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This is the latest post in our “TIL (today I learned)” blog series that spotlights specific digital advertising technologies and strategies. Today we give you the lowdown on PMPs (private marketplaces).
A PMP (private marketplace) deal is an invitation-only RTB (real-time bidding) auction. The publisher designates specific inventory for an advertiser or small group of advertisers to bid on.
This is in contrast with an open auction where thousands of advertisers bid to serve ads across millions of publishers.
In a PMP deal, the terms are pre-set by the publisher or pre-negotiated between the publisher and advertiser. The terms are based on fixed prices, minimum floor prices, or access to guaranteed inventory. CPMs (cost per mille) are typically higher in a PMP because advertisers are competing for premium ad inventory on the most reputable sites.
By that measure, advertisers that engage in PMPs are those willing to pay higher bids than those in an open auction. In return they receive higher-quality placement or a guaranteed number of impressions at a specific price.
Two of the complaints about open RTB auctions are the lack of transparency and “supply chain fees.”
Regarding transparency: In an open auction, the publisher has less control over what ads are running on its site. The advertiser cannot always pre-select where its ads run. This creates more risk of fraud (domain spoofing, malware-laden ads) and brand safety violations. In a PMP, advertisers are pre-approved by the publisher, which reduces the transparency problem. Advertisers know what sites they are placing ads on; publishers know which advertisers are appearing on their site.
The fee issue is based on supply chain intermediaries (DSPs, Exchanges, SSPs) that charge a 10%-15% fee for their services. In many cases, $1 in ad spend dwindles to 50 cents by the time it reaches the publisher. For the advertiser, this means losing a bid it may have won or spending money on inferior inventory. For the publisher, it can result in lost revenue.
While PMPs don’t directly eliminate the supply chain “middleman fees”, they can help alleviate the challenges of higher costs (for advertisers) and decreased revenue (for publishers).
PMPs can facilitate more transparency for both sides.
Advertisers are able to select the publishers they want to work with. More importantly, PMPs allow advertisers to work out deals for the placements that best align with their audiences. For instance, in a PMP a brand’s ad would be guaranteed to place on ESPN’s Fantasy Football page. In an open auction the ad could potentially place at the bottom of the Cricket coverage page.
In turn, publishers can sell blocks of inventory or give preferential deals to well-known brands to ensure their ad units show high-quality placements. And by gatekeeping their private auctions, publishers make sure that only pre-approved advertisers show up in the most viewable placements.
In terms of combatting fees (at least indirectly), PMPs allow advertisers to only compete in auctions for premium inventory. Therefore, they aren’t wasting money on ad inventory that puts them in front of the wrong audience (i.e. the bottom of the Cricket page).
While PMPs don't directly eliminate the supply chain 'middleman fees', they can help alleviate the challenges of higher costs (for advertisers) and decreased revenue (for publishers).
Additionally, PMPs could potentially be money savers because advertisers can set up deals on SSPs (supply-side platforms) based on their fee structure, giving preference to exchanges that have eliminated or reduced buy-side or sell-side fees.
For publishers, PMPs allow them to easily set minimum floor prices, charge premiums for select inventory, choose the most preferential fee structure, and better forecast revenue based on the deals they’ve set up.
Ultimately, PMPs allow both parties to constrain auction rules. This can lead to improved results for all even if the “middleman fees” aren’t completely removed.
Unfortunately, PMPs can’t solve every problem facing advertisers and publishers. If floors are set too high, advertisers may not win any auctions. At the same time, winning the auction is no guarantee of hitting KPI goals either. Just because the inventory is of higher quality doesn’t mean it will be worth the premium price. Performance advertisers should keep a close eye on metrics to ensure the additional cost of a PMP is showing them the results they seek (conversions, sales, revenue).
For publishers, setting up PMPs with an advertiser does not guarantee the advertiser will actually purchase the inventory. If publishers set their floor too low or don’t have enough competition in the auction, their return may suffer as the premium inventory is effectively discounted.
While not a perfect solution, PMPs do give advertisers and publishers an edge in a competitive world by allowing them to connect in a more direct way, negotiate pricing, and boost the quality of both ads and inventory.