As Private Marketplaces Take Hold, A Duel Between Privilege And Convenience

brianbrowniesellsiderupdatedThe Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Brian Brownie, director of advertising operations at eBay North America.

Do you remember the old American Express tagline, “Membership has its privileges”? It made the simple act of having its standard green charge card seem like a special club. American Express added an even greater allure of exclusivity by creating an inner circle of card members striving for the pinnacle of special treatment – the Black Card.

While the American Express Black Card allows you to make purchases just like with its other cards, the upfront investment of a membership fee opens the user to VIP treatment. The same holds true in the programmatic arena.

There are the open exchanges, which work well for many brands and campaigns, and there are private marketplaces, which move premium inventory out of the open market. While open exchanges still have a place in an advertiser’s strategy, the popularity of private marketplaces and their privileges is growing, with some predicting these closed marketplaces to reach $8.6 billion by 2016.

In private exchanges, buyers still enter and bid, but the value of the inventory commands higher prices due to higher-quality traffic and impressions. The private marketplace, however, is not without its potential pitfalls.

Like the American Express Black Card, it does require a bit of an upfront investment. To enter the confines of a private marketplace, buyers need to set up a Deal ID. This unfortunately puts a little manual effort back into the previously perfect world of automation, since a real person needs to create and share out the Deal ID. While this is certainly not a deal breaker, it does lessen the “white glove” experience a bit.

For example, let’s say an ad buyer has a $1 million budget. For the sake of diversification, the ad buyer puts $500,000 into a private marketplace and $500,000 into the open exchange. The open exchange can be optimized much more easily. There is just one single control point, and changes can be made in real time, from any device. So if the budget changes at the last minute, or even if the campaign needs to end early, changes can be made very easily.

On the contrary, the private marketplace buy will be a bit more complicated. In this case the ad buyer would diversify by working with several publishers by setting up multiple private marketplaces with each to guarantee a fantastic ROI. While it sounds amazing, the buyer is suddenly required to potentially watch and optimize more than 20 line items. Although it doesn’t negate the benefits of using a private marketplace, it certainly detracts some of the allure from this private “club.”

With any luck, in the near term, the DSPs and SSPs will work together and find a technology solution that will make the deal ID a thing of the past. We’ll also start to see far richer quantification of the benefits of higher bidding priority, premium ad units and publisher data. These case studies could propel the industry to one where we see premium inventory sold exclusively within the private marketplace. At that point, we’ll truly know that programmatic has arrived, and for brands and publishers alike, membership will absolutely have its privileges.

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