The goal of advertisers and publishers are incompatible.
Advertisers want to pay as little as possible for their ads, while publishers want them to pay as much as possible.
One of the programmatic techniques developed to help publishers do just that is floor pricing.
In this article, we’ll explain everything you need to know about floor prices and how to implement and optimize them for maximal revenue.
What are Floor Prices?
Floor prices, also known as price floors, are the minimum price that a publisher is willing to accept to run an advertiser’s ad. Publishers set floor prices according to CPM (cost per 1,000 impressions).
For example, if you set your floor price CPM to $2, advertisers whose CPM bid is less than $2 won’t have a chance of running their ads on your site.
The rationale behind floor prices is to ensure that your ad inventory is not lowballed by advertisers and is sold for what it’s actually worth.
The Importance of Floor Prices for Publishers
Setting and optimizing floor prices is crucial for publishers, especially in light of new techniques like bid shading that help advertisers pay less for their ads.
If publishers don’t set floor prices, advertisers will eventually catch on and they will begin bidding less for your ad inventory.
When that happens, your overall ad revenue drops significantly.
The Risks of Floor Pricing
The risk of floor pricing lies within overvaluing your inventory and setting floor prices that are too high.
If you set your floor prices higher than what advertisers are willing to pay, then advertisers will simply not buy your ad inventory and you will lose revenue.
Of course, as explained above, setting your floor prices too low will also have an adverse effect on your revenue.
That’s why it’s key to find the perfect floor price for your site.
6 Factors to Consider for Setting Floor Prices
- Ad format and size
- Ad location
- Device and platform
- Geographic location
- Seasonal trends and events
- Historical bid data
Ad Format and Size
Different ad formats and sizes attract different levels of advertiser interest and bid values.
That means that your floor prices will not be the same for each ad unit. For the top performing ad units, you will want to set higher floor prices.
Ad Location
As with ad formats and sizes, the ad’s location on a site affects performance and value.
Ads located above-the-fold or in-content typically have higher engagement rates and therefore require higher floor prices.
Device and Platform
Ad performance and demand can vary across devices and platforms. i.e. computer, mobile, and tablet.
Your floor prices should be set in accordance to the performance of the ads on each device.
Geographic Location
Ad performance varies according to regions.
Ads in tier 1 countries, for example, are much more valuable than ads from tier 3 countries. That’s why you need to make sure that your floor prices reflect the value of the geographic location.
Seasonal Trends and Events
Ad demand fluctuates with seasonal trends, holidays, and major events.
For example, ad prices are historically high around the holiday season in November and December.
During such times, you can raise your floor prices to capitalize on the large demand. Just don’t forget to readjust the prices after the trend is over!
Historical Bidding Data
Analyzing the historical bidding data will enable you to identify trends and average bid values for your ad inventory.
This will help you determine when and how to set the floor prices.
How to Optimize Floor Prices
- Segment your ad inventory
- Use dynamic floor prices
- Do A/B testing
Segment Your Ad Inventory
Segmenting your ad inventory is a crucial step in optimizing floor prices.
By grouping similar types of inventory together, you can set more accurate floor prices that reflect their true value to advertisers.
For example, you might segment your inventory by ad format, ad size, location on the page, or user demographics and device type. Once you have segmented your inventory, you can set different floor prices for each segment based on factors listed above such as seasonality and demand.
Use Dynamic Floor Prices
Dynamic floor prices allow you to adjust your floor prices in real-time based on changes in market conditions.
This is particularly useful because bids and competition can fluctuate rapidly.
By using dynamic floor prices, you can ensure that you are always setting your floor prices at the optimal level to maximize your revenue.
You can set rules to automatically adjust your floor prices based on factors such as time of day, day of the week, or user location.
Do A/B Testing
A/B testing is critical for effective floor prices.
By comparing the performance of different floor price levels, you can determine the optimal floor price for each segment of your inventory.
A/B testing can be time-consuming, but it is critical for finding the right floor prices for your site.
This Sounds Complicated – Who Can Help?
It’s true, setting effective floor prices requires years of expertise and ongoing management. And that’s exactly why publishers turn to reliable and certified monetization companies like Adnimation.
As a Google Certified Publishing Partner (GCPP) and a Google AdX Partner/MCM Partner, we have years of expert experience managing floor prices to ensure that you get the most out of your ads.
Feel free to contact us today for a free consultation to see how you can start optimizing your floor prices.
