• by Max Knight , November 17, 2014

Programmatic buying has broken through. It’s more mainstream and more effective than ever, but now buyers want to know: What is this “programmatic private” thing I hear about? Does it work? And if you’re already buying on the open programmatic markets, is it worth the effort?

My answers: Yes and yes, depending on what you’re trying to achieve with your campaign. Private marketplace deals can open access to unique audiences, incremental reach with high value inventory, and overall efficiency. All good things, right? Let’s walk through how this works.

First of all, we should define programmatic private deals. At a high level, the term simply refers to real-time-bid, technology-enabled media buys that take place outside the open RTB markets. The underlying technology is the same, but the financial and competitive dimensions are different.

The first thing to note is that while all sales on the public markets are auctions, all private deals are not. Private deals generally fall into three major categories:

• Guaranteed programmatic: A classic guaranteed deal of a fixed amount of impressions for a set cost or CPM. There is no auction here; delivery guarantees are negotiated by buyer and seller. Programmatic technology can streamline paper pushing, trafficking, and billing.
• First look: Provides priority access to impressions before they hit the open market. The buyer commonly negotiates a floor price for the inventory, and buyers are willing to meet the price, it is delivered to them before it goes to auction.
• Private auction: An auction with a select list of participants. Sometimes different types of inventory are made available here, since the seller can control the potential buyers.

 

Of course, these classifications have no bearing on inventory quality, quantity, or cost; they simply describe different ways to buy. What’s more, private does not necessarily mean premium in the same way that public does not necessarily mean remnant. As Marissa Mayer pointed out at the 4A’s conference in March: “The opposite of programmatic is manual, not premium.”

 

Now that we’ve defined the types of deals, let’s look at the parties involved. There are five stakeholders in most private deals, each with their own rationale for participating:

• Publishers enable private deals because there can be advantages to curating a list of buyers with controlled access to their inventory for premium rates. They also benefit from maintaining exclusivity of certain inventory while leveraging programmatic efficiencies for deal setup, analysis, and access.
• Advertisers get additional or more efficient access to the inventory that works for them.
• Agencies pursue private deals for lots of reasons, but generally they benefit from the pass-through of the advertiser’s benefits or from providing exclusive access to inventory.
• Exchanges/supply-side platforms(SSPs) and demand-side platforms (DSPs) enable private deals to provide more opportunities for their clients to transact.

There are many potential benefits to the buyer, who may gain efficiency, scale, and audience access from private deals. The efficiency derives from negotiation of rates, targeting, and even smart reduction of competition – getting the media you want, in front of the audience you want, for the price you want.

Scale comes when a buyer gains access to unique inventory that provides incremental reach while still being efficient. For example, a large financial services firm found that ESPN inventory negotiated through a private deal performed very well, as did specialized inventory from Yelp and Pandora. Although these deals cost significantly more than open market inventory on a CPM basis, the higher conversion rates justified the expense.

Finally there’s audience access, which -- though it’s often not that well understood -- may be the most powerful advantage of private deals. Buyers may gain incremental access to an audience rarely found on the open market, and may also realize a more efficient audience mix. For example, a CPG company wanted to drive more viewable video inventory against an audience they had modeled. The team looked to private deals to acquire video inventory with a higher rate of viewability than is found in the open market, and then purchased only the impressions that would reach their audience. In this case the audience was the strategy, and a private deal was the most efficient mode of execution.

Negotiating private deals can certainly be more complicated than buying on the open market, but most advertisers would say that the benefits pay off and then some. Will private deals work for you? That depends entirely on your campaign strategy and objectives. But understanding the ins and outs of programmatic private deals is the first step.