Asymmetric Information in Programmatic Advertising. Three studies on adverse selection, mechanism choices, and fee structures

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The display advertising market has undergone major changes in recent years thanks to programmatic advertising, a high-tech real-time supply chain that facilitates the transaction and delivery of ad impressions. However, actors in the programmatic advertising supply chain still suffer from a generalized lack of transparency due to its complex competitive and technological landscape.

This dissertation investigates the role of asymmetric information in the relationships between advertisers (buyers), publishers (sellers), and Ad Exchanges (auction platforms) in the programmatic supply chain.

The first study examines the coexistence of open real-time auction markets (RTB) and private marketplaces (PMP). We find that allocating ad impressions to PMP through premium contracts not only does not benefit advertisers, but also leads to adverse selection in RTB.

The second study focuses on Ad Exchanges' choice between the second-price and first-price auction mechanisms. Our results suggest that despite widespread mistrust in their commitment to auction rules, Ad Exchanges offering second-price auctions can gain a relevant market share depending on their competitors' fee policies.

The third study examines the impact of publishers' mechanism changes on Ad Exchanges' incentives to set buy-side and sell-side fees. We show that the shift from the waterfall mechanism to header bidding eliminates the incentive for Ad Exchanges to maintain lower sell-side fees, ultimately reducing publishers' revenues.

Overall, these studies provide new insight into the digital advertising market by highlighting the effects of asymmetric information, conflicting incentives, and mechanism choices in programmatic advertising.