Monetization - 7 min read  - September 10, 2019

Programmatic Ads of the Future: Conversation with Head of BidMachine

Stack has consistently kept our eyes on the prize: developing programmatic advertising technologies and introducing innovative mobile ad standards to the wonderfully turbulent industry of ad tech. We talked to Dmitry Usakov, Head of BidMachine, who stood at the origins of Appodeal and helped develop disruptive in-app header bidding technology in the mobile ad world.

Katia: Hi Dmitry. It’s great to see how many positive changes that happened in the past couple of years, including the opening of a development office in Minsk and the launch of an end-to-end solution Stack, with BidMachine as a significant programmatic part of it. Could you talk about how you began your career in ad tech and in Appodeal, in particular?

Dmitry: I grew up in a small town of Kirov, Russia, and, believe it or not, began my career in ad tech there. I started with developing mobile marketing solutions for companies that previously heavily relied on traditional ad channels, like yellow pages, call centers and internet portals. When the iPhone 4S and the first iPads started infiltrating the market, I became fascinated by ideas of how user experience with ads and brands can be significantly improved and the interaction between customers and vendors facilitated.

Mobile development became my passion. In my first endeavors I gathered around like-minded developers and learned a great deal about mobile marketing and in-app advertising. I started a company that did outsource mobile development and helped clients advance their products with ads. One of our partners was Appodeal, which I eventually joined as it offered an exciting opportunity — to develop an ad mediation SDK that would help mobile developers to get a bigger exposure for their apps and, consequently, more revenue. These four years have been so exhilarating — we had so many interesting projects and had a chance to bring so many ideas to life.

K: How did BidMachine as an ad exchange company come to life?

D: I have to mention that four years ago we were the first company on the market to introduce the prototype of in-app header bidding technology that is now thriving. Our Appodeal SDK used that technology early on. So then the ad exchange that sprouted from that technology became an internal product of Appodeal. This year we evolved it into a separate product called BidMachine. It is now a part of our comprehensive suite of mobile app scaling solutions, Stack. Appodeal continues to be our classic ad monetization product, while BidMachine is solely focused on programmatic advertising.

K: Programmatic in-app advertising is slowly but surely winning over the trust in the mobile world. Why do you think more and more players are investing time and effort into programmatic?

D: The trust you mentioned is very important here. First of all, programmatic moved to mobile from web, so time has shown that this technology is functioning well and can be relied on. People deem programmatic trustworthy, because it gives the most accurate prices. Its accuracy is actually 100%. It’s never $3-5 per impression, it’s $3.75. With such accurate data, publishers can work more efficiently with their analytics. This is especially important for LTV prediction, ad LTV, and building effective user acquisition campaigns. This level of precision is only present in programmatic monetization.

Another very appealing factor is the speed of auctions — real-time data auctions happen in a span of 150ms to 300ms. This allows us to receive data that we can use for timely predictions, for extracting metrics, and for making decisions independent of overdue reports.

Finally, programmatic stands for high quality control of what you’re working with. With flexible Open-RTB protocol you can set up targeting of ads you want to buy, as well as targeting of the audience you want to buy, you can adjust filtrations, create black lists, etc. This flexible tool allows both publishers and advertisers to interact with each other without middlemen.

K: Let’s leap ahead, what trends do you envision as dominating the market in the nearest future?

D: There are several important ones that I can think of. I don’t know if transparency can be called a trend? To me transparency is about diminishing the number of domains between mobile publisher and advertiser. For example, app-ads.txt helps advertisers instantly identify the publisher inventory, which mitigates fraud risks. 

Programmatic TV is another trend that I think will become stronger and stronger, since Internet TV is already blooming now. Almost everyone today has a subscription with a video service, like Netflix. When you see ads through a streaming service like that, you give some information about yourself as a viewer — the streaming platform knows your interests, your viewing patterns, and can subsequently offer you personalized ads and relevant purchasing experiences. Now most players are still investing in web and in-app advertising, while TV players and home video cinemas are something that is still unexplored and has a great potential, in my opinion.

K: What about programmatic auctions? 

D: In terms of trends, I think that the hybrid auction model with focus on the first-price auction will be the next big thing. In order to be successful in programmatic auctions, you need to know very well what kind of auction you’re participating in — first-price or second-price — and what bids are the most likely to succeed. Bid shading is becoming more frequent, exactly because most players switch to first-price auction where you need to place higher bids. Bid shading helps find an optimal bid price to minimize the expenses, but keep a good chance of winning anyway. In simple terms, this technique helps avoiding paying too much.

I think that, ultimately, In-app Header Bidding will reign in the market and the waterfall model will become a thing of the past. All auction participants should have equal opportunities to offer their bids and to be seen by publishers. As a company that pushed in-app header bidding forward in mobile, we are happy to see how much more transparent the industry has become with this technology. 

K: First-price auctions becomes more popular and widespread. What would you say are the downsides and advantages of first-price auction?

D: When ad exchange is just a line item in a mediation, participation in a first-price auction is not essential, because line items display a $2 price, for example, even if you offer $50, $2 will be shown anyway. When ad exchange is a part of header bidding auction along with other similar partners and ad networks, then you need to bid the maximum price, because it allows to win in the unified auction among top players. In order to be successful with first-price auction, you need to be competing with in-app header bidding as the main driver. In that case there is a high chance of targeting valuable, profitable users. DSPs and demand partners that participate in header bidding often collaborate with big brands that want to be displayed in successful, high-converting apps. So in that case first-price auction provides very real opportunities to match that app and that brand. 

Ultimately, In-app Header Bidding will reign in the market and the waterfall model will become a thing of the past. All auction participants should have equal opportunities to offer their bids and to be seen by publishers. As a company that pushed in-app header bidding forward in mobile, we are happy to see how much more transparent the industry has become with this technology. 

K: Ad format offerings, like playable ads, are becoming much more engaging and effective. What ad format innovation do you think will be coming up next?

D: Panoramic video. Vertical videos and playable video ads have already become very popular. I think panoramic video is next, because it offers users a lot of interaction. They can move their smartphone around to see a 360 view or to zoom in. The augmented reality technology is evolving and, perhaps, soon people will be able to try shoes on through ads or place a product on their table, visualize it, see its vivid colors, etc. This will definitely inspire a more a personified content and more confident purchasing decisions.  

K: BidMachine recently announced that it went open-source and supported the development of in-house technologies as a part of Stack solutions. Could you share why those two elements are now a priority? 

Going open-source was a big step forward for us. The reason why we made BidMachine open-source is because we want everyone to be able to benefit from it. Once you test it and get used to it, the next logical move is to move the technology in-house in order to become independent. It is a challenging task, but we are excited to help companies make that change if they need our assistance. This is tied to deep need of having transparent relationships between publishers and advertisers and fewer middlemen.

The decision by companies to move technologies in-house can be influenced by several factors. There are a lot of companies that don’t want to be under risk of their data leaked or shared with third parties. So mobile publishers strive to have in-house technologies and work with data internally. Moreover, we observe a growing number of various privacy rules, like GDPR, that need to be closely monitored from within the company. 

K: What does BidMachine place a strong focus on? What are some innovative solutions proposed by BidMachine that can help ad tech players succeed? 

D: BidMachine SDK provides really high standards for viewability — content is deemed viewable when it is 99.9% visible for no less than 2 seconds. We established these quality standards a long time ago and we stick to them. For comparison, industry standards are quite relaxed; banners are usually considered viewable if they are at least 50 percent visible for at least one second. We built this SDK so that our demand partners can be assured that their ads are rendered and viewed properly. Brand safety is very important to us as we want quality standards to help both mobile app developers and advertisers. 

We implemented a hybrid auction model for our clients on our server, which means there is an opportunity to use header bidding for your specific needs. Hybrid auction model allows both server auctions and clients auctions, as well as support of third-party SDK. This means publishers can work with providers and ad networks that have just begun working with in-app header bidding. Through custom adapters we can connect Vungle, Facebook, Tapjoy, etc. Our system is set up so that you can easily connect with any demand partner fast and invite them to participate in a first-price or second-price auction.

Going open-source was a big step forward for us. The reason why we made BidMachine open-source is because we want everyone to be able to benefit from it. Once you test it and get used to it, the next logical move is to move the technology in-house in order to become independent.

K: How to inspire companies to move technologies in-house? What are the main concerns that make people think twice? 

D: The biggest concern is technical, you have to fully support and maintain these technologies. But as we see companies like Ubuntu supporting an open-source OS and showing that they are trustworthy, reliable partners for a lot of clients, I don’t see why it can’t be like that in the industry of in-app mobile advertising. We want more companies like ours to help organize and support in-house mobile technologies.

Why is it so important? In-house programmatic is not only about monetization with ads for external brands, it’s about promoting your own products and interacting with your audience more effectively. This creates a much stronger bond between a company and a customer. We strive to continue bringing innovative solutions to facilitate this communication. And we hope that more ad tech solutions will emerge to improve user experience.

If you’re a mobile app publisher, you might be interested in the BidMachine $20,000 upfront offer that is meant to provide support at integration stage and help monetize your app with premium ads.

Ekaterina Kupidonova
Product Marketing/Content Manager

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