfig function to set up price floors. Here is a code snippet showing how to set price floors for different media types:

pbjs.setConfig({
    floors: {
        currency: 'USD',
        schema: {
            fields: ['mediaType']
        },
        values: {
            'banner': 0.50,
            'video': 1.00
        }
    }
});

In this example, the floor price is set to $0.50 for banner ads and $1.00 for video ads. This is a basic example, but the setConfig function is flexible and can handle more complex setups based on attributes like device type or geographic location.

Here’s an example of how to set up different price floors for different ad sizes:

pbjs.setConfig({
    floors: {
        currency: 'USD',
        schema: {
            fields: ['size']
        },
        values: {
            '300x250': 0.80,
            '728x90': 0.60,
            '160x600': 0.50
        }
    }
});

In this example, the floor price is set to $0.80 for 300×250 ad units, $0.60 for 728×90 ad units, and $0.50 for 160×600 ad units. This helps the publisher optimize revenue based on the demand and performance of different ad sizes.

Prebid’s flexible configuration allows you to set more complex rules, like combining parameters (e.g., media type and size) or using more specific targeting (e.g., device type, user geography, etc.).

Conclusion

Price floor optimization is an invaluable tool in the publisher’s arsenal to maximize ad revenue.

The goal is to find the perfect balance between enticing advertisers and maximizing revenue from each impression. This involves understanding market trends, regular monitoring, A/B testing, aligning with advertisers’ objectives, and being adaptive to seasonal changes.

With tools like Google Ad Manager and Prebid, publishers can harness the power of price floor optimization to their advantage. Remember, the key to success lies in continuous experimentation, evaluation, and adjustment of your strategy.

Happy optimizing!