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What Every Tech-Savvy Marketer Should Know About the Future of Programmatic Advertising

Brands prefer the private marketplace

Cadillac is one brand buying into private exchanges for its online ads.

Premium programmatic is a hot concept, and it's catching on. The ad industry's top brands are embracing more automation for digital campaigns—Cadillac, Tory Burch, CBS—and publishers are too.

Instead of open exchanges where low-quality advertisers compete for low-quality Web inventory, a more selective programmatic landscape is growing up. The private marketplaces are where top brands are putting more of their dollars. Private programmatic will be a nearly $8.6 billion industry by 2016.

What the private exchanges are allowing is for brands and publishers to set up direct relationships—just like the old days—while embracing the technology that delivers digital ads in nanoseconds and targets campaigns to individual Web users.

To see how big private marketplaces are becoming, just look at Google—this area of its business doubled in the past year.

There are some big advantages to private marketplaces but also major limitations yet to overcome. If you're going to play in this area, here are seven crucial pointers every tech-driven advertiser should know.

  1. Premium brands as well as premium publishers are taking advantage of programmatic buying. Private marketplaces allow brands and publishers to work with the partners they choose.
  2. Private marketplace models vary. There are brand-centric exchanges in which the brands pick their preferred media partners, and this model is taking off, according to Google's Neal Mohan. "The brands are sort of putting themselves at the center of this," he said. Or the publishers choose to work with only a handful of buyers.
  3. The private model is allowing more brands to embrace programmatic because they can customize the campaigns. They can bring their data to the buying and optimize campaigns for brand-centric metrics.
  4. The private model gives the advertiser more influence over which impressions they buy.
  5. In some private auctions, there are preferred buyers who have more information than other advertisers, and they have the right of first refusal over impressions. For instance, a preferred buyer may know whether an impression is showing up on a website's homepage, while other bidders in the auction are unaware.
  6. A real drawback of the private model is reach, however. Can the advertiser get all the impressions it needs? If there is just one publisher in the private marketplace, then probably not. Publishers have to pool together to create more opportunities for advertisers to find the number of impressions they need.
  7. The next evolution of private marketplaces is to enable buyers and sellers to commit to spending and inventory guarantees. OpenX, an ad tech platform for buyers and sellers, is working on a programmatic direct model where the advertisers have certainty and control. "It gives the buyer the best of both worlds: The certainty it can buy 10 million impressions but also give them influence over which 10 million impressions," OpenX's Qasim Saifee said.
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