After a burst of initial announcements of private exchanges, followed by a lull in activity, private marketplaces are getting another look by premium publishers as the technology has improved and programmatic buying gains traction.
The aim of the private exchanges is to leverage publishers’ most valuable online ad inventory, typically with a select number of VIP advertisers, that would lose value if sold through open, real-time bidding exchanges. As Hearst Digital Media’s CRO Kristine Welker put it, a private marketplace means “we can monetize our inventory more efficiently.”
Hearst opened its exchange in Q4 2012. In that period, its private business accounted for 19 percent of revenue from all the ads it sells through real-time biddable exchanges, open and private, per supply-side platform PubMatic, which manages the marketplaces of Hearst and eBay (in the U.S.) along with Business Insider, Rodale and Scripps.
While Hearst manages access to its premium audience through the exchange, other publishers put a velvet rope around their most choice content. “The inventory we’re seeing is premium inventory that the publisher would have sold on a direct basis,” said PubMatic CEO Rajeev Goel.
Sources say NBCNews.com is selling homepage ads through private marketplaces, and tags on the site suggest PubMatic is managing that inventory (Goel wouldn’t confirm).
Akin to private exchanges are private-order systems that plug orders directly into a programmatic platform to process direct sales. Supply-side platform Rubicon Project has signed 60 publishers—among them Hearst and eBay (in Europe), along with The Wall Street Journal—to a private-order product it launched in November. CEO Frank Addante revealed that publishers have had advertisers willing to pay CPMs of $10 to $20, while one recently laid out a hefty $27 (versus the usual $1 to $5 CPM usually paid for programmatic buys).
Advertisers appear willing to pay the premium rates that come with privatized systems. “Premium publishers should go about their monetization strategy through a combination of private marketplace and programmatic reserve,” said Brian Lesser, CEO of WPP’s agency trading desk Xaxis. “We’re not going to encourage a premium publisher to participate in open exchanges because it devalues the inventory and doesn’t provide control of what advertisers go up against their content.”
Meanwhile, Forbes, at least for now, sees more value in open exchanges. Advertisers that initially showed interest in Forbes’ private exchange “are asking for fixed CPMs lower than what we’re able to get through the open exchange,” said Forbes svp, digital ad strategy Mark Howard.
He said Forbes was even approached by a couple of “more aggressive and advanced digital agencies” looking to flip the private marketplace concept around by setting up a closed network of 20 to 25 premium sites on which a client can bid, providing more of the inventory that publisher marketplaces lack.
There’s general agreement that, despite the hurdles, all ad buying and selling will eventually become programmatic.
Building private marketplaces with the technology to power them, said Howard, lays “the foundation for how all addressable media will be bought for years to come.”