The Future of Online Advertising – Private Marketplaces versus Open Exchanges

According to eMarketer’s recent report, US advertisers are set to spend close to $16 billion dollars on digital display ads bought in real-time on private marketplaces (PMPs) by 2021, according to the latest forecast from eMarketer. The analysis also predicts that the dollars spent via PMPs will overtake that of open exchanges next year.

Digital Ad Spend

Programmatic advertising offers different ways to purchase inventory – either through a private marketplace or an open exchange.

An open exchange is defined as an open digital advertising marketplace for aggregated inventory from multiple partners where buyers can bid either manually or programmatically to purchase ad impressions. Ad inventory on an open exchange allows all buyers the opportunity to purchase the same inventory. (Tube Mogul)

Private Marketplaces (PMPs) are exclusive marketplaces where premium publishers offer their media inventory to a select group of advertisers. Unlike open real-time bidding (RTB) auctions, this private deal gives an exclusive group of advertisers priority to inventory before it becomes available in the open marketplace.

In this ad buying setting, a buyer and a seller must come to terms sch as pricing and ad position on inventory. A unique identifier called a Deal ID that represents this buyer-seller transaction is generated. Passed in the bid request only to the specified DSP(s), it enables the buyer to identify Private MarketPlace inventory and bid accordingly.

Benefits of Buying Through a Private Marketplace

Private Digital Marketplace

• Buyers can access inventory before it hits the open exchanges.
• Buyers know exactly where their ads will appear and have more control of where they appear.
• Using inventory from vetted publishers reduces the chances of ad fraud & invalid traffic.

Ad Buying of the Future

According to eMarketer, the shift to PMPs are largely due to concerns over brand safety, fraud and poor ad quality. However, the open exchanges are beginning to clean up their act, improving safety and performance. According to AdExchanger, “Buyers cite third-party measurement providers, Ads.txt, FBI arrests of ad fraud masterminds and Google’s invalid traffic refunds as positive factors that have motivated them to move budgets back to the open marketplace.”

As buyers are more confident and move back to the open exchanges, they cite getting the same inventory at a lower cost as a major advantage. Some cite PMPs as being a victim of their own success. With more buyers competing for the same slots, they end up paying more.

Clearly, quality, transparency, and trust will drive ad buys in the future – whether through PMPs, Open Exchanges or somewhere in between.

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