It’s time for PMPs to pass the baton to a new way of buying

Open X

As part of The Digital Trading Awards Program USA we hear from Ian Davidson, VP of Platform Demand OpenX who talks about a new way of buying.

The very first online ad appeared in 1994. The ad was for AT&T, and was hard coded into Hotwired’s (now known as Wired) page. It looked like this:

In the 22 years since this ad appeared, digital advertising has evolved from direct sponsorships, to the birth of the ad server, followed by RTB and programmatic. With every iteration of advertising technology, the overarching goal has largely been the same: advertisers want more eyeballs, conversions and increased ROI, and publishers want to generate the most ad revenue possible while providing an exceptional user experience that keeps readers coming back.

Each evolution of the online advertising model moves the industry closer to achieving this idyllic reality. However, each buying model presents certain tradeoffs, whether it is speed, efficiency, fill rates, access to premium inventory, driving the highest CPMs, etc., meaning certain desired elements have always been sacrificed.

As programmatic buying became increasingly sophisticated, private marketplaces (PMPs) emerged as a promising solution to fully leverage the efficiency of programmatic while also presenting a number of benefits for both buyers and sellers. Advertisers can control and access more premium inventory before it hits the open exchange, inventory that traditionally was only available in direct sold deals. Publishers can approve buyers to ensure quality, and both sides benefit from the increased efficiency and accuracy offered by programmatic technology.

However, even at this most evolved stage of programmatic, we are left with four fundamental problems: manual workflows, supply led package discovery, no guarantees via programmatic and low revenue per deal.

PMPs require significant manual front-end coordination between buyers and publishers for parameters such as CPM floors, placements, etc. And with no guarantees via programmatic, one of the biggest complaints about private marketplaces is that they don’t deliver the scale that both buyers and sellers want. The lack of pre-synced audience targeting results in low fill rates since the buyers targeting does not get applied until they are sent the request. All of the manual work, coupled with low revenue and fill, makes it difficult for PMPs to reach their full potential. Even Automated Guaranteed deals, which can allow for audience syncing in some cases, doesn’t allow for any buy side optimization – meaning buyers don’t get to apply any of the benefits of real-time bidding technology to those deals.

The industry is ripe for a method of executing guaranteed deals via programmatic technology that incorporates audience forecasting. Buyers like programmatic because of the control, efficiency and transparency provided, but to date, they haven’t been able to access direct-sold inventory programmatically. Without a method in place to transact programmatically with a volume guarantee, it is possible that the ad-tech industry is quickly outgrowing the private marketplace.

Consider a scenario in which buyers and sellers can do an audience forecast prior to making a deal and know how many impressions a publisher can deliver. When both sides know ahead of time the level of scale that can be reached by a specific deal, flexible guarantees can be established wherein a publisher commits to delivering a set number of impressions knowing that an advertiser must fill a certain percentage of those impressions.

The benefits are clear and enticing: publishers can secure guaranteed volume commitments, unlike private auctions and preferred deals, as well as open up an entirely new revenue stream for premium inventory. Advertisers benefit from guaranteed inventory availability prior to deal execution—all the while taking advantage of the efficiency and value of RTB.

The needs of both buyers and sellers are evolving rapidly and the major exchanges need to be able to execute in accordance with those needs as the industry continues to redefine its standards. PMPs are quickly becoming a buying model of the past. It’s crucial for buyers, sellers and exchanges anticipate and adapt to the latest buying methods in order to maintain a competitive edge; to ultimately reach the same goal that AT&T set out to achieve in 1994: more eyeballs, conversions, optimal ROI and revenue.

OpenX are a sponsor of The Drum Digital Trading Awards USA 2016, more details can be found at digitaltradingawards.com and openX.com.

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