The pros and cons of private marketplace (PMP) deals

According to a report by eMarketer, programmatic ad spending on private marketplaces (PMP) will surpass that on open exchanges for the first time in 2021. Also, ad spend on PMPs is growing 3x faster compared to open exchanges. So, why is spend shifting from open exchanges to PMPs?

There are two key reasons for this trend. First, the proliferation of newer PMP discovery, planning, and transaction tools are simplifying the process of setting up and maintaining PMPs. Second, the collapse of third-party cookies is making advertisers shift focus to first- and second-party data—which is more readily accessible for use in campaigns via PMP deals.

While PMP deals have several advantages over transacting on the open exchange for publishers, it is also just as easy to undersell inventory, depending on the terms. Here’s a quick overview of what is a PMP deal, how they work, where they sit in terms of priority, and their pros and cons.

What are PMP deals?

A private marketplace, as the name suggests, is an invite-only marketplace where publishers make their premium inventory available directly to select buyers. PMPs are a subset of real-time bidding (RTB) and combine the efficiency of programmatic with the exclusivity of direct deals.

In terms of priority, PMP deals sit between guaranteed deals and the open exchange. Publishers segment and bundle premium placements for PMP, leaving remnant inventory for the open exchange. This is not a rule of thumb, but many publishers set it up this way.

If we look at the private marketplace vs the open exchange, advertisers don’t have full visibility over where their ads might appear with the latter. PMP deals allow advertisers to selectively choose inventory. In other words, PMP deals allow advertisers to meet their brand safety goals. There are other advantages for advertisers too, but in this post, we’ll focus on the pros and cons from a publisher’s perspective.

Like other types of programmatic direct deals, PMP transactions happen via a Deal ID.

What is a Deal ID?

A Deal ID or Deal Identifier is a unique 19-character number generated by a publisher’s ad server or supply-side platform for facilitating programmatic direct deals (including PMP deals). Once the Deal ID is generated, it is passed along with the bid request, and allows demand-side platforms (DSP) to recognize the deal in auctions and bid accordingly.

The specifics of the deal, including minimum bid price, are usually pre-negotiated between the publisher and the advertiser before the Deal ID is generated.

Deal ID is therefore the technical mechanism that enables one-to-one relationships in programmatic deals, where advertisers can access premium inventory on previously agreed upon and/or preferential terms and publishers can command a better price for their premium inventory, while simultaneously keeping it outside the open exchange.

Pros of PMP deals for publishers

Better inventory control

PMP deals give publishers more flexibility and control over how they want to package and sell their inventory, and on what terms. For instance, you might decide that you don’t want to sell your above the fold (ATF) inventory on the open exchange and instead want select buyers to access it at a set price. PMP deals allow you to do that.

Premium on first-party data

As part of the PMP deal, publishers can provide direct access to their first-party data to participating advertisers. Given the erosion of third-party cookie data, deals where advertisers are more confident about who they are targeting will only become more valuable with time.

Brand reputation

While publishers have access to category filters and URL block lists on most open exchanges, they don’t have complete control over what types of ads will end up being served. Since PMP deals allow publishers to selectively invite advertisers to bid, they can exercise better control over what type of creatives will be served on the most prominent locations on the website.

Cons of PMP deals for publishers

No revenue guarantee

Unlike programmatic guaranteed deals, publishers don’t have the obligation of meeting a specific impression volume in PMP deals. The downside of that is that advertisers are also not obligated to purchase your inventory via PMP. So you might spend the time creating a PMP deal, only to find that you underestimated the advertiser demand for that offering.

Easy to undersell

All models of inventory sales require ongoing maintenance and PMP deals are no different. Publishers need to frequently revisit their offering and adjust the minimum bid price based on demand, market trends, and seasonality. As a specific example, a publisher will want to increase their minimum price in anticipation of increased demand as Q4 approaches. If you don’t, there’s a risk of your inventory being sold at a price lower than what it could have.

Not immune to ad fraud

Despite the exclusivity, PMP deals are not immune to ad fraud. “Instead of being robotic, botnets now piggyback on existing malware-infected computers, mimic human behaviors, and reverse engineer detection solutions. They can copy IP addresses, browsing times, cookies, mouse movements, and keystrokes,” says Paul Harrison, Manager of Business Intelligence at White Ops. “The result is that PMPs buys are now just as susceptible to fraud as non-PMP ones. Our research uncovered that 40% of domains had more fraud on private buys than outside PMPs.”

Conclusion

PMP deals are one of the three types of programmatic direct deals. They allow publishers to package their premium inventory and offer it directly to select buyers. It can be a useful tool for meeting a variety of broad objectives including revenue goals and brand reputation.

Remember, unlike the programmatic open exchange, multiple bidders aren’t competing for your PMP deals by default. So once you create an offer, it’s crucial to get it in front of the right people and actually sell it by emphasizing the benefits, whether that’s in terms of the premium placement, viewability scores, or any other key metrics that matter to advertisers.

Comments
  • Very interesting post,

    So, from a publisher perspective, what would your answer be on the in-house built vs outsource question? Is it worth for big publishers to try and build this in-house? And second part of the question, which players would you recommend to go with in case the answer is to outsource it?

    Cheers!

    • Hi Pepe,

      Thanks for your comment! The in-house vs. outsource question has been a long-standing conundrum for many publishers. In the end, it’s a factor of how much customizability you need and availability of in-house engineering resources. Building in-house solutions is probably the right move for really large publishers, who have the resources to set up and maintain their own ad stack. For smaller publishers, it might also not make sense from an RoI perspective, as the revenue you might save in lower operational costs might not adequately cover the initial investment needed to in-house.

      Here’s an interesting guide on this: https://www.admonsters.com/ad-ops-guide-outsourcing/

      Warm regards,
      VJ

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