Guest article by Hervé Brunet, CEO and Co-Founder at StickyAds.tv
Private Marketplaces (PMPs) have been introduced to solve the challenge of inventory control– particularly in relation to programmatic video advertising – and are creating a significant buzz in the advertising industry, especially in Europe.
A PMP – also known as a private exchange in the US – is a direct, invitation-only marketplace that enables premium publishers to make their video inventory available to a select pool of buyers, allowing publishers to protect their brand and control advertising yield in a real-time environment. The model combines the efficiency of programmatic with enhanced brand safety and contextual placement.
In Europe, over a quarter (27%) of all programmatic ad spend in the second quarter of 2014 was traded via PMPs, demonstrating their growing popularity in a region that has a strong influence on the programmatic market. In the U.S., the trend continues for digital marketers to place the most importance on open exchanges, maintaining that while PMPs have been launched to bring the efficiency of programmatic video trading to a closed marketplace, they are not presenting a guaranteed revenue stream for publishers against their video inventory.
However in the U.S.,private exchange spend is rising and predicted to reach $3.31 billion by 2016,indicating that its benefits are being realised by increasing numbers of publishers and advertisers.So while PMPs have struggled to gain a foothold in the U.S.,where private deals still have lower priority than direct deals transacted using more traditional methods, it is the benefits of PMPs that seem to be lost in translation across the pond from Europe.
So why are PMPs – particularly concerning programmatic video – not yet growing to their full potential in the U.S., despite the numerous benefits they offer?
Perceived deficiency in inventory
Video inventory is still relatively scarce, and therefore very valuable.Upon first glance it could appear that PMPs are increasing that scarcity by reducing available inventory, but in reality they are more concerned with providing quality inventory over the quantity available. PMPs simply place borders around video inventory to ensure it does not become diluted by less premium inventory. This benefits both the publisher, who can make their inventory shine, and the buyer – who can easily find and target quality inventory.
Concerns over publisher CPMs
In general, publishers have been reluctant to trade premium video inventory programmatically due to concerns over losing control of the sales process, resulting in lower CPMs. In fact, PMPs tend to provide higher CPMs as they have higher floor prices and publishers can charge more for premium inventory.Because publishers can set their own business rules, they can work on a highly customised pricing strategy. They can sell their inventory at different prices according to content type, so a popular TV show or video tends to be priced higher than less attractive inventory. Prices can also be altered at different times of the day to take advantage of traffic peaks, or set by format –so a 30 second pre-roll could cost more than a 20 second pre-roll for example. The higher cost per impressions will become more evident as marketplaces grow – research by Admeta discovered that a 41% increase in CPM was achieved when the number of bidders grew by 50%. The higher CPMs of PMPs are more suited to brand awareness campaigns with less restrictive KPIs than performance marketing.
Individual publisher relationships
One of the major benefits of open exchanges for advertisers is the ability to work with a multitude of publishers without having to strike terms with each one individually. The PMP model is seen by some as a step backwards into a time-consuming world of individual publisher relationships. However, PMPs are still more efficient than traditional media buying as they operate on a programmatic basis, and the benefits to both the advertiser and publisher in terms of brand safety and contextual placement offer additional benefits to an open exchange.
Technical teething problems
Initial technical glitches, along with a lack of investment as technology companies assessed the viability of the model, have led to a degree of caution around private exchanges. Deal IDs – unique numbers that enable direct deals between a publisher and particular buyer based on detailed criteria and objectives– have caused particular concerns. They can be cumbersome to execute and overly restrictive in their pricing rules, resulting in inventory being ignored if its audience does not meet very specific requirements. Fortunately, the industry is working to streamline Deal IDs to make sure direct buys within PMPs benefit both publishers and advertisers, and increased participation by adtech providers in the private exchange arena – particularly in programmatic video – is increasing confidence in the model.
PMPs are the future of global programmatic video advertising. As these initial concerns are overcome, we’ll begin to see more PMP models being adopted in the U.S., especially for premium publishers who need to gain more control over the video inventory they sell.As the employment of PMPs increases on both sides of the Atlantic,they are likely to overtake the open auction as the standard programmatic model – and the adtech industry as a whole will really start to speak the same language.