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The Price is Right: Which Programmatic Pricing Model Should You Choose?
Like many things in online advertising, programmatic media buying is a numbers game. By choosing the right pricing model for your DSP, you can optimise your spend and supercharge your campaigns.
Whether you’re considering your eCPM, calculating your click-through rate, or totting up conversions, it’s all about the core metrics.
But there’s one metric which may be higher on your priority list than others: the price you pay the DSP to access the inventory you need. How this price is calculated – the pricing model – can make all the difference in maximizing your working media spend and ensuring your budget isn’t being diverted anywhere other than the media you want.
To this end, you’ll need to choose a demand-side partner that has a pricing model that works for you – but where do you start?
Here’s everything you need to know.
Table of contents
- A brief history of programmatic pricing models
- Pricing Model #1: Share of Media Cost (SoMC)
- Pricing Model #2: QPS (Queries Per Second)
- Pricing Model #3: Filled Impression Volume
- A note about (potentially) hidden fees
- Summing up
A brief history of programmatic pricing models
Before we dive into a detailed comparison of the industry’s most common pricing models, let’s first take a (very brief) trip down memory lane.
Back in the early days of programmatic, (yep, we were there), the world’s first media buying platforms used the same pricing model: share of media cost. While this model was easy to understand and apply equally across clients, it also created financial risk to the DSP if a buyer was listening to traffic and not buying – which is why many DSPs will impose minimum spend commitments and will actively shape or filter the traffic they send to buyers to ensure the media fees they are able to collect are greater than the hardware costs they incur.
We’ll go into detail on this in a few moments, but the key point is that it wasn’t always a suitable option for every media buyer.
While this approach works for some media buyers, those looking to achieve specific goals and ensure positive ROI or greater flexibility started looking for alternatives – and it’s here that other pricing models started to hit the marketplace.
Pricing Model #1: Share of Media Cost (SoMC)
What is Share of Media Cost (SoMC) based pricing? Share of Media Cost is typically charged at between 12% and 20% of the media you buy. For example, if you buy $100 in media, and your DSP has a 15% share of media fee, you can expect to pay $15 in fees - these fees almost always include technical costs for accessing the platform as well as operational costs for things like managing collections, payouts, and, discrepancies among the various trading parties.
DSPs offering this model will usually do so on a sliding scale or tiered system based on volume; for example, you might pay 15% for all media purchased before hitting $250k and 14% for spend between $250k and $500k.
Which buyers are best suited to this model? SoMC is one of the easiest ways to plan your media buying – easy to forecast, reliable, easy to explain back to clients – because you know exactly how much you’ll pay before you even begin. It’s a good option if you aren’t using any technical solutions which are dependent on the traffic volume you’re processing.
What else should you know? While SoMC is simple and scalable, it’s also worth noting that SoMC is not always cost-effective for buyers looking to secure premium or video traffic with high CPMs. For example, when you are buying media at $0.50, a 15% fee only equates to $0.075 CPM. However if you are buying CTV inventory at $30 CPMs, that fee all of a sudden becomes less palatable at a $4.50 CPM.
It is also important to find out how and where the DSP fees are taken in the bid flow: does the DSP reduce your bid amounts to collect the fee or is it billed on top of spend? Depending on the collection process, this may impact how competitive a buyer is in the auction, and will necessarily inform how you bid to ensure those bids are able to satisfy any pricing floors.
Pricing Model #2: QPS (Queries Per Second)
What is QPS (Queries Per Second) based pricing? A QPS, or Queries Per Second, model is charged based on the volume of bid requests you are listening to and processing each second. So, if you elect a plan that guarantees you 1,000 QPS, every second you will receive 1,000 bid requests, or 1,000 ad opportunities to bid on across all of your campaigns. Actual pricing will differ depending on the DSP, but as a general rule, the price per QPS will drop with the more volume you receive. In addition, there is typically a small billing fee (taken as a % of media) added for collections, reconciliations, discrepancy management, and other operational costs.
Which buyers are best suited to this model? QPS is ideal for clients who are more engaged with the technical side of programmatic buying. If you’re looking to leverage machine learning algorithms and log-level data intelligence in order to maximise performance, QPS is a great option.
It also offers an unmatched level of control, letting the buyer dictate how much of the bidstream they want to listen to and what it looks like (unlike other models where the bidstream is shaped by the DSP to control its costs). This is especially good if you need access to large volumes of users to match audience pools or are constantly exploring new supply pools to find higher performing inventory types and sources.
What else should you know? Along with the minimum volume we mentioned above, it’s important to understand that QPS pricing is most profitable when you maximise your price-per-query. In other words, your aim should be to pay the lowest QPS value possible while also filling the maximum number of impressions. Alternatively, if pure volume is what you’re after, you’ll pay less per query at higher QPS levels; depending on the pricing tiers of your DSP, doubling the QPS you buy could half the price-per-query.
It’s also worth noting that QPS pricing works best when you have a deep understanding of the data you’re bringing to the bidstream. If you have a low user match rate, or a low win rate, you might end up with excess costs for limited media spend – in which case, another pricing model might work better.
Pricing Model #3: Filled Impression Volume
What is Filled Impression Volume based pricing? This pricing model is based on the total number of ad impressions served on publisher sites across a month. For a set monthly fee, you will be allowed to serve a given number of impressions. If you fill more impressions than your plan allots to you, you'll either be bumped up to the next plan or charged an overage fee to cover the excess impression volume. Like the QPS model, the price you pay will decrease with volume: the more impressions you buy, the lower your costs will be.
Which buyers are best suited to this model? Impression Volume is an economical choice for any media buyer targeting high-value inventory or those that mostly buy through deals. For example, if you were buying CTV inventory for an average CPM of $20 and were paying a percentage of media fee (say 15% average), your fee would be $3 CPM. However, if you were paying via a filled impression model, your fee could be somewhere in the $0.20 to $0.40 CPM range – and those are some pretty huge savings.
What else should you know? If you’re considering leveraging the Impression Volume pricing model, it’s important that you understand the type of inventory you are targeting - it would be unwise to use your impression allocation on traffic that you can easily acquire cheaper via other pricing models. The flipside of this is that there’s less room to use exploratory spend to find new audience or inventory pools, in which case you’d be better off with the QPS model.
A note about (potentially) hidden fees
These three models cover the basics, but you should also know about a couple of other potential costs when it comes to your DSP – some of which aren’t always obvious.
The most common of these is that some DSPs will apply either monthly spend or fee minimums. These costs are generally levied to account for ongoing hardware and other client maintenance costs, and they can raise the floor of what you’ll need to spend to work with that DSP. So, if you're quite new to programmatic, or aren’t spending a lot, it may be best to start with a DSP which doesn’t apply these.
Some DSPs may also apply a fee to use optional data or optimisation services (for things like viewability, contextual overlays, etc). It’s usually up to you whether you leverage these third-party services, but your DSP will generally add a charge to your CPM or charge a low percentage of media cost.
Now that you’re familiar with each of the most common DSP pricing models, let’s sum it all up to help you make a better DSP decision.
- Share of Media Cost (SoMC) is arguably the ‘standard’ pricing model in online advertising, but that doesn’t mean it’s right for all media buyers. If you like predictability, and a model that is easy to understand - this is a good model. If you have specific bidstream filtering or targeting requirements, or are buying very high CPM inventory, this is not the best model for you.
- Queries Per Second (QPS) based pricing is ideally suited to companies looking to make the most of the data within the bidstream or leverage first-party segments and algorithmic assets. It can also be very lucrative for those looking to tap into large volumes of high-CPM traffic.
- Filled impressions pricing is perfect for media buyers who are looking to focus on high-value or deals traffic with a high chance of conversion. This pricing model allows these buyers to buy at high CPMs while also minimising trading costs.
Still unsure about how to choose the right DSP for you? No problem – we’ve put together a list of 9 essential questions to ask a potential DSP partner – or speak to us about BidCore, our fully customisable DSP designed to grow with your business.
Book a demo of BidCore today, and we’ll show you exactly how nimble, flexible, and scalable it can be as your DSP of choice.