By now you’re well aware of programmatic advertising and its effect on the market place. Publishers have also been setting up private exchanges that utilize many of the same elements of an open programmatic exchange, but allow them to offer one-to-one ad opportunities in a more exclusive setting. Here’s what a private exchange looks like and what’s involved in setting one up.
Private ad exchanges are still sold programmatically, but publishers have more control over pricing and who’s doing the buying. Brand marketers also know more about what they’re getting and that the inventory they’re buying is premium quality and appearing in a safe and trusted context.
“A private exchange is the ability to transact a digital spend in a one-to-one relationship with an advertiser,” says Mike Hannon, chief revenue officer at Purch. “You’re still doing it programmatically, but setting up a specific opportunity—size, audience and the part of the site. It’s a defined piece of inventory that you are negotiating with the agency or advertiser.”
Dana Caputo, director of programmatic ad operations at The Enthusiast Network, says private exchanges are typically open to hand-picked advertisers, which inherently limits scale. “It’s a good starting point because publishers can have control over how the inventory is accessed. Dollars are shifting in the market and advertisers are testing things out to see what works for them. If you’re not trying it out you could be losing out on potential opportunities.”
But even if the scale is more limited than an open exchange where anyone can bid on inventory, Hannon says publishers can still grow their pool of private exchange partners. “There is a ton of revenue transacting in private marketplaces, tens of billions of dollars. If you’re not playing in that you’re simply losing out on that opportunity. We take a little bit of a different approach. We look every single day at who is buying our inventory [on the open exchange]. That allows us to go back to the brand and look at how we can get them into the private marketplace.”
While endemic advertisers are an obvious first choice for the invite-only private exchange, publishers should pay close attention to different audience segments that might open up revenue opportunities for non-endemics. “We’re obviously targeting endemic clients,” says Hannon, “but I’ll tell you right now we have non-endemic buyers as well. We can identify different pockets of an audience that might be attractive to a non-endemic advertiser where a direct or open exchange deal might not be as likely.”
Private exchanges are a bit of a hybrid when it comes to pricing. They can still be auction-based, or a preferred deal, but their exclusivity necessitates negotiated rates. Publishers can set a floor price for protection, but simply letting buyers bid on inventory won’t necessarily maximize yield. “A preferred deal is one-to-one,” says Caputo. “Advertisers adjust their spend minute by minute. Have an ongoing conversation with them. You may see one advertiser doing really well and from there you can customize the pricing by showing them the audience data. There’s a lot more opportunity than setting it and forgetting it.”
Also, PEs use different ad inventory that’s not just available to anyone. “There is a lot of inventory that publishers might put on a private exchange that’s not available on an open exchange,” adds Caputo. “Inventory that’s considered more valuable than standard IAB units. The goal is to use units that bring in higher CPMs.”
CPMs vary, says Hannon, based on demand but the publisher has more control in a private exchange.