Bid caching: Index Exchange is reusing bids in future auctions

This week a new revelation is mining the trust between exchanges, DSPs, and buyers. On Wednesday, Index Exchange revealed that is reusing win auctions, on another bid requests “on the same inventory, for the same users, on a very tight time window to maximize performance for their advertisers.” Index Exchange called this process bid caching.

According to Ad Exchanger, DSPs are not happy with this practice. At least one DSP was forbidding this practice contractually, and another DSP asked Index Exchange to stop doing bid caching. Index Exchange ad revenue dropped significantly on the DSP, after bid caching stopped.

“We didn’t think it was an issue with buyers. We were so surprised. We thought this was an industry practice,” said Drew Bradstock, SVP of product at Index Exchange, to the Ad Exchanger.

PubMatic, a competitor ad exchange, said yesterday on LinkedIn that “does not, and has never, engaged in bid caching.” Rubicon, Mopub, and OpenX confirmed on Twitter that they are also not doing bid caching.

The difference between ad caching and bid caching

Ad caching is when the auction happens before the placement appears on the screen. A user is playing a game, and after 3 seconds an ad will appear. During this time frame, the auction already happened and the ad was loaded to be shown to the user. Ad caching improves the user experience, as the user does not wait that the ad loads. Ad caching can, however, invalidate the viewability measurement.

Bid caching seems to have been originated on the ad caching method. Index Exchanges says they “optimized caching to ensure buyers are bidding on the same inventory, for the same users, on a very tight time window to maximize performance for their advertisers.” What does this mean? Bid caching reuses a bid submitted in one auction, in another future auction.

Pros and Cons of bid caching

Simon J Harris, did a deck on Twitter and LinkedIn where he elaborates the pros and cons of bid caching. Benefits are mainly for the exchange caching the bids. In addition, publisher yields will be improved. But on the buying side, there are risks of overpaying, for brand safety and quality.