Ad tech can no longer handle all the ads available for sale

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There are so many ads for sale on the web that ad tech firms can barely even handle it.

Many ad tech companies promise software designed to process thousands of ad transactions in real time. But thanks to header bidding — a tech hack that has leveled the playing field in programmatic ad space over the past several years — ad tech can’t process all the ads that are out there.

That’s according to Tom Kershaw, chief technology officer at the embattled ad tech firm Rubicon Project. The surge in popularity in header bidding, which allows web publishers to open up their ad space to multiple potential buyers simultaneously, has led to such an explosion in inventory that it is straining the current infrastructure, he contends.

That’s why Rubicon just spent $US38.5 million to acquire the two-year-old startup nToggle. The company’s technology is designed to make it easier for ad buyers to sift through millions of ad impressions at a given moment.

The very premise of ad tech is that software can evaluate and buy thousands, if not millions, of digital ads with a level of speed, sophistication and precision that humans can’t replicate. Dozens of companies have launched promising to help media buyers avoid having to directly make deals with thousands of websites, instead allowing them to use all sorts of data to target individual web users in milliseconds with a few clicks of a mouse.

Ad buying software companies like DataXu and The Trade Desk, known as demand side platforms, or DSPs, are supposed to be good at doing solving for the challenge Rubicon is describing. But ever since header bidding took off, these companies are dealing with five times the number of ads, said Kershaw.

Previously, when an ad on a publisher’s site went up for sale via various programmatic channels, potential buyers took turns. Google’s ad exchange might get the first chance to bid on that ad, and if that exchange passed, another buyer, like AppNexus might get a shot.

But with header bidding, publishers can let multiple ad buyers all get a chance at their ad inventory all at once. Which means that DSPs are seeing potentially all the same ads on all the same publishers again and again.

“DSPs see tons more traffic than they used to,” said Kershaw. “
Now every exchange has access to all the impressions. Buyers see see same ad slot 10 times.”

That dynamic is straining ad tech companies’ infrastructure while adding to their costs, he said. “Something had to give.”

That’s where nToggle comes in. The startup had been selling its tech to publishers, helping them avoid having to dig through every single ad impression on the planet by using a proprietary algorithm and compression technology. Rubicon plans to bake it into its ad exchange.

“Buyers will only see requests they want to see,” said Kershaw.

The acquisition comes at a pivotal time for Rubicon Project. The company has had a rocky time every since it went public in 2014. And executives have acknowledged that the rise in header bidding has impacted the company’s business negatively. It’s stock price has hovered around $US5 for a while.

Rubicon’s founder stepped aside from his CEO role earlier this year, and the company was reportedly looking for a buyer, according to the Wall Street Journal. Meanwhile, Rubicon is being sued by the Guardian, which alleges that Rubicon did not disclose certain fees.