Private Marketplaces: Welcome to the VIP Club

By Diksha Sahni | April 28th, 2016

Last week we discussed in detail how the RTB auction process works. This week, as part of our on-going series on Programmatic, we take a deep dive into the world of private marketplaces.

Private Marketplaces, or PMPs, are invite-only marketplaces that allow high-caliber publishers to set aside certain ad inventory packages and sell them to a select buyer or group of buyers through a private auction mechanism, transacted through Deal IDs. Deal IDs can be understood as a unique code that is generated to represent the negotiated terms of the deal between the buyer and the seller.

In comparison to open auctions, PMPs give publisher tighter control on what kind of buyers they allow to display on their web page or app, without having to negotiate with each advertiser directly. PMPs have evolved into a format that offers advertisers to test waters in a controlled marketplace environment, before they dived into an open auction system. As a middle ground between open auctions and direct deals, PMPs are also preferred by advertisers who want to gain access to premium inventories before it is made available for open auctions.

Although PMPs are relatively new, the spending on such kind of media buying is expected to reach $3.31 billion by the end of 2016, according to eMarketer. A reason for this is primarily because it offers transparency to both advertisers and publishers on the inventory available and the CPMs. The latter are more competitive because premium advertisers compete for the highest quality ad inventory on highly reputable publishers’ platforms, combining it with the efficiencies of programmatic technology.

For buyers as well as publishers trying to get into a PMP deal, it is important to understand what they are trying to achieve through such a model of media buying to ensure ROI. To understand whether it is the right channel to transact, the Interactive Advertising Bureau (IAB) has put down the three below mentioned points as a checklist:

1. Consideration: Determine if a PMP is an appropriate approach to generate ROI by comparing the buyer’s needs and target audience with the capabilities and audience of the publisher.

2. Activation: Once it has been established that a PMP is the right way to go, ensure that buyers and sellers agree on terms such as inventory, finances, parties involved, etc.

3. Troubleshooting: Identify common issues that may arise once the PMP is set up.

The terms of private marketplaces can vary, allowing buyers to choose how they want to buy media under a PMP ecosystem. There are mainly two types of setup:

Pre-Negotiated or Preferred Deals

Private Marketplaces work with a Deal ID, as explained above. Simply having a Deal ID, however, doesn't put you on top of the “waterfall”. In case of PMP deals, the buyer and seller can choose to strike a “first look” or a “right of first refusal”. "First look" means that a publisher can give priority access to the buyers to buy the inventory, before it is sold off in an open auction. This is a great opportunity for buyers to first get their hands on premium inventory. However, for buyers, it is important to understand and have clarity on what the “first look” entails - is it available on all inventory or only on remnant impressions? "Right of first refusal" is a contractual business obligation under which the advertisers get to have a first say on an inventory when it becomes before it is offered to other parties.

Preferred deals on the above criterion are executed privately with one buyer and one seller at a fixed, pre-negotiated price (usually a fixed CPM basis) before the inventory goes in an open auction.

PMP deals executed as such can be beneficial to both publishers as well as to buyers. For publishers, it means a higher yield for their inventories, while buyers are able to choose the best placement that can work in favor of their ROI.

If you do not have the first look, it is important to understand where you stand in the waterfall and, based on this, discuss the terms of the deal such as CPM etc, as it will have a great impact on your campaign.

Private Invite-Only Auctions

Private auctions are invite-only auctions for specific buyers to participate in when publishers can open their non-guaranteed inventory. Private invite-only auctions also call for a Deal ID to be set up, but are only limited to bidding with a particular bid response rather than competing in an open auction. However, similar to open auctions, private invite-only auctions are cleared on a second-price basis for the winning bidder.

Publishers establish a minimum floor price with the advertisers, allowing a small set of buyers to participate in a private auction. In case of private auction PMPs, the floor prices are set higher than those in open auction. If none of the buyers take the inventory, it goes to an open auction.

PMPs: The Last Word

Private Marketplaces are a great option for premium buyers who are conscious of their brand. It is also being embraced by buyers who want to test the waters of programmatic media buying before sailing off onto the blue open auction ocean. By combining the traditional setup of the ‘sacred’ buyer-seller relation with the efficiencies of programmatic campaign, PMPs allow brands to reach a broader audience base, all while leveraging the first-party data of the publisher as well as their their own. Because of the flexibility they provide to the advertisers, PMPs are finding increased preference, particularly among big brand campaigns.

Up next in the series, we will take a look at Programmatic Direct Deals. Stay tuned!

Diksha Sahni
Diksha is a Content Marketing Manager at AppLift and is based out of our Bangalore office. When she is not behind her computer writing, you can find her binge watching her favorite movies, finding her happy place at a dance studio, and checking off places on her bucket list.

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