That’s a great question, and I’m sure there will be three groups with different opinions on it. One group might swear by targeted CPM, another group may advocate for a fixed floor, and a third group might argue in favor of a combination of both. Let’s dive into it
So, here’s an interesting question that I’m sure has crossed the minds of many: when it comes to setting the right floor for advertising bids, do you lean towards targeted CPM, stick with a fixed floor, or maybe opt for a combination of both? Let’s break it down.
When Google rolled out targeted CPM, my immediate concern was about the minimum bid accepted below the set floor. The answer I got was anywhere from a few cents to 10% less. To put it simply, if you set the floor at $1, you might still be accepting bids like $0.99, $0.98, $0.97, and so on. But hey, that seemed alright because it meant a slightly higher fill and a nice 10% bump in revenue. Everyone’s happy, right?
But here’s the twist. When you peek at the pricing rules scorecard, you might be shocked to see that it’s accepting bids starting from $0.01 all the way up. Wait, what? Setting a floor at $1 and still taking in bids at $0.01?
Now, a common question that keeps popping up is why there’s a slight drop at the beginning when you change the floor, followed by a revenue boost for a while, only to eventually level off or maybe just be slightly higher than before.
My take on this is that when you change the floor, you’re essentially letting the machines decide at what price your starting auction should kick off. It’s like giving them the keys to the car, and this phenomenon is often referred to as “Bid Shading.”
So, should you stick to a fixed floor? Personally, I’d say yes, but of course, it depends on your pricing strategy. You could also consider a hybrid approach—mixing a fixed floor with targeted CPM. Here’s how:
- Check your pricing rules scorecard.
- Look at the bids buckets and decide where you want the cutoff to be.
Let’s say you want a floor of $1 for the USA. You’d create two pricing rules for the USA:
- Pricing Rule 1: Use targeted CPM at $1.
- Pricing Rule 2: Use floor CPM at $0.50.
What’s happening here? You’re accepting bids below $1, all the way down to $0.50, but drawing the line at anything below $0.50.
After 7 days, use the Unified Price Floor Assistant Widget to evaluate your set floor and make adjustments if needed.
Now, you might think, “Let me just crank up my target CPM so the machine optimizes for higher bids.” While this might work well with Google alone, it could impact line items below the floor if you’re using other SSPs via Prebid and Amazon, leading to potential revenue loss.
Consider using the Unified Price Floor Assistant. Hope this sheds some light on the topic for you. If you have any questions, feel free to ask!