nToggle: A Hot Product but No Customer

Yesterday’s acquisition of nToggle by Rubicon was a big surprise.

nToggle offers technology in big need right now. All programmatic platforms saw massive spike in impression volume, resulting from the combined effect of Header Bidding and Reselling.

In order to protect their infrastructure, DSPs and SSPs need to eliminate bid requests that have a low probability of converting, including duplicated impressions. This filtering mechanism is often referred to as “intelligent throttling” or “supply path optimization” (SPO).

A few startups lined up to solve this industry-wide problem. nToggle became the best known of them.

You would think nToggle had customers lining up to license their technology. So why selling?

SPO is too important to outsource

From what I heard, most platforms are developing SPO in-house. SPO is mission critical for platforms, who must offer scale without spending a fortune on hardware.

There is also strategic value in SPO.

Most SSPs want to do reselling. Reselling AdX inventory, for example, means double bid requests even for the largest platforms. Fill rate on resold inventory is tiny, so SPO is a must.

For DSP, the strategic impetus is more about scale for highly targeted campaigns, and in effective campaign optimization.

SPO must identify and eliminate intermediaries who take the higher margins. In particular, DSPs will start integrating directly to the header bidder or ad servers of the largest publishers, and they will need to de-dupe impressions they can buy directly.

Rubicon Was Getting Desperate

Officially, Rubicon is buying nToggle to offer clean, de-duped inventory to their DSP clients as a differentiation move. I don’t buy that one minute.

Rubicon was simply slow at developing SPO in-house, reminiscent of how they missed the boat on header bidding in 2015.

As Rubicon realized their competitors were filling up their pockets with reselling impressions, they needed a jump start on SPO. Buying nToggle gave them the technology and manpower to catch up with the widespread practice.

A $38MM mistake.

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