PII issues will never go away with real time bidding

Houston, PII has a problem
Houston, PII has a problem

PII issues have long been a point of discussion among us all.  In all that talking and discussing, we never uncovered the root cause of why PII issues are such a dominant force in the current real time bidding market architecture. I propose that taking another point of view at the problem reveals that it is a direct outcome of the market architecture and not a side-effect of some other economic inefficiency. The current market architecture in real time bidding is a ‘call-and-response’ system. One side, the seller calls, and the other side, the buyer responds. This means that the entire market is dominated by the way sellers define their demand. In simple terms, if no one is selling what I am specifically looking to buy in the market, how do I market my demand?

This means sellers need to express their supply so that buyers will bid. Economics teaches us that in this situation, the seller is best served by providing as much information as possible on this impression, so that the maximum number of potential buyers is achieved. In other words, there is an economic incentive to say as much as possible about the impression.

The problem with this market architecture is that sellers can’t search for buyers before the inventory shows up. If a seller could search for demand and elect to meet some of that demand with their supply, the only information transferred during the transaction is that this audience member and ad placement unit meet the criteria of the buy order. So, if a seller never meets demand that violates PII standards, all transactions will be free of PII issues. In a market structure where demand can be transparent, the incentive is to share as little information as possible. This is the opposite market structure incentive from that of the real time market architecture.

The real time market architecture segregates supply and demand to the ‘call’ side or ‘response’ side, the market self-defines itself as an asymmetric market. For some inventory acquisition strategies like retargeting, this is a great, and most probably the most optimal, market structure. But, for big brands this market asymmetry is bad. We all know that they buy huge swaths of audiences across all media to build their brand. For these buyers, the real size of the transactions ($) they want to make is not accounted for in the second price auction. That auction does not know or care that you have a $25K budget for this line item.

This is a problem. By leaving this demand out of the price calculations we are effectively only looking at the tips of icebergs; and we still have tons of PII issues. If you are a marketer or a publisher navigating your boat through these treacherous waters, no wonder you’re fed up.