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High-Speed Ad Traders Profit by Arbitraging Your Eyeballs

34 points by forrest_t 12y ago

aggronn 12y ago
I'm interested in knowing how people can even detect this happening. Anyone? The article didn't really go into detail on that point.
toth 12y ago
I got the impression that writer of the article thinks that this arbitraging is supposed to be hurting someone, but it's not clear who. If the traders are arbitrating prices between different ad exchanges, their net price will be zero and they make the ad market more efficient. Who exactly is hurt?
- kasey_junk 12y ago
  In aggregate? No one. But the people who had been buying ads on the "cheaper" exchanges exclusively either through luck or because they had done research to determine they were cheaper, will now be paying a higher price. Personally, that doesn't bother me, but when discussions about this come up with regard to the financial markets there seems to be some folks who have a moral problem with market participants who "only" act as price arbs between exchanges.
  - toth 12y ago
    Yes, and they miss the fact arbitrageurs actually help most people. If these arbitrageurs are keeping all the prices in different exchanges in line, it means that your average ad seller/buyer does not need to spend time and money on researching which exchange has best liquidity (although they probably still want to know which one chargers lower comissions). Of course, there will be an effective fee that the arbitrageurs collect, but competition amongst them will drive that feed down (in principle, to less than what the average person would have spent on research).
- aggronn 12y ago
  Assuming this doesn't affect advertiser RTB budgets, it hurts all of the players who actually create value (publishers, exchange providers, etc)
  - toth 12y ago
    How does it hurt them? They are matching buyers and sellers of ads across different exchanges, how are buyers and sellers hurt by this? Yes, the traders pocket a spread for their trouble, but they also save you the hassle of checking all the different exchanges. And if you really care about that spread, you still have the option of looking at all the different exchanges.
    - aggronn 12y ago
      X dollars go in, x dollars go out. before, average revenue per market participant category was x/n. Now its x/(n+1). At the end of the day, unless their participation increases x by more than their cut, they're just taking revenue from everyone in the game who actually provides value. They don't make the market more efficient.
imaginenore 12y ago
I don't get it. If you buy an ad, you are the highest bidder. How do you sell it for more? Another exchange?
- kasey_junk 12y ago
  Yes. This is describing classic venue arbitrage.
  - imaginenore 12y ago
    And how do you transfer an ad between exchanges?
    - sologoub 12y ago
      Supposedly, you'd fire another ad tag or be integrated in some other way.
- sologoub 12y ago
  The oldest model that is technically arbitrage are the old school Ad Networks. If you can get audiences assembled from lots of small pieces and sell one big chunk, you make more money overall. With RTB, you can do this "assembling" on the fly and sell with some sort of data enrichment. If impression A is sold as more or less anonymous and you know that impression A is actually a potential customer for brand B, you can sell it to band B for more.
programminggeek 12y ago
This kind of thing used to happen in the early days of AdSense and other platforms. Any time you can take low value ads, and move them to higher value ads, you can make money. It isn't a great user experience, but people peddling ads at scale don't care about UX a whole lot from what I've seen.
johnrob 12y ago
All transactions on ad exchanges are arbitrage, unless the real time bidder is actually selling a product.
t0mas88 12y ago
After reading this I took the rest of the article with a very big grain of salt: "When you open a web page, information such as age, sex, location and search history are zapped to buyers vying for your attention. Bundled with 999 other people, those eyeballs are offered to the highest bidder, usually ad agencies and their clients" Since the data described is not actually "zapped to buyers" and there is definitely no "bundled with 999 other people" involved in RTB. The whole concept is bidding for a single impression to avoid paying for people you don't want to target to.

34 points by forrest_t 12y ago

I'm interested in knowing how people can even detect this happening. Anyone? The article didn't really go into detail on that point.

toth 12y ago

I got the impression that writer of the article thinks that this arbitraging is supposed to be hurting someone, but it's not clear who. If the traders are arbitrating prices between different ad exchanges, their net price will be zero and they make the ad market more efficient. Who exactly is hurt?

kasey_junk 12y ago
In aggregate? No one. But the people who had been buying ads on the "cheaper" exchanges exclusively either through luck or because they had done research to determine they were cheaper, will now be paying a higher price. Personally, that doesn't bother me, but when discussions about this come up with regard to the financial markets there seems to be some folks who have a moral problem with market participants who "only" act as price arbs between exchanges.
- toth 12y ago
  Yes, and they miss the fact arbitrageurs actually help most people. If these arbitrageurs are keeping all the prices in different exchanges in line, it means that your average ad seller/buyer does not need to spend time and money on researching which exchange has best liquidity (although they probably still want to know which one chargers lower comissions). Of course, there will be an effective fee that the arbitrageurs collect, but competition amongst them will drive that feed down (in principle, to less than what the average person would have spent on research).
aggronn 12y ago
Assuming this doesn't affect advertiser RTB budgets, it hurts all of the players who actually create value (publishers, exchange providers, etc)
- toth 12y ago
  How does it hurt them? They are matching buyers and sellers of ads across different exchanges, how are buyers and sellers hurt by this? Yes, the traders pocket a spread for their trouble, but they also save you the hassle of checking all the different exchanges. And if you really care about that spread, you still have the option of looking at all the different exchanges.
  - aggronn 12y ago
    X dollars go in, x dollars go out. before, average revenue per market participant category was x/n. Now its x/(n+1). At the end of the day, unless their participation increases x by more than their cut, they're just taking revenue from everyone in the game who actually provides value. They don't make the market more efficient.

imaginenore 12y ago

I don't get it. If you buy an ad, you are the highest bidder. How do you sell it for more? Another exchange?

kasey_junk 12y ago
Yes. This is describing classic venue arbitrage.
- imaginenore 12y ago
  And how do you transfer an ad between exchanges?
  - sologoub 12y ago
    Supposedly, you'd fire another ad tag or be integrated in some other way.
sologoub 12y ago
The oldest model that is technically arbitrage are the old school Ad Networks. If you can get audiences assembled from lots of small pieces and sell one big chunk, you make more money overall. With RTB, you can do this "assembling" on the fly and sell with some sort of data enrichment. If impression A is sold as more or less anonymous and you know that impression A is actually a potential customer for brand B, you can sell it to band B for more.

programminggeek 12y ago

This kind of thing used to happen in the early days of AdSense and other platforms. Any time you can take low value ads, and move them to higher value ads, you can make money. It isn't a great user experience, but people peddling ads at scale don't care about UX a whole lot from what I've seen.

johnrob 12y ago

All transactions on ad exchanges are arbitrage, unless the real time bidder is actually selling a product.

t0mas88 12y ago

After reading this I took the rest of the article with a very big grain of salt: "When you open a web page, information such as age, sex, location and search history are zapped to buyers vying for your attention. Bundled with 999 other people, those eyeballs are offered to the highest bidder, usually ad agencies and their clients" Since the data described is not actually "zapped to buyers" and there is definitely no "bundled with 999 other people" involved in RTB. The whole concept is bidding for a single impression to avoid paying for people you don't want to target to.