Posted on Jun 28, 2023

Adaptive Margin on SmartHub: The Secret of Boosting Performances in Programmatic Advertising

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Have you ever wondered how great it would be if your advertising platform could set itself up in the most favorable way for you to get maximum benefit?

It’s already happening! We’ve added an adaptive margin feature to SmartHub. A lot of people have been waiting for this (including us). Now let’s find out what it is and why it will certainly please many of our users.

What is Adaptive Margin?

Adaptive margin is a functionality that helps you maximize revenues obtained from media trading inside your SmartHub ad exchange platform. When activated, for each endpoint (SSP or DSP), it automatically calculates the most optimal margin (based on recommended markups taken from the most successful trades that happened within 24 hours). Essentially, the adaptive margin is based on the self-learning mechanism that takes into account such components as data analysis and calculation of the optimal margin for different traffic types and ad formats. 

In the context of the SSP endpoint, adaptive margin automatically applies the dynamic markup for each bid floor based on the expected revenue for a particular chain.

This expected revenue is calculated based on historical data about the performance of similar ad connections, thanks to which the bid floor values will stay flexible and optimally adjusted.
In the context of the DSP endpoint, adaptive margin adjusts the bid floor for each ad request in real time based on a margin history with the key — the system checks recommended margin from the most successful trades that happened during 24 hours.

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How Adaptive Margin works on SmartHub?

Let’s now look at how the adaptive margin feature is implemented specifically on our platform.

First, note that on our platform, you can choose from three types of margins.

Fixed Margin

Fixed Margin: the exact percentage that will be added to the bid floor in the request.

Adaptive Margin

Adaptive Margin: with this feature, the system will automatically calculate the margin set at the endpoint based on activity. The system takes the recommended margins from the most successful net transactions within 24 hours.

Margin range

Margin range: you should set the minimum and maximum margin allowed in this setting. Our system will check the trading history and apply the most appropriate margin from the range you set.

At each endpoint with an adaptive margin (adaptive or range), the system checks and adjusts the margin according to the most appropriate profit rates every 10 minutes. The effectiveness of the adaptive margin at each endpoint is checked by a range parameter, also known as a key.

The key which a comprehensive system checks is: connection chain — ad format — traffic type — GEO — bid floor value.

This may all seem too complicated, but you’ll understand everything once this information settles in your head. Basically, different types of margins give you various levels of control over your bids. 

With a fixed margin, you and your idea of what you want from your bets are in charge. With an adaptive margin, the system and its complex algorithms manage everything to find out the most winning variant. The margin range, on the other hand, is a kind of compromise between the two.

It’s hard to say whether one option is the best and another one is the worst. Everything, as always, depends on your current goals and needs. If the fixed margin is required for whatever reason, then, of course, that would be the most logical choice.

However, we still recommend at least testing the adaptive and range margin features to see how much they can affect the performance of your connections (you’ll likely be pleasantly surprised).

An example of using a fixed and adaptive margin

Now, let’s look at some examples of how adaptive margin can affect your income. The example is hypothetical and illustrative to demonstrate in comparison to fixed margin.

Let’s say you have two endpoints with a fixed margin: SSP 1 and DSP 1.

1. SSP 1 sends a request. Your platform receives the request from SSP 1 and passes it to DSP 1. DSP 1 analyzes the request and replies with a bid response with the price of $7. Without a fixed margin, the bid price SmartHub will send to the SSP 1 will equal the DSP bid price — $7 (with subtracted markups); 

2.With a fixed margin applied, the bid price that SmartHub will send to the SSP 1 will equal $5 (Bid floor in the bid request = SSP bid floor price / (1 – SSP markup) / (1 – DSP markup). 

The higher the fixed %, the higher the bid floor will be sent to the demand partner, but the revenue your platform receives will also be higher.

But you will also earn more revenue as the margin will be higher. On the other hand, the lower the adaptive margin percentage, the less revenue you’ll get, but also, the bid price to the supplier will be lower, which can lead to more deals.

Let’s review the logic of adaptive margin now. Let’s say you decided to try adaptive margin on one of the endpoints mentioned above. 

Having analyzed the value obtained from the SSP bidfloor and the rest of the data contained in the key, the algorithm will start to suggest trained margin values to adjust the bidfloor on DSP accordingly. 

As soon as you activate this functionality, your system will start to collect relevant historical data, and the special script will calculate which kinds of margins have elicited the best results (biggest profit rate) for the particular keys. 

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The margin value with the biggest profit rate will be further used as the most successful for this connection; with this, 10% of the traffic will always go for training purposes; for example, with new markup data, more profit rate data will be detected, so the bidfloor will need to be adjusted accordingly. 

What’s the bottom line?

Adaptive margin allows you to improve the performance of your ad exchange qualitatively.

Without using an adaptive margin, the price may grow too high or too low, leading to missed opportunities to generate more revenues. With all this in mind, we highly recommend testing and starting to use this feature, as it can significantly optimize your bids and maximize profits from deals.

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