Dynamic pricing is a core part of how digital advertising works today. It refers to the real-time adjustment of ad inventory prices based on changing market conditions. Instead of relying on fixed prices, platforms use auctions to determine how much each impression is worth at the moment it becomes available.
When a user visits a website or opens an app, an auction happens almost instantly. Advertisers who want to reach that user submit bids based on the user’s profile, device type, location, and other data points. The highest bidder usually wins the impression, but the actual price paid may follow second-price or first-price auction rules depending on the platform.
For advertisers, this system offers more precision. They can bid more aggressively for high-value users who are more likely to convert and spend less on impressions that offer lower value. This improves return on investment because ad spend can be concentrated where it has the most impact.
For publishers, dynamic pricing creates an opportunity to increase revenue. When demand is high, such as during peak shopping seasons or in highly competitive verticals, prices can rise significantly. Publishers who open up their inventory to multiple demand sources through header bidding or exchange integrations can increase competition and drive up yield. Dynamic pricing ensures that no impression is undervalued when there’s strong demand.
Factors that affect dynamic pricing include time of day, device type, ad format, geolocation, and historical performance. For example, a user browsing on an iPhone in the evening might trigger higher bids than a desktop user during working hours. Similarly, video inventory often commands higher prices than static display.
It’s also important to note that dynamic pricing can be managed through floor prices and rules set by publishers. These controls help prevent underpricing and ensure a baseline value is maintained. Platforms like Google Ad Manager offer these tools so publishers can stay competitive while protecting their bottom line.
Overall, dynamic pricing brings more efficiency to both sides of the ecosystem. It helps advertisers reach the right audience at the right price and allows publishers to maximize their inventory’s value without manual intervention.
Sam Khoury
Founder, Cedar Consultants
Creative consulting solutions for Adtech