Ad technology enables publishers to sell their inventory via different methods like direct deal, real-time bidding, private auction, programmatic guaranteed, and many more. As the list of options increases, publishers find themselves wondering—which method is the most profitable for selling their ad inventory?
One way to find out is A/B testing. Ad testing helps publishers choose between different ad placements, ad layouts, and ad types. However, things become complicated when it comes to choosing between direct deals and programmatic deals. This is because of the difference in how they are executed. Programmatic deals are completely automated while direct deals involve human involvement. Due to this, they are difficult to compare.
To make things easy for you, we present you with the difference between the two processes: Programmatic vs. direct deal.
Programmatic deal: The automated sale and purchase of ad inventory. As soon as an impression is available, an auction is conducted (except in case of Programmatic Guaranteed where no auction is involved) and a buyer is determined. Programmatic deals rely on complex auction algorithms and minimal human intervention. Programmatic makes use of OpenRTB Protocol and is transacted on an impression level.
Direct deal: The process of selling publisher’s ad inventory directly to the advertiser. Sometimes a negotiator or agency is involved to initiate contact between publisher and advertiser. With direct deal, no auction is conducted, instead, the inventory is sold at a fixed price.
How Do They Work?
As mentioned, programmatic deals are automated. When a user lands on a publisher’s site and is ready to be served an impression, a bid request is generated, which contains the details of the user’s parameters (history, demographics, behavior) for targeting purposes. Publisher’s SSP then sends this bid request to the connected ad exchange to find a suitable creative for the user. Based on the user’s information, the ad exchange further passes the signal to the demand-side platforms (DSP). Different DSPs send their buyer bids back to the ad exchange. The ad exchange then conducts the auction and selects the winning creative. The publisher’s site retrieves the ad creative from the ad server and shows it on the user’s screen.
In case of direct deals, publishers are either directly contacted by the advertiser or they are connected by an agency, following this, publishers send a request for proposal (RFP). No matter how they are connected, publisher and advertiser communicate directly to discuss the terms. After negotiating the price, an insertion order is signed by both parties. Depending on the terms, the advertiser gets to display his creatives on the publisher’s site for a fixed price and time interval.
Which Deal Generates More Money for Publishers?
Direct deals. Generally, publishers only put their premium inventory up for direct deals. And due to better CTR and conversions, advertisers generally agree to pay higher prices. On the other hand, with programmatic deals like PMPs and RTBs, there is no guarantee how much money a publisher might make (depending on the number of impressions the advertiser is willing to buy). Also, some ad units may even get blank impressions due to low fill rate, creating further uncertainty in yield.
Which One Offers Better Targeting?
Both methods offer targeting options to the advertisers.
With programmatic deals, advertisers buy the audience. They target each user based on demographics, geographical location, and other aspects. Most publishers allow cookie syncing to let advertisers target users in order to get a better click-through rate.
With direct deals, advertisers are generally hoping for contextual targeting. They target the website here rather than the audience. This is because it is usually predetermined that users visiting the website are more likely to show interest in the ads, based on the existing content on the website.
Let’s understand it with the help of an example:
A lifestyle blogger writing about food, travel, fashion and other everyday stories is wanting to sell her inventory. She has a blog page where she uploads all her content related to the mentioned categories. However, she has also categorized food blogs under a specific category. For the rest of her blogs, she runs a programmatic auction. However, for the food category blog, she will look for direct deals. She can be contacted by a ready-to-eat food brand. This brand knows that people visiting this particular section of the site are potential food enthusiasts and might also want to try the brand for easy food access. So, the lifestyle blogger can take benefit for both direct deals and programmatic selling.
Impact of third-party cookie demise
While at the present time, programmatic deals offer more targeting options than direct deals, the situation may very likely change in the coming months. The rapidly approaching demise of third-party cookies will heavily impact how publishers and advertisers have been leveraging user data for serving relevant ads.
The tide will inevitable shift towards contextual advertising in the absence of cookies, thereby lending direct deals an upper hand. Google’s Privacy Sandbox is one the alternatives to third-party cookies and it’s APIs, such as TURTLEDOVE and PARRROT, rely greatly on context-based advertising. Therefore, publishers may benefit widely from leveraging direct deals.
You can also checkout our webinar to know how programmatic is evolving
What About the Workflow?
Direct deals are mostly manual, from finding the buyer or seller and negotiating a deal to placing the creative on the site, everything involves human intervention (the only exception being programmatic guaranteed). It can take weeks to find and negotiate a direct deal. The one-on-one meetings, exchange of emails and finally signing an insertion order, all these can make workflow messy and troublesome. Not to mention, this can involve hiring a sales team for negotiation purpose.
In contrast, programmatic deals are handled by algorithms. There is neither much manual input required nor constant communication between buyer and seller to close a deal. Furthermore, programmatic makes bulk selling of inventory fast and effective. As a result, programmatic deals are much more efficient in ad serving and generating reports at the same time.
Let’s Talk About Safety
A 2018 survey reports, 37% marketers and advertisers said ad fraud is one of the worst aspect of programmatic ad buying, followed by brand safety concerns and poor inventory quality.
It would be wrong to blame the entire programmatic structure for ad fraud. Although, if we compare the two, direct deals are definitely safer than programmatic deals. This is because direct deals are negotiated directly without involving any third-party, hence ensuring privacy. Further, user data doesn’t get shared by anyone but remains with publishers.
Even within programmatic deals, the market is more inclined towards the private marketplace rather than open marketplace. It has been predicted that in the coming years, open marketplace spending will be surpassed by private marketplace and one of the reasons for the same is less ad fraud.
Both programmatic and direct deals have their pros and cons. Hence, publishers are recommended to put both methods in action to maximize their revenues. Place your premium inventory for direct deals and use programmatic deals for selling any unsold inventory.
Programmatic is all about machines and software, working to sell/purchase inventory with the least human involvement. In programmatic deals, the price and ad creatives are chosen dynamically, making it uncertain for publishers to predict the profit. However, the previous performance of the inventory can help anticipate a number.
Direct deals involve human involvement with negotiation and manual IO creation. It is recommended to choose direct deals for premium inventory to maximize the profit. Due to pre-negotiated nature, the price remains the same throughout the campaign, eliminating revenue uncertainty.