“A typical DSP charges advertisers a percentage of the media dollars that flow through its platform. An advertiser that spends $10M per year might pay its DSP $1M. At the most basic level, DSPs make more top line revenue by growing advertiser budgets.
DSP expenses, however, have nothing to do with advertiser budgets. After covering overhead like people and facilities, DSP costs scale with the number of bids the platform must process. The core technology of a DSP becomes more expensive to operate as the volume of incoming bid requests grows. Every lost auction is pure cost to a DSP, driving down its profitability.
The trouble with unified auctions is that they drive up bid requests without bringing more revenue into the system. The value proposition of a unified auction hinges on increased bid density — more demand sources participate in every impression. But the byproduct of increased bid density is decreased win rates. Only one demand source can win an impression, so as more bidders participate, more of them lose. A spike in lost auctions is an economic crisis for a DSP.”