Introducing Soft Price Floors

Friday, April 12, 2013
By: Kevin Weatherman

Update: Please note the Soft Price Floors feature has been deprecated as of 2018.

November 2015 update to our soft price floors: Soft price floors operate as a first-price auction while the majority of our exchange operates as second-price auction. Many buyers have developed features that can detect these floors, and they will react accordingly by bidding down on impressions until they hit the real floor — making the soft price floor ineffective.

We are excited to announce the beta launch of Soft Price Floors in MoPub Marketplace . Soft floors allow publishers to indicate more flexibility around their inventory pricing. The goal is to “harvest” higher bids while not compromising on lower bid opportunities.

Currently, you can set a “minimum price” for your inventory in MoPub. Bids below this price are simply discarded. Our team did some analysis and discovered that we could increase bid volume by 25-50%+ by considering bids that came in below the floor but above the top performing ad network. You could lower your minimum price in order to gain access to that demand, but then you’d be also lowering the clear price for high bids that come in.

With soft floors, you no longer face the dilemma of choosing between higher CPM or lower clear rate. Bids above the soft floor will be treated the same as bids are treated today – they run in a second price auction . Bids below the soft floor, in contrast, will be taken and evaluated in a first price auction . They are then compared to your ad networks and cleared if we determine it would be the optimal outcome. It’s important to note that the soft price floor will be communicated to all buyers as the price floor in the RTB request, so they will know when each auction mechanic is being applied.

Let’s consider an example. You set a hard floor at a $1 CPM in order to ensure maximum pricing for your RTB auctions. However, in many cases you will be receiving bid activity at $0.75-0.90, too. With a soft floor, you can lower the hard floor to $0.50 and introduce a $1 soft floor. Now you can clear an $0.80 incoming bid at $0.80, above your best performing ad network, increasing your revenue. At the same time, a $2 bid is still cleared at the full $1, ensuring full pricing in competitive situations. Preserving the second price auction mechanic for higher bids retains the incentive for bidders to bid their true value.

We expect that this additional flexibility will be a large improvement for all participants in the MoPub Marketplace : more revenue for publishers and more clear and access to well-priced inventory for buyers.

If you would like to participate as a publisher please email supply@mopub.com . If you’re a buyer and you have additional questions, please contact your Account Manager.

If you’re interested in learning more, here are some good articles on the subject of pricing and auction mechanics:

  1. AdExchanger: The Temporary Problem with Second Price Auctions
  2. AdExchanger: Second Guessing the Second-Price Auction Model
  3. Mike On Ads: Price Floors, Second Price Auctions and Market Dynamics

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