One of the oft asked questions is how to define margins on the platform to make money ! This article aims to define some critical parameters of the platform.
Under Settings -> Defaults, following important parameters govern margins:
DSP Pricing Model (1st or 2nd Price)
This parameter defines whether you charge your direct clients who create campaigns on the platform on 1st or 2nd price basis. For example, if a campaign bid is $1.00 and you charge on 1st price, then client will be charged $1.00. But on second price, client will be charged on the basis of cost of media buy + margins.
Note that all programmatic selling to DSPs is always 2nd price.
Network Margin in Percentage for Media Buy
This parameter defines the percentage margin you wish to keep in a transaction. Lets say this margin is 20%. So a bid of $1.00 would mean that system would purchase inventory of $0.80 or less.
Profit Mark Up in Percentage for Dynamic Bids
This parameter defines the percentage mark up you wish to apply on cost of media buy. Lets assume that the actual cost of media buy was $0.50. So you would charge your client $0.50 + the profit mark up.
Some clients just use a small network margin so they can purchase inventory closer to actual bid amount of the campaign and bill their clients a percentage of their spend, like in an agency model.
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