Dynamic allocation

Dynamic allocation is a feature available on all Ad Manager networks that allows all non-guranteed demand—Open Auction, Open Bidding, and remnant line items—to compete in real time with guaranteed line items. Competition occurs on an impression-by-impression basis and does not compromise delivery or revenue of guaranteed line items.

How dynamic allocation works

If a guaranteed (Standard or Sponsorship) line item is eligible for an impression, in competition with Open Auction and remnant line items: 

  • The guaranteed line item competes using a temporary CPM or "opportunity cost" that Ad Manager calculates automatically. 
  • Open Auction or a remnant line item will serve if they pay more than the opportunity cost of not serving the guaranteed line item.
  • The temporary CPM set by dynamic allocation maximizes your revenues from Open Auction and remnant line items without causing underdelivery of guaranteed line items.

Products that work with dynamic allocation

The following Google products can serve ads to Ad Manager networks using dynamic allocation:

  • Ad Exchange (and Open Bidding, when enabled)1: Demand can come from a number of large third-party ad buyers, including Google Ads and other buyers participating in the real-time bidding exchange, which may include Preferred Deals and Private Auctions.
  • AdSense: Provides fewer controls and more straightforward management. Demand can come from a number of large third-party ad buyers, including Google Ads and other buyers participating in the real-time bidding exchange.

Line items types mentioned in this article

  • Line items with delivery goals: Line items that have delivery goals, either an absolute impression/click goal or a percentage of delivery. These include Sponsorship, Standard, Network, Bulk, or House line item types.
  • Line items without delivery goals: Line items that compete on the basis of CPM but do not have delivery goals—that is, they have unlimited delivery goals. These include Price Priority, Ad Exchange, and AdSense line item types. 
  • Guaranteed line items: Sponsorship and Standard line items, which fall in the priority range of 1 to 11
  • Remnant line items: Price Priority, Network and Bulk line items, with a priority 12
  • Ad Exchange line items: Also with a priority of 12
  • House line items: House line items have a priority of 16

Determining if Ad Manager or Ad Exchange serves an ad

If the ad server determines that an Ad Exchange line item is eligible to compete for an impression, Ad Manager goes through the following steps to determine whether the Ad Exchange or the Ad Manager-booked line item should serve an ad.

Steps of dynamic allocation

Step 1 There's an ad request to Ad Manager 
Step 2 Ad Manager finds the best guaranteed line item eligible to serve for the ad request and calculates a temporary CPM based on the line item's current delivery
Step 3 Ad Manager finds an eligible remnant line item with the highest CPM
Step 4 Ad Manager calls Ad Exchange to find ads which can beat the temporary CPM of the best guaranteed line item
Step 5 Ad Manager selects the line item with the highest CPM to serve an ad, protecting guaranteed ads in all cases

Finding the best guaranteed line item

Ad Manager finds the best guaranteed line item eligible to serve for the ad request and calculates a temporary CPM based on the line item's current delivery.

Selection of the best guaranteed line item is based on many factors, including line item priority and how close each line item is to being on schedule. Learn more in the Ad selection white paper.

For example, we'll designate the best guaranteed line item as Line Item A.

Ad Manager creates a temporary CPM for Line Item A. This value can be thought of as an opportunity cost based on the line item's progress and historical bid data for non-guaranteed demand, to optimize publisher revenue. In general, the lower a line item’s Satisfaction Index (SI) (that is, the more behind schedule it is), the higher the temporary CPM that’s passed to Ad Exchange. Dynamic allocation uses this temporary CPM value to allow Line Item A to compete against eligible Ad Exchange and remnant line items in Step 5.

Competing with other sources of demand to maximize yield

Lower-priority remnant line items and Ad Exchange line items do not compete when either of the following are eligible to serve: a Sponsorship line item with a goal of 100% or a combination of Sponsorship line items at the same priority with goals that add up to greater than or equal to 100%. Similarly, Ad Manager may prevent lower-priority remnant and Ad Exchange line items from competing if Line Item A is a guaranteed line item that is at risk of not delivering in full (for instance, if Line Item A is far behind schedule).

Otherwise, Ad Manager looks at remnant/non-guaranteed and Ad Exchange line items eligible to serve to the same impression:

  • If there is no remnant or Ad Exchange line item eligible, Ad Manager serves Line Item A and serving is complete.
  • If there are several contending remnant and Ad Exchange line items, Ad Manager ranks all eligible remnant line items by their value CPM. It chooses the highest value remnant line item, which we refer to as Line Item B for brevity. If there is no value CPM, Ad Manager uses the line item CPM instead.
  • Among eligible Ad Exchange line items, the highest priority (lowest priority number) line item is selected. If two or more Ad Exchange line items have the same highest priority, then one is chosen by Ad Manager.

Ad Manager then calls Ad Exchange (using the selected Ad Exchange line item) to see if it can provide a bid with a higher price than the temporary CPM of Line Item A. Calling Ad Exchange only means that Ad Exchange gets a chance to compete with Ad Manager; it doesn't necessarily mean that an Ad Exchange ad gets served (see Step 5 for that).

Determining if Ad Exchange serves an ad

If Ad Manager calls Ad Exchange in Step 4, eligible Ad Exchange ads and Line Item B compete with Line Item A on a CPM basis in Step 5. The reserve price for Ad Exchange ads is at least the temporary CPM from guaranteed Line Item A. (The reserve price may be higher than this maximum due to other publisher configurations, such as unified pricing rules.)

  • If either an Ad Exchange ad or Line Item B can beat the reserve price, then either the Ad Exchange ad or Line Item B serves, depending on which has the higher CPM.
    Any Ad Exchange ad selected to serve still adheres to the conditions of Preferred Deals or Private Auctions, if applicable.
  • If no eligible Ad Exchange ads or Line Item B can beat the reserve price, Ad Manager fills the impression with Line Item A based on its temporary CPM.

When we refer to the CPM of an Ad Exchange ad, that CPM is on a net basis to the publisher (that is, it takes into account Ad Exchange's revenue share).

Example

When a visitor stops by your site, an Ad Exchange line item is eligible to serve to the impression, as are a number of guaranteed line items. With dynamic allocation, Ad Manager looks at all the eligible guaranteed line items and calculates a temporary CPM for the winner. The winning guaranteed line item is late on delivery. The temporary CPM is calculated as $6.50.

There are 2 other remnant line items with CPMs of $3 and $5, respectively. Ad Manager sends the temporary CPM ($6.50) to Ad Exchange. As it turns out, there’s no eligible Ad Exchange ad that can beat $6.50, and so the guaranteed line item fills the impression.

General notes about dynamic allocation

  • Note that the dynamic allocation process protects delivery of guaranteed line items by dynamically adjusting the temporary CPM. Therefore, a guaranteed line item that is behind schedule wins often enough to stay on pace to satisfy its goal and pacing settings. If the temporary CPM is too high, Ad Manager doesn't make the call to Ad Exchange, which explains why sometimes the number of "Impressions competing" is lower than the "Eligible impressions" in the Ad Exchange opportunities report.
  • Since Ad Exchange ads compete with remnant line items on a CPM basis, the dynamic allocation process maximizes publisher yield regardless of demand source.
  • By dynamically allowing competition between Ad Manager guaranteed line items and remnant line items/Ad Exchange ads (when the latter have a sufficiently high bid), Ad Manager maximizes efficiency and increases publisher yield/advertiser value compared to a static allocation/“waterfall” system.
  • Remnant line items set to a CPA rate (Network and Bulk) are treated like House line items: as if they have a $0 rate and, thus, do not compete on price via dynamic allocation.

Configurable priority

Some network may have configurable priority values enabled. This feature allows users to change the numeric value of a line item type. For instance, the Ad Exchange line item type has the default priority value of 12, but with configurable priorities, users can change the value to of an Ad Exchange line item to 4.

Use of this feature is recommended only for exceptional cases as it can have unintended impact on ad serving and revenue.

Guaranteed line items may be impacted if priority is changed 

Guaranteed (Standard or Sponsorship) line items may be impacted by this rule if Ad Exchange line items are set to a priority value above them. Changing priority so Ad Exchange is higher prevents dynamic allocation from taking line item pacing into consideration and can cause delivery issues for guaranteed line items.

Consider the following:

  • Line items with a lower or equal priority than that of the Ad Exchange or Price Priority line item are considered remnant inventory and compete based on price, rather than a temporary CPM.
  • Price Priority line items with a custom priority can change the priority level where other line items are considered remnant or guaranteed.

Customized numeric priority values

Some networks can change numeric priority value of line item types. Guaranteed line items can only be set to priorities 1-11 and non-guaranteed only between 12-16.

Changing priority may be needed for very few and limited cases. However, use this feature with caution as changing the priority value can adversely affect ad selection and is therefore not generally recommended.

Learn more about the Ad Manager ad selection process and how Ad Manager counts impressions and clicks.

House line items and the auction

House line items only serve when no remnant line items (Network, Bulk, Price Priority), Ad Exchange or Open Bidding demand are available to serve. That is, House line items are treated as if they have a $0 rate and do not compete on price via dynamic allocation.

House line item CPM determines ranking of eligible House ads but do not need to meet any floor price set in unified pricing rules in order to be eligible to serve an ad, thereby effectively serving as a fall-back ad. Learn more

1 Throughout this page, references to Ad Exchange mean Ad Exchange and Open Bidding when enabled.

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