Buckling under scrutiny, the exchange is getting rid of its undisclosed buyer fees and gearing up for a price war. Rubicon Project announced this month that it will not charge the “variable and undisclosed” buy-side fees anymore—the one that had infuriated The Guardian enough to drag the company to court.
The change applies to every marketplace type, auction dynamics, and product set, including header bidding and waterfall transactions across the exchange.
In its March 10-K filing, the company had acquiesced to charging buyers “a variable price for real-time bidding impressions” without specifying the exact amount or how they calculated it. The fee was levied on open auctions as the platform says they didn’t charge buy-side fees for PMP deals and guaranteed orders.
Rubicon ditched the fee in a bid to stay competitive in a market evolving with header bidding, which is changing the ecosystem in unexpected ways:
- On buy-side: With more exchanges providing access to a single publisher’s inventory, buyers have nothing to lose by removing a particular exchange/SSP from its supply chain. They can get the same impression through a different exchange/SSP, possibly at a lower price.
- On sell-side: Sick of gamey auctions and huge differences between winning bid and clearing price, publishers now demand net bids (i.e., bid price after deducting platform fee) from all header demand partners, so that they know what price an exchange owes them if they win.
Exchanges that engage in auction gimmicks or charge undisclosed fees on buy-side will return lower net bids for the final auction in the ad server. This hurts their own win rates and the exchange gets ousted from the auction.
The dynamics in this industry are changing quickly. Though charging buyer fees made sense for us at one time, that tide began to turn with the rise of header bidding, and we want to stay ahead of it and retain our competitiveness.
— Michael Barrett, President and CEO, Rubicon Project
Rubicon has been gradually lowering its sell-side take-rates (“marketplace fee” as they call it) since early this year. CEO Michael Barrett told AdExchanger that take rates may decline further by 4-5% in next quarter.
In order to be successful, exchange take rates will need to be between 10% and 15%.
— Michael Barrett (via AdExchanger)
To stay competitive in the face of header bidding, Rubicon has also been testing modified first-price auctions, which would make its bids more likely to win against platforms sending second-priced auction bids.
Rubicon Project is finally taking the right steps towards fee transparency and making innovative decisions (like bidstream shaping through nToggle acquisition) to create value for buyers and sellers.
The damper comes from uneasiness at dismal Q3 earnings report. The company lost over $100 million in quarterly revenue and 40% share value the day the report was published. There are speculations that the platform may be about to close up shop, although AdExchanger reports that the platform will be using cash reserves of $100 million to fund operations as it moves to significantly lower fees.