Key Takeaways

• Dynamic Allocation automatically puts direct-sold ads and programmatic demand into competition for each impression

• It helps publishers make more money by ensuring the highest-paying ads always win

• Google has expanded this concept with Exchange Bidding/Open Bidding to compete with header bidding

• Dynamic Allocation favors Google's Ad Exchange in ways that some publishers find problematic

So you're running ads through Google Ad Manager (GAM), and you keep hearing about this thing called "Dynamic Allocation." But what actually is it? Is it some fancy AI tech? Is it just another buzzword that Google created to sound impressive?

Nope - it's way more important than that.

What Dynamic Allocation Actually Is

Dynamic Allocation is basically a traffic cop for your ad inventory that decides which ads get shown and when. But insted of just following a rigid set of rules, it makes decisions on the fly to maximize your revenue.

The main idea is simple: let different sources of demand compete for each impression in real-time.

Before Dynamic Allocation, publishers had to make tough choices. They'd either:

1. Reserve their best inventory for direct-sold campaigns (potentially leaving money on the table)

2. Or prioritize programmatic demand (risking under-delivering on guaranteed campaigns)

Dynamic Allocation changed all that by creating an automatic, real-time competition between these different demand sources.

How Does Dynamic Allocation Work?

Imagine you've got a valuable ad slot on your site. When a visitor loads the page, here's what happens behind the scenes:

1. GAM checks if any direct-sold campaigns (like sponsorships or guaranteed deals) are eligable to serve

2. It calculates a "predicted value" for direct-sold line items based on their CPM and delivery goals

3. Simultaneously, it checks what Google's Ad Exchange (AdX) would pay for that impression

4. The highest bidder wins and gets to show their ad

All of this happens in milliseconds!

As PubGalaxy explains, "Dynamic Allocation creates competition between your direct-sold campaigns and programmatic demand to ensure you're getting the best possible price for each impression."

The Benefits of Dynamic Allocation

This approach has some clear advantages:

1. Higher Overall Revenue
By ensuring each impression goes to whoever values it most, your total revenue naturally increases.

2. Less Unsold Inventory
With more sources competing for each impression, fill rates typically go up.

3. Better Campaign Management
Direct campaigns only serve when they're the highest value option, which helps you allocate inventory more efficiently.

4. Automated Decisioning
The system handles complex decisions automatically, freeing you from constant manual optimization.

According to Google Ad Manager support, "Dynamic allocation allows all non-guaranteed demand—Open Auction and remnant line items—to compete in real time with guaranteed demand," which means you're always getting the best possible price.

The Downsides and Criticisms

But its not all sunshine and rainbows. Dynamic Allocation has faced some legitimate criticism:

1. The "Last Look" Advantage
Historically, Google's AdX had what was called a "last look" advantage. As Digiday reported, "Google would beat any bid based on the average rate that exchanges like The Rubicon Project or Open X would offer." This meant AdX could see what everyone else bid and then just bid slightly higher.

2. Limited Competition
For years, only Google's AdX could compete with direct-sold inventory through Dynamic Allocation. Other SSPs and exchanges were left out.

3. Complex Setup
Getting everything configured correctly can be tricky, especially for publishers with sophisticated direct sales operations.

4. A Black Box Process
The exact decisioning logic isn't always transparent, which can make troubleshooting difficult.

From Dynamic Allocation to Open Bidding

To address some of these criticisms (and to counter the growing popularity of header bidding), Google evolved Dynamic Allocation into what was first called "Exchange Bidding in Dynamic Allocation" (EBDA) and later renamed to "Open Bidding."

Google's Open Bidding documentation explains that it "eliminates the need to manage complex custom header bidding code and the numerous Ad Manager line-items associated with a header bidding implementation."

The key difference is that Open Bidding invites multiple exchanges and SSPs (not just AdX) to compete for inventory simultaneously in a server-side auction. This creates a more level playing field while maintaining the core benefits of Dynamic Allocation.

According to Geniee Group, "Open Bidding enables publishers to invite a number of yield partners to bid for their ad inventory in a single auction."

Dynamic Allocation vs. Header Bidding

Many publishers now have to choose between using Google's Dynamic Allocation/Open Bidding approach or implementing header bidding.

The main differences are:

1. Where the Auction Happens

• Dynamic Allocation/Open Bidding: Server-side (within Google's systems)

• Header Bidding: Client-side (in the user's browser) or server-side through independent platforms

2. Implementaton Complexity

• Dynamic Allocation: Native to GAM, relatively easy to set up

• Header Bidding: Requires additional code and potentially dozens of line items in GAM

3. Control and Transparency

• Dynamic Allocation: Google maintains more control of the process

• Header Bidding: Publishers typically have more visibility and control

As optAd360 notes, "in Ad Manager mediation, each yield partner is called individually, unlike in EBDA, where all yield partners are summoned simultaneously."

Is Dynamic Allocation Right for Your Site?

If you're running GAM, you're already using Dynamic Allocation to some extent. The real question is whether you should rely on it exclusively or supplement it with header bidding.

For small to medium publishers, the native Dynamic Allocation/Open Bidding approach is often simpler and more than adequate. Larger publishers with sophisticated ad operations might benefit from the additional control header bidding provides.

Either way, understanding how Dynamic Allocation works is essential for anyone serious about ad monetization.