- 30 Apr
- Eric Hochberger
BidShield: How Our New Technology Guarantees Payments
As you all know, we are living through unprecedented times, both personally and professionally. What none of us know is how extreme the economic fallout from this global health crisis will be.
Fortunately for Mediavine publishers, we will not only survive this tumultuous period but come out stronger on the other side.
To that end, we’re proud to announce BidShield, our proprietary new technology designed to mitigate risk and ensure that we all continue to prosper through this current uncertainty and beyond.
We’ll explain how it works below, but BidShield can be summarized as follows:
You will always be paid and paid on time. Period.
We guarantee that, with no exceptions. Period.
It’s in our contract. Period.
What is BidShield?
BidShield is a technology we developed in the past few weeks to safeguard against industry risks outside of our control. These include clawbacks, delayed payments, bankruptcies and more.
We can’t vouch for the financial situations of the dozen-plus ad partners whose inventory runs on Mediavine websites, but we can calculate and apply a real time risk factor to their bids.
Why are we introducing BidShield now?
Mediavine has been an internet publisher for 16 years and an ad management provider for five. Even in times of relative stability, we’ve seen the volatility of this industry; a looming recession amplifies the unpredictability.
The programmatic advertising ecosystem was already headed for a period of consolidation — a nice euphemism for companies going out of business or being swallowed up by bigger ones before inevitably folding.
Why things were trending that way is a topic for another blog post, but in short, programmatic ads are becoming more mature, efficient and commoditized — what naturally happens to nascent industries as they evolve.
Add a global economic crisis into the mix and we knew we needed to act.
In the past, Mediavine has never passed along a clawback (a non-payment due to bankruptcy) to our publishers. Put another way: We will still pay you the full revenue you have earned even if advertisers leave us high and dry.
We’ve witnessed companies such as YieldBot, Defy Media, Sizmek, IgnitionOne and others go under. We absorb these often considerable costs as a company, while publishers’ income remains unchanged and secure.
However, with the Mediavine revenue share reaching as high as 90% for the publisher, and these payment issues becoming more and more common, fully absorbing the costs of them is no longer sustainable.
But rather than moving to the model of most ad companies — pulling this money back from publishers whenever they feel like it — we decided to solve this the Mediavine way: Using technology to make our community better.
How does BidShield work?
A joint effort from our Business Intelligence, Ad Operations and Finance teams, BidShield uses a proprietary formula to determine the risk factor for bids received in our auctions.
While we can’t divulge the exact figures, for fear of the system being gamed, it translates into a proprietary adjustment in the bid response, which is then applied to incoming bids. This will accomplish two goals:
First, it will give companies with a lower risk factor a bidding advantage.
This, in turn, will help shift money to more financially stable companies. Riskier companies will win fewer auctions, therefore lowering the overall risk to our company and publishers.
Still confused? We don’t blame you. Let’s use an example.
Let’s say we have Risky Bidder, who bids 1.00. We internally adjust that down to 0.95 based on risk factors. Safe Bidder, meanwhile, bids 0.97, but with no risk adjustments.
This will mean that Safe Bidder, who previously would’ve lost, wins the auction with its 0.97 bid. Why do we want this? Because we know that 0.97 from Safe Bidder is guaranteed.
While 0.97 is nominally less than 1.00, assuming all things are equal, that’s the entire point — we can’t assume all things are equal. Especially not now.
When there’s a very good chance the 1.00 from Risky Bidder isn’t real — because we’ll never actually get paid — it’s worth less than Safe Bidder’s 0.97.
That’s part one. Second comes the much more complex aspect.
We’re going to take the original bid amounts and store them, but only enter the adjusted bid into the auction. If we end up being paid as promised, we’ll end up with an extra payment.
Let’s use an example:
Let’s say Risky Bidder put in a bid at 1.00, adjusted down to 0.95 due to risk as discussed earlier. Where does that 0.05 go? Into the BidShield pool.
The BidShield pool
Here is the simplified version, if you’re still with us. Winning bids from risky bidders get adjusted down and there’s some extra money. What happens with it?
If Mediavine gets paid by that Risky Bidder, then it enters into the pool. It then sits in the pool while we wait to make sure there’s no “clawbacks.”
Unfortunately, clawbacks, late payments and unfavorably long payment durations will mean that this money will sit there for up to six months.
After those six months, we’re able to distribute all paid monies to our publishers. Mediavine does not keep any additional fees from this service and all paid funds are distributed to publishers.
We will be completely transparent in this process and let publishers know if there’s been any “claims” against the pool from non-payments or clawbacks.
We certainly hope there won’t be, but the best news of all is that even if you never receive a single BidShield pool payment (which don’t worry, you will), there still won’t be much impact to your bottom line.
How will this impact Mediavine publishers?
Almost not at all! In demoing this product on Mediavine owned sites, we’ve found that BidShield and our risk factor calculations will impact earnings by less than 1 percent. Yes, you read that correctly.
BidShield will be almost completely if not entirely undetectable to you as a publisher. So why are we even telling you about this?
Because one, you’ll be receiving checks from BidShield in about 6 months. That’d be kind of super weird if we didn’t explain.
More importantly, this is actually exciting news — and not just because it means you’ll always get paid. (Though that is exciting.)
It’s exciting because this can actually mean more money for you.
This will allow us to work with and bring on new ad partners during what should, by all accounts, be a risky time to be doing so.
At Mediavine, we never want to stop innovating, and part of our innovation has been — and will continue to be — evaluating and optimizing the companies involved in our auction.
Our pool of bidders has already shifted significantly over the past year and we only expect these changes to continue. Not just from consolidation, but from a broadly reshaped landscape.
Mediavine has always been agile and able to adapt to shifting circumstances. This gives us the flexibility we need to do so even at a time when many industry players are contracting or outright failing.
We are independently owned and operated, with zero outside investors, debt or obligations beyond sustaining your businesses and ours. Our commitment to financial responsibility and transparency is paramount.
BidShield is yet another tool in our arsenal as we continue this mission. We are all in this together and will continue to grow together.