Programmatic Video #WotW: What is The Floor Price?

Programmatic video is the fastest-growing category of programmatic buying, but a lot of marketers are still struggling to get to grips with the basics.

A recent study by the Association of National Advertisers and Forrester found that only 23% of marketers said they understood programmatic and were using it to execute their campaigns. This is despite the fact that more than half of US publishers reported selling their premium video ad inventory programmatically in August 2014 (Adap.tv), while mega-brands like American Express and P&G vowed to shift the majority of their ad spend to programmatic by the end of 2014.

There’s clearly a knowledge gap between the programmatic front lines and everyday marketers, making 2015 a key year for programmatic education. As with any burgeoning new trend, one of the main causes of confusion is vocabulary.

Any discussion of the topic produces a web of jargon and acronyms that’s enough to send anyone running to Google. But fear not, this is easily solved.

Each week we’ll be serving up handy guides to the most important programmatic video terms, courtesy of Unruly co-founder and CTO, Matthew Cooke. Last week looked at what a DMP is. This week, Matthew explains what the Floor Price means. Stick around and see how quickly you can master the art of programmatic.

What is The Floor Price?

The floor price is the minimum price a seller is willing to accept for an item being auctioned.

In the programmatic world you might hear someone say, “That publisher has a floor of $5 CPM.”

So what does that mean? Floor is simply short hand for “floor price”. CPM stands for “Cost per thousand”. The “M” is actually from the Roman Mile, which is 1,000 paces.

So what this means is that the ad impressions must generate at least $5 for every 1000 impressions for that publisher (or 0.5 cents per impression auctioned).

If no bidders place a bid of at least the floor price then the impression is not sold at auction, the publisher might then either not run an ad or fall back to some other exchange or network.