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The Four Types of Programmatic Deals

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Not all impressions are created equal. So why trade them wholesale without distinction?

It’s a good and democratic way to trade all your impressions in open RTB environment (akin to AdSense)—all bidders get the same data and price floor, the highest bidder wins, end of story. But that sort of “throw it to the market and let them decide” approach severely limits yield and barely scratches the surface of all the capabilities of programmatic selling.

In this primer, we are discussing all four of programmatic deal types, along with their potential merits and disadvantages for media sellers.

1. Open Auction

  • Also known as: Open exchange, Open marketplace, RTB
  • Participation: All (eligible) buyers on a platform
  • Ad Server Priority: Lowest (just above in-house ads)

An Open Auction is the Wild West of auctions.

— IAB

It’s a lot like plug-and-play trading on AdSense: Every advertiser on an exchange/SSP/ad network gets the impression call, they all bid, and the highest bidder wins (but usually pays only 1 cent more than second-highest bid, thanks to second-price auctions). You earn a share of that price, depending on the winning platform’s compensation terms.

While it sounds chaotic, the environment isn’t entirely out of publisher’s control—there are block-lists and price floors to exclude unwanted buyers and raise the bid amount, at the cost of bid density, i.e., fewer advertisers competing in the auction.

Today, in most publishers’ ad serving stacks, open auctions are a way to sell off scraps (remnant inventory) in order to monetize every last impression. Keep in mind that the blind buy-and-sell environment of open auctions is blamed for brand-risk and fraud, so most major brands will stay away from this inventory.

But that doesn’t mean open auctions are completely without merit.

Pros:

  • Easy setup: You don’t need deal IDs for open auctions. You can, however, “use them as ‘tokens’ to signal that the impression falls into separate content and placement categories, with different floor price”.
  • Easy optimization: With fewer controls, optimizing yield is less time-consuming.
  • Unlimited revenue potential: Demand is not going to dry up on open exchanges. There may be seasonal downlifts, but otherwise, the revenue remains steady.
  • Niche advertisers:  For newer publishers with niche content and too few pageviews to be sold on a niche-specific network, open auctions can help find relevant advertisers amongst a global market.
  • Unsegmented audience: Open auctions maximize yield for sites where the audience is a blend of demographic characteristics and there is no unique value of either the visitors or content. Sites like these benefit from DSPs’ targeting strategies, which enhances the value of impressions for buyers.

Cons:

  • Low overall eCPMs: Compared to other programmatic channels, open exchanges have a much larger supply of impressions. This oversupply gives control to buyers and often returns low eCPMs to publishers.
  • Malicious ads: Attackers aim malware-laden creatives towards open exchanges, specifically for scale—to affect most possible systems at lowest possible cost. Pinpointing the source can be difficult, thanks to media arbitrage and transparency issues.

2. Private Auction

  • Also known as: Private marketplace, invitation-only auction, closed auction
  • Participation: Restricted to whitelisted (invited) buyers only
  • Ad Server Priority: Higher than open auction

Private marketplace spend is increasing, without fail, year over year.

— Index Exchange

We have covered the topic of programmatic private exchanges pretty thoroughly in a previous post. ICYMI: Private Marketplace (PMP) is an invitation-only RTB auction where one or more publishers invite selected buyers to bid on their inventory.

It’s a lot like open auction, with more exclusivity and control in terms of ad revenue optimization. PMP inventory is labeled ‘premium’ and offers differentiated ad inventory packages (built around audience data, impression attributes, content type, and more) to a group of buyers pre-approved by publisher.

Deal ID is mandatory: A unique string of characters defining things like priority, transparency, floor pricing, or data (depending on the platform you’re using). It is assigned to the inventory package which allows it to be purchased programmatically through a DSP.  Major programmatic advertisers are shifting their focus to private marketplaces in search of premium inventory. But it’s not all fun and games.

Pros:

  • High eCPMs: There is great demand for premium, high performing inventory packages on PMPs as brand-safety concerns continues to bring more advertisers to private marketplaces. This means more competition and higher prices for your impressions.
  • Automated: It’s not plug-and-play like open auction, but PMP deals are still automated among DSPs and SSPs, which means they’re less labor-intensive than direct sales.
  • Less data leakage: The impression data isn’t passed to every buyer on an exchange.
  • Better buyer relationships: You know who is buying your inventory packages and you can use this information to give first-look privileges.

Cons:

  • Prime fraud target: According to WhiteOps report, publishers selling high-priced video inventory on PMPs were the prime target of the extremely sophisticated Methbot operation, which spoofed domains and faked clicks on ad impressions.
  • Potential downlift: It may be difficult to maintain high enough fill-rate to surpass open auction revenue.

Within PMPs, you can keep the inventory open to all selected buyers, or you can give some buyers a “first-look” privilege, which brings us to…

3. Preferred Deals

  • Also known as: Unreserved fixed rate, private access, first right of refusal, spot buying
  • Participation: One buyer
  • Ad Server Priority: High (above open and private auctions)

Within private marketplace you’ve set for yourself, buyers may reach out to you for a more “predictable offering”, i.e., they may request to look at inventory (to see if it meets their requirements), without the commitment to purchase it. These are called preferred deals.

Essentially, at the cost of a pre-negotiated fixed price, the buyers get priority and exclusive access to inventory before you make it available to everyone else in private, and then open auction.

The number of impressions are not guaranteed, but the audience is, since buyers’ DSP can use their audience data to review every ad impression before they decide to buy it.

Pros:

  • Highly targeted ads: Impressions won in preferred deals are shown to very specific audiences enriched by DSP data, making it more relevant to your visitors.
  • Better buyer relationships: Buyers reach out directly to publishers for first-look privilege and price negotiation. You negotiate privately with the buying party.
  • Creative control: You can review and approve the campaign creatives beforehand.

Cons:

  • Downlift risk: With less competition, the impressions bought in preferred deals may get sold at a lower price.
  • Potentially low fill: The buyer has the privilege to accept or reject an impression depending on their requirement. Once rejected, they can’t re-enter open auction for same impression. For this reason, it’s important to price and segment the inventory appropriately.

Note that exchange rules apply to preferred deals. For instance, in DoubleClick AdX

If multiple buyers bid at the fixed price set for them, the highest fixed price wins. If the fixed prices are the same for all those buyers, one buyer is chosen at random from that set.

The inventory is unreserved in preferred deals. But when a buyer does reserve it, it gets one step closer to a traditional direct sale and becomes…

4. Automated Guaranteed

  • Also known as: Programmatic guaranteed / direct / premium / reserved
  • Participation: One buyer
  • Ad Server Priority: Highest (same as manual direct deals)

Programmatic direct is hotter than a Times Square Rolex as brands want to avoid the grotesquerie they face on open exchanges.

— Digiday

In programmatic direct deals, the buyer knows exactly what audience and content they want, and when. Guaranteed deals are negotiated directly between buyer and seller. Inventory, pricing, flight/ run time (start-end dates) are fixed, although buyers may apply additional audience targeting, filters, and frequency caps during campaign run time.

So what makes it different from good ol’ direct ad sales? The ad ops and data capabilities, for one. Paul Bannister of CafeMedia explains the fundamental difference between programmatic direct and manual direct sales in an AdExchanger post published in 2016:

(In programmatic direct) the buyer incorporates audience targeting data and decides which impressions to buy. In a standard direct deal, the publisher owns or licenses any audience data and dictates when the ad server should deliver an impression. Moving that control to the buy side is a great thing in theory, but in reality it creates a large disconnect between the inventory owner and buyer.

Pros:

  • Guaranteed revenue for inventory: Programmatic direct deals are pre-negotiated at fixed prices, usually long before campaign run date.
  • Excellent buyer relationships: Negotiations are direct, and communication is key during run time for successful execution.
  • Creative review: Sellers can request to see and approve creatives before executing campaign.

Cons:

  • Underselling: Despite negotiating for highly valuable inventory served at top priority, publishers can’t accurately account for targeting parameters on buyer side and/or viewability, which could lead to underpricing.
  • Resource-intensive: Although technically ‘automated’, publishers still need ad ops resources to make sure the campaign executes as required.

To summarise the four, here’s a neat deal comparison chart by DoubleClick:

Publishers can build a sustainable advertising-based publishing business with a strong hold on both direct and automated selling. Knowing how to trade your inventory will allow you to fetch higher rates for your inventory, and potentially strengthen relationships you use for manual direct selling once you’re competent enough.