Context information can increase revenue in ad auctions : Evidence from a policy change

Ad exchanges, i.e., platforms where real-time auctions for ad impressions take place, historically emphasized targeting based on users, and advertisers often did not know which sites their ads would appear on, i.e., the ad context. More recently, some ad exchanges have been encouraging publishers to provide accurate context information to ad buyers, allowing them to adjust their bids for ads at specific domains, subdomains or URLs. This paper explores the empirical effect of a change in context information provided by a major private European ad exchange. Analyzing this as a quasi-experiment using diff-in-diff, we find that average revenue per impression rose when the exchange provided subdomain information to ad buyers. This shows that ad context information is important to ad buyers and that they will act on it. We also find that revenue per impression rises for nearly all sites, which is what is predicted by auction theory when rational buyers with heterogeneous preferences are given more information. The exception to this are sites which had a low number of buyers prior to the policy change; consistent with theory, these sites with thin markets do not show a rise in prices. Our analysis adds evidence that ad exchanges with reputable publishers, particularly smaller volume, high-quality sites, should provide ad buyers with context information, which can be done at almost no cost