Why Private Exchanges Can Be More Than Just A Publisher Tool

paul-rostkowski“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 Paul Rostkowski, president at Varick Media Management.

Online advertising is workflow-intensive, requiring agencies to field large teams of media planners and buyers to deal with orders.

RTB has emerged to free up time, but many agencies equate RTB platforms with poor quality inventory. Although the benefits of purchasing media through a single outlet make buying easier, agencies often avoid it because they don’t want clients thinking they’re aligning ads with low-quality, unwanted content.

Agencies need relief. One possible solution is the private exchange, which to date has been seen as largely aiding premium publishers. But viewing premium exchanges only from the publisher side is short sighted. If agencies look closer, they’ll see that private exchanges alleviate many of the problems associated with RTB.

Agency Priorities

Agencies spend too much time managing low-touch display, video and mobile buys, eating into the time needed for planning high-touch ad executions. “High-touch” refers to anything from custom ad programs, such as homepage takeovers, to content integration. The current model has agencies working with 50 different publisher sales reps to activate low-touch banner buys. Trading desks alleviate the workload, but prioritizing working with private exchanges can take it even further.

Yes, the media will cost more on a private exchange than on open-exchange RTB marketplaces. But that comparison model is slightly misguided because private exchanges should be compared to direct buys, not open-exchange RTB. Agency buyers can easily purchase across premium sites without juggling multiple publisher orders. Working with private exchanges actually reintroduces the classic, old-school ad network model, but in a method that solves many issues that still plague display buying.


No issue sullies RTB quite like fraud. Open RTB exchanges are plagued by bad placements or potentially damaging contextual situations for advertisers. The potential for wasted ad spend – and the lack of transparency – keep agencies out of RTB.

Private exchanges can solve this problem. Agencies can pick publishers operating within a private exchange from a menu, introducing the transparency absent from RTB.

And while direct buys offer this transparency, they focus on the content of a page and the perceived value of a publisher, rather than the efficiency afforded by a valuable audience. Private exchanges give advertisers real-time access to consumers, and they can still apply data to discover new audiences or leverage tactics like retargeting. But they have a hybrid direct-buy/RTB approach now, eliminating many transparency concerns.

Open RTB Will Endure

Private exchanges were once referred to as the next wave for RTB. That’s not entirely true. Private exchanges are great tools for agencies and publishers, but that doesn’t mean they’ll cannibalize the open exchange model. In fact, open exchanges will continue to grow – rapidly – because they still provide a benefit to advertisers.

Media available via open exchange RTB is cheaper than premium because it doesn’t have the same appeal to advertisers. Performance-based marketers will always drive a market for cheap inventory. If a campaign is based strictly on retargeting consumers, there’s little incentive to pay $10 when that same cookie costs a fraction of the price on an open exchange.

While there are limits to retargeting, there’s nothing wrong with the exchange approach, especially if ROI is a key success metric. A national banking advertiser wanting consumers to open checking accounts doesn’t need to spend a $10 CPM, and if they do, they probably won’t get their money’s worth.

What private exchanges will do is provide a conduit for agencies to more confidently introduce brand advertisers to RTB. The addition of transparency, planning and audience efficiencies make private exchanges a great tool to help agencies act like leaders for their advertiser clients.

Rather than waste time negotiating multiple direct buys and fighting fraud, agencies can focus on creative executions and important high-touch work for clients. Private exchanges are great tools for publishers to profit off from valuable ad inventory, but agencies need to capitalize on these benefits as well.

Follow Paul Rostkowski (@prostkowski), Varick Media Management (@VarickMedia) and AdExchanger (@adexchanger) on Twitter.

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  1. Why does a buyer need a private exchange to execute the equivalent of a direct by on a premium site? Adding more exchanges just complicates the world for buyers who could buy on CNN or NYT with the same level of personal interaction and brand safety on an Open RTB as they could on a private RTB. Private RTBs provide Publishers the ability to pick and choose who can buy their inventory, but Open RTBs already allow white lists and black lists, so I have yet to see what a private RTB can really provide, functionally, that an Open RTB can’t. In fact, most private RTBs today are already powered by the Open RTB platforms like Adap.TV.

  2. Many premium publishers only allow specific advertisers to buy from them – and nobody else. Some advertisers also get preferential access to specific inventory or even discounts when going through Private RTB. To create a connection between a buyer and seller over Open RTB infrastructure that is effectively “private” only requires both parties to turn it on. Private Exchanges don’t require proprietary infrastructure – they’re relatively “virtual”.

  3. Programmatic Direct and Private Exchanges enable agencies and brands to leverage their buying power for high value placements with commitments to their best publisher partners. As Paul points out, open RTB will endure. It will be most effective when used in combination with Programmatic Direct. Due to the nature of video supply, this combination becomes more significant.