This article describes how DFP guaranteed line items compete with remnant line items when Ad Exchange line items are eligible. It covers network settings for configurable line item priority, a feature that is enabled for certain networks. Although this article specifically covers Ad Exchange line items, note that AdSense monetization behaves in the same manner.
About dynamic allocation
Dynamic allocation is a network-level mechanism designed to maximize your remnant and Ad Exchange revenue without compromising reservations. With dynamic allocation, both remnant and Ad Exchange line items are given a chance to serve if Ad Exchange/AdSense is eligible for the request (using line item targeting for Ad Exchange/AdSense or ad unit monetization for AdSense). You can configure settings in DFP and Ad Exchange to control which inventory is eligible to compete, and how.Google products that work with dynamic allocation
The following Google products can currently serve ads to DFP networks using dynamic allocation:
- Ad Exchange: Demand can come from a number of large third-party ad buyers, including AdWords 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 AdWords and other buyers participating in the real-time bidding exchange.
- Line items with delivery goals: Line items that have delivery goals, either absolute or by percentage: sponsorship, standard, network, bulk, or house.
- 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): price priority, Ad Exchange, or AdSense.
- Non-remnant/Guaranteed: Line items with a priority of 1-11, or line items of equal or higher priority (numerically lower) than an Ad Exchange or price priority line item.
- Remnant: Line items without delivery goals, line items with a priority of 12-16, or line items of lower priority (numerically higher) than an Ad Exchange or price priority line item.
Overview of how dynamic allocation works
Dynamic allocation is a yield-maximizing capability of DoubleClick for Publishers that allows Ad Exchange to compete in real time with line items booked in DFP as either remnant or guaranteed. This competition is on an impression-by-impression basis. You can configure settings in DFP and Ad Exchange to control which inventory is eligible to compete by using line items in DFP and rules in Ad Exchange. Since dynamic allocation is active across your entire network, you don’t need to change any network-wide configurations.
If you only have remnant line items competing with an eligible Ad Exchange line item, Ad Exchange competes in real time with the highest CPM of the remnant line items that haven't reached their goal (absolute or by percentage).
If you have guaranteed line items of a higher priority (numerically lower or equal) than the eligible Ad Exchange line item or price priority line items, dynamic allocation can evaluate and set the reserve price as a "temporary CPM" or opportunity cost in Ad Exchange without causing underdelivery of the guaranteed line item. This allows Ad Exchange or remnant line items to serve when they pay more than the opportunity cost of not serving the guaranteed line item.
Determining whether DFP or Ad Exchange serves an ad
If the ad server determines that an Ad Exchange line item is eligible to compete for an impression (based on targeting and priority), DFP goes through the following steps to determine whether the Ad Exchange or the DFP-booked line item serves.
The following infographic outlines the dynamic allocation process, described in more detail below.Step 1: Choosing the best guaranteed DFP line item that can serve to the impression
First DFP selects the best guaranteed line item that can serve to the impression. This selection is based on many factors, including line item priority and how close each line item is to being on schedule. For example, based on DFP ad selection logic, a guaranteed line item of priority 8 might be the best DFP line item that can deliver to the impression.
For brevity, let’s call the best guaranteed line item that DFP can deliver to an impression, Line Item A. DFP dynamically creates a "temporary CPM," or opportunity cost, based on Line Item A’s progress and Ad Exchange historical bid data, 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 2, below.
Lower priority remnant line items and Ad Exchange line items do not compete when either of the following are eligible to serve to a request: 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, DFP 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, DFP 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, DFP serves Line Item A and serving is complete.
- If there are several contending remnant and Ad Exchange line items, DFP 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, DFP 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 DFP.
DFP then calls Ad Exchange (using the selected Ad Exchange line item) to see if it can provide a bid with a higher price than both the temporary CPM of Line Item A and the value CPM of Line Item B. Calling Ad Exchange only means that Ad Exchange gets a chance to compete with DFP; it doesn't necessarily mean that an Ad Exchange ad gets served (see Step 3 for that).
If DFP calls Ad Exchange in Step 2, eligible Ad Exchange ads compete with Line Item A and Line Item B on a CPM basis. The reserve price for Ad Exchange ads is at least the maximum of the temporary CPM from guaranteed Line Item A and the remnant value CPM from Line Item B. (The reserve price may be higher than this maximum due to other publisher configurations, such as rules.)
- If an Ad Exchange ad can beat the reserve price (at least the maximum of the remnant value CPM from Line Item B and the temporary CPM from guaranteed Line Item A), then that Ad Exchange ad serves.
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 ad can beat the reserve price, DFP fills the impression with the line item that provided the highest CPM in Step 2: Either Line Item A based on its temporary CPM, or the remnant Line Item B that provided the maximum 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).
Your network is enabled for dynamic allocation and you use Ad Exchange with the default settings. 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. The best guaranteed line item is at priority 10. With dynamic allocation, DFP 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. DFP sends the maximum of the temporary CPM ($6.50) and the highest eligible remnant CPM ($5) 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, DFP 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 DFP guaranteed line items and remnant line items/Ad Exchange ads (when the latter have a sufficiently high bid), DFP maximizes efficiency and increases publisher yield/advertiser value compared to a static allocation/“waterfall” system.
If your network is eligible for configurable priority and you have it activated, Ad Exchange or price priority line items can be set to any priority. If the priority of the Ad Exchange/price priority line item is higher than that of the selected standard or sponsorship line item, DFP doesn’t calculate a temporary CPM for the reservation line item. In other words, line items with a lower priority (higher number) than that of the Ad Exchange/price priority line item are considered remnant inventory and compete based on price.
Using configurable priority and placing Ad Exchange/price priority line items at a higher priority than standard or sponsorship line items prevents dynamic allocation from taking line item pacing into consideration, and may cause delivery issues for your standard or sponsorship line items. For this reason, we don't recommend using configurable priorities in conjunction with dynamic allocation, as it increases complexity in your account.