A publisher’s guide to the 4 programmatic deal types

Programmatic ad spending has grown by 29% since 2020, according to eMarketer. In their revised forecast, eMarketer estimates that advertisers will increase their display spend by more than $97 billion by the end of 2021.

This spells out an incredible opportunity for publishers to better monetize their content. Normally, this would be done via header bidding. A method most publishers are familiar with when it comes to monetizing their website(s). This method involves the open auction.

Spoiler alert: There’s actually more than one auction model in programmatic advertising.

1. What is Programmatic Guaranteed?

AKA guaranteed buy.

This is a one-to-one relationship between the advertiser and publisher.

The advertiser identifies the content and audience they want to target. They can also set filters and frequency caps (how often the same ad shows for a unique user per day).

The publisher sets the number of impressions the advertiser will get for what they pay.

This process is similar to regular media buying, but the process is automated within Google Ad Manager or any other ad server used to create Programmatic Guaranteed deals. Doing this avoids any potential discrepancies and lowers overhead costs when managing negotiations.

Publishers often use the terms Programmatic Guaranteed and Programmatic Direct interchangeably. But they’re not exactly the same.

What is Programmatic Direct?

Programmatic Direct is an umbrella term for deals that involve directly selling your ad inventory. Think of the normal media buying process, but automated. It includes deals such as Programmatic Guaranteed, Automatic Guaranteed, and Preferred Deals.

Pros and Cons of Programmatic Guaranteed

Pros:

  • Guaranteed revenue: The advertiser buys inventory at a predetermined price set by the publisher.
  • Control: Advertisers and publishers decide on what inventory and creative will be sold and used.
  • Automated process: Everything post setup is automated, so there’s less chance for human error.

Cons:

  • Labour intensive: Although the process is automated, there is still a bit of work needed to set up the deals. Locating advertisers, pitching your premium inventory, negotiating the deal, etc.
  • Volume control: You could under-deliver the number of impressions from the initial quote. If this happens, you may be able to make up for the missing impressions in the following month or quarter. So long as your advertiser is aware.

Who benefits from Programmatic Guaranteed? This deal type is usually reserved for publishers with a big brand appeal.

2. What are Preferred Deals?

AKA unreserved fix rate or spot buying.

Here’s another deal type where an advertiser and publisher negotiate the price (CPMs) and volume (impressions) that the former could bid on.

While this is similar to the one-to-one relationship in Programmatic Guaranteed deals, the advertiser is not obligated to bid at the negotiated price. They just get the first-look option to bid at that price when the ad request for the matching inventory is first generated before it goes into the open auction.

These deals sit in between Programmatic Guaranteed and Private Marketplace deals in terms of priority.

Pros and Cons of Preferred Deals

Pros:

  • Easier to set up: There is no contract, similar to a Private Marketplace deal.
  • Control: You see what type of ad creatives would show up on your website.
  • Better revenue potential: The revenue potential is higher for you as you are able to set your own floor price.

Cons:

  • No revenue guarantee: You may be able to set your floor price but the advertiser does not need to commit to buying inventory at a set price. This can lower your fill rate.
  • Risk of lower CPMs: Your ad placement may pass through the Preferred Deal phase and go straight to the open auction where your ad placements may sell at a lower CPM rate.

Who benefits from Preferred Deals? Publishers with small programmatic or Ad Ops teams that have the bandwidth to diversify their monetization streams should look into Preferred Deals.

3. What are PMP deals?

AKA private marketplace or invite-only marketplace.

What is PMP in advertising? Although this auction still uses real-time bidding, it does not have the same many-to-many relationship that the open auction relies on. PMP deals use a one-to-many system in what we call the invite-only marketplace. In this marketplace, publishers make their premium inventory available directly to select advertisers. PMP deals fall within the realm of private auctions.

How is this normally set up? Unfortunately, it’s a bit of a manual process that involves sending emails to advertisers, leaning on SSPs for their demand partner relationships, or using Google Ad Manager for their buyer relationships.

PMP deals can leverage your first-party data or additional page-level targeting that would not be available in the open auction. Thus, making it more valuable to advertisers. PMP deals happen via a Deal ID.

Pros and Cons of PMP Deals

Pros:

  • Automated process: Once you’ve identified which advertisers you’d like to pitch your inventory to, the rest of the process is automated between DSPs and SSPs.
  • Improved advertiser relations: This comes with negotiating the terms and conditions of the deal with your advertisers
  • Better revenue potential: The revenue potential is higher for publishers as they are able to set their own floor price.

Cons:

  • Perceived inventory value: If you don’t do the best job in highlighting the benefits of your premium inventory, you could end up underselling yourself. Take a closer look at your first-party and site traffic data to break your audience into cohorts. Look at their buying habits or their interests. Think about how you can make this data more attractive to advertisers.

You can find our additional pros and cons of PMP deals here.

Who benefits from PMP deals then? Publishers who know that their inventory is valuable to select advertisers and can convey that value successfully.

Programmatic Guaranteed vs. PMP vs. Preferred Deals

Many publishers assume that once they strike a deal with an advertiser, that advertiser has to bid on their inventory. This is false.

Unlike a Programmatic Guaranteed deal, an advertiser is not obligated to bid on your inventory in a PMP or Preferred Deal. They can even wait until the bid request goes into the open auction to see if they can get the same ad placement at a lower CPM.

4. What is the Open Auction?

AKA open exchange programmatic or real-time bidding (RTB).

RTB is used for header bidding, as well as waterfall auctions. If you are using header bidding, then you are monetizing your website through an open auction in real-time. Most publishers tend to start by using AdSense. The type of auction can also be executed by ad exchanges, DSPs, or SSPs.

During the auction, advertisers and publishers buy and sell impressions in a matter of milliseconds. All of this happens in the time between a user clicking a link on your webpage and that page fully loading.

As this is an auction, publishers set the floor price for their ad inventory. If there is enough demand for the inventory and advertisers meet the floor price, the highest bidder wins.

Among all the deal types we mentioned earlier, the open auction has the lowest priority. The bid request will go through the aforementioned deals first, if applicable, before heading into the open auction.

Pros and Cons of the Open Auction

Pros:

  • Easiest to set up: This is the most accessible monetization method to publishers of all sizes. You can select your floor price, ad placements, any audience filters and you’re set.
  • Wide demand pool: You have access to the widest range of advertisers; great for scaling.
  • Control: You control your floor price, audience targeting, and more.

Cons:

  • No revenue guarantee: A wider pool of advertisers does not mean everyone will want your inventory. There’s no guarantee of ad units sold or the price they sell at.
  • Drop in CPMs: Advertisers can choose where to spend their budget from a large supply of impressions. This gives advertisers more power, which spells out lower CPMs for you. Look into your first-party and site traffic data to see what makes your website(s) attractive for advertisers and convey that accordingly.
  • Control: Surprised to see control as a pro and a con? Although it’s true that publishers are given more control over their inventory, they don’t get much control over who’s buying that inventory. There’s only so many filters that you can apply. You still need to be vigilant about which creatives are showing up on your website and your brand safety.

Who benefits from the open auction then? It has the lowest barrier to entry with its easy setup and you can start monetizing right away.

In Summary

It doesn’t matter if you’re new to ad-supported monetization or have been in the game for a while. Understanding the different deal types will empower you to make better choices without feeling beholden to just the open auction.

Knowing how to value your inventory means taking an analytical view of your first-party data and understanding how to properly leverage your audience in a way that makes it valuable to advertisers.

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