Will 2015 Will Be The Year Of Private Marketplaces?

“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Barry Lowenthal, president at The Media Kitchen.

A couple of years ago we started exploring using private marketplaces. But we weren’t successful at getting wide adoption, within the agency or from publishers. But that’s all changed and 2015 is shaping up to be the breakthrough year.

It made sense that private marketplaces would be an important part of the programmatic ecosystem. We tried to shift significant budgets to programmatic channels starting in 2011 but couldn’t buy enough inventory and wound up spending more money buying site direct than in programmatic channels simply due to inventory scarcity.

That dynamic made no sense, because it was more efficient to buy media programmatically through DSPs and much easier for publishers to sell media programmatically through SSPs. But buyers and sellers weren’t connecting mostly because sellers were worried about cost per mille (CPM) deflation.

Buyers famously and proudly, myself included, would talk about how they bought audiences through open exchanges for as little as $0.25 per CPM. No serious publisher would be able to afford the cost of their content at those prices, so many resisted experimenting with programmatic selling. Once buyers could buy audiences on a respectable white list, they didn’t care if the ad was running on a home page or deep in the site. What they cared about, and rightly so, was that they reached the right audience. Using third-party data was very illuminating and justified buying audiences instead of context.

But clearly buyers and sellers were not aligned and no marketplace could be very successful without having lots of both. Private marketplaces are quickly fixing the problem.

When first investigating private marketplaces we made a few mistakes. There was an assumption that media buyers would shift budgets from direct site buys to private marketplaces simply because it was more efficient. But that didn’t happen. Publishers weren’t giving the private marketplaces better CPMs than direct; why should they compromise the value of their content? We also didn’t do a good job of explaining to the media buyers the value of bringing third-party and first-party data to a private marketplace. A $5 CPM could be worth a $10 CPM if you could buy just the audiences we wanted.

This year we’ve worked hard to fix our mistakes.

We’ve already started 2015 talks with about two dozen publishers, and all of them are very keen to work with private marketplaces. In the past, the trading desk had one negotiation with publishers and the agency had another. This year there is only one negotiation. What’s also happened in the last year is that many publishers have identified one person to work with, rather than a site direct sales person and a programmatic sales person. It’s become commonplace, especially among the sophisticated publishers, to have one point of contact supported by a team of programmatic tech people.

This year we’re coming to the publishers with one bucket of money that will be used to create original content programs, sponsorships and standard placements. The agency is negotiating the price, the rules around viewability and fraud, and content requirements. Anything that can be bought programmatically, like standard placements, is being bought in a private marketplace. Since most of our standard placements are not 100% share of voice deals, we have the option to bring our own data to the private marketplace and pick the impressions we want. We’re happy to commit a certain budget and the publishers are happy to sell us the audiences we want.

This kind of a marketplace is a win-win. Our clients are getting smarter buys, the publishers are selling complete packages priced at a fair value and the agency is improving its overall efficiency.

For all these reasons I think 2015 will be a wonderful year for private marketplaces.

Follow Barry Lowenthal (@barrylowenthal), The Media Kitchen (@themediakitchen) and AdExchanger (@adexchanger) on Twitter.