The Different Flavors of Programmatic: What All Those Programmatic Buying Terms Really Mean

If you sometimes get confused about programmatic marketing, don’t feel bad. The industry changes rapidly and it can sometimes be hard to keep up. It seems as though as soon as we became accustomed to the three-letter-acronym, PMP, new terminology cropped up — not to mention entirely new deal structures, such as “Premium Exchanges,” that, while different from PMPs, can seem strangely similar.

With so many new terms and abbreviations out there, we thought it would be a good idea to provide some clear definitions and to explain the real differences. While we’re at it, we’ll also take some guesses on what 2015 holds for buyer frameworks.

Programmatic Guaranteed (AKA: Automated Guaranteed, Programmatic Reserve, Programmatic Direct):

A plain and simple definition: The buyer and seller negotiate directly for guaranteed inventory at a fixed price.

What else should you know about Programmatic Guaranteed? It’s never an auction environment. Prioritization is typically at the highest level (the same as other direct deals and/or sponsorships). This probably doesn’t sound much like programmatic advertising but typically the RFP process is automated.

Why/when does Programmatic Guaranteed matter? Whenever you’re focused on strict brand safety, inventory control, high-value placements, and so on.

Private Marketplace (AKA: PMP, Private Exchange, Private Auction, Closed Auction):

A plain and simple definition: The inventory transaction is within an auction environment but the buyers need to be approved by the publisher and there is typically pre-negotiated pricing (i.e. a CPM floor).

What else should you know about Private Marketplaces? Prioritization is typically one level above the open auction and there’s manual workflow involved in setting up a PMP. The terms of the deal must be negotiated between the buyer and seller (CPM floors, placements, etc.) and the advertiser must be approved. When this happens a unique identifier that represents the terms of the agreement between the buyer and seller (the Deal ID) is generated to represent the deal.

Why/When do Private Marketplaces matter? As with Programmatic Guaranteed, PMPs offer the benefits of high-value placements, access before the inventory hits the Open Exchanges and the opportunity to gain additional reach (access to users who might not be found across the Open Exchanges). Another benefit: exclusive and/or “premium” access at a lower price than you\’ll likely get with Programmatic Guaranteed.

Premium Exchange (AKA: Premium Marketplace):

A plain and simple definition: An exchange with only “premium” supply. The Premium Exchange offers all of the automation of an Open Exchange (and none of the manual work of PMPs) with only “premium” supply sources. (Sonobi is a good example.)

What else should you know about Premium Exchanges? They often get first-look privilege with the supply sources that they bring on board and they’re designed to avoid the more manual workflow of PMPs — no deal negotiations, advertiser approvals, and so on.

Why/when do Premium Exchanges matter? A Premium Exchange makes sense whenever you want to augment reach and frequency to the open market without sacrificing quality. Premium Exchanges are structured in a more automated fashion than PMPs (no manual workflow) and can also be more cost effective.

Open Exchange: (AKA: Open Marketplace, Open Auction, RTB):

A plain and simple definition: The most standard and unrestricted way to buy inventory. An Open Exchange allows many buyers to bid on the inventory of many publishers in an auction environment. (Google AdX is an example.)

What else should I know about Open Exchanges? Publishers can participate on a blind basis (the buyer doesn’t know the publisher). Publishers may also choose to use block lists so that certain advertisers can’t buy their inventory. Most Open Exchanges operate on a 2nd price auction model (the winner pays equal to the second highest amount that was bid).

Why/when do Open Exchanges matter? If you’re looking for the most cost effective way to buy, Open Exchanges could be the way to go. They’re fully automated and so avoid the manual headaches of PMPs. The Open Auction also gives access to the largest audience — meaning a sophisticated bidder can happily pick and choose the best impressions.

A Look Ahead

In 2015, we’ll likely see consolidation of some of these frameworks. Premium Exchanges will look a lot like PMPs but without the manual workflow. In fact, we may see PMPs evolve into a more standard, automated, exchange model.

There are also hints that some exchanges are trying to come up with hybrid models that combine Programmatic Guaranteed with an auction model that provides the best of both worlds. We might see frameworks where buyers commit to buying a certain percentage of inventory but still get to pick and choose impressions or even price auction models where the highest bidder wins the impression and pays equal.

In other words, we’ve got a lot of really interesting developments to look forward to in the year ahead. If only it were easier to keep up…