It was April 2014, Pharrell Williams’ “Happy” blared through speakers across the world, HBO made the tough decision to renew “Game of Thrones” for seasons 5 and 6, Obama placed sanctions on Russia, and version 2.2 of the Open RTB protocol was released.
This was no ordinary update to the common tech language with which programmatic buyers and sellers communicate. This update included the first reference to Deal ID, a simple little addition that enabled the creation of private marketplaces (PMPs). Deal ID, or “an identifier representing a pre-arranged agreement between a Publisher and a Seat to purchase impressions,” is what makes PMPs possible. Two years later, the market has grown significantly, with buyers and sellers using PMPs to buy programmatically with high levels of transparency and control.
Today, we’ll dive into what’s happening in Index Exchange’s private marketplaces, who is buying, and how it compares to the open market.
Private Marketplace Share and Growth
At Index Exchange, around 10% of exchange-wide spend and 4% of total impressions are exchanged in private marketplaces. These numbers fluctuate month over month and are wildly different by geography: for instance, Canada’s private market swings each month from 40-60% of exchange wide spend.
As Index Exchange on boards new clients and deepens connections with existing ones, we’ve seen private marketplace spend increase, without fail, year over year. Last year was a period of rapid growth for the private marketplace channel – December 2015 PMP spend was four times higher than PMP spend in January 2015. The growth continues in 2016: PMP spend from the first six months of this year was 70% higher than in the first half of last year.
Index Exchange Private Marketplaces in Q2 2016
The second quarter of 2016 saw a 19% increase in PMP spend over Q1 2016. The strongest month of the quarter was May, which is likely due to seasonality – it’s typical to see an influx of spend in the week leading up to Memorial Day Weekend. As most advertisers use PMP deals to reach specific demographics or advertise in distinct contexts, big name brands likely wielded PMP spend to market Memorial Day deals and sales. PMP spend dipped 6% in June 2016, but was 5% stronger than in April.
The most striking difference between the private and open marketplaces is the value of the inventory. Private marketplace inventory is typically around three times higher than inventory sold in the open market. A few factors could be responsible for the difference in price.
First, a publisher could set a floor in private marketplaces that requires buyers to bid at a certain (premium) price. Also, a private marketplace could package valuable audience targets (such as Mom’s or affluent millennials) which an advertiser could be willing to pay a premium to reach. Alternatively, the inventory itself could be extremely valuable – we’ve seen private marketplaces created for the sale of pre-roll video inventory or inventory that’s as close to 100% viewable as possible. Finally, you can chalk the price difference up to the laws of supply and demand – less of it, more demand for it.
In Q2 2016, the average PMP clear price was three times higher than the average open market clear price during the same period. The strongest month of the quarter was June 2016, when private marketplace clear prices trumped open market clear prices by 172%.
Winning bid prices (the highest price bid by auction participants) were 256% higher in PMPs than in the open market during Q2 2016.
The Brands that Bring Private Marketplaces to Life
It’s always curious to see which brands rise to top a market’s list by spend. The top ten brands by spend are generally a directional indicator of programmatic’s biggest bulls – you can draw conclusions on the brands’ savvy based on how they spend, what they buy, and how they price the impressions they buy.
The top ten private marketplace brand spenders are unique – they aren’t always the brands with the biggest budgets, but they are brands who have programmatic maturity. To buy in the private market you have had at least one smart conversation with a publisher about how to access premium inventory, as private buying requires some level of interaction between buyer and seller, which, in our opinion, is a linchpin of programmatic success.
The top ten private marketplace spenders are a blend of CPG companies, auto manufacturers, banks, and everyone’s favorite big-box discount retailer. Unilever, the CPG giant responsible for household names like Axe, Dove, and Hellmann’s, outspent all other top ten brands by a significant margin, and bought the most private impressions of the bunch. The brand’s PMP spend was 5x higher than the brand in second place, General Motors.
Interestingly, the majority of the spend we see within Index Exchange from Unilever is channeled into private marketplaces: the company famously decreed PMP as a critical part of its programmatic strategy, citing “viewability” and the “whole quality component” that the private channel affords as main reasons. The company buys through its own trading desk set up at media buying agency, Mindshare, which helps it go far and wide with deal discovery and deal creation.
The table above depicts the top ten brand buyers by spend, indexed. Also in the table you’ll see the volume of impressions purchased and average CPMs, also indexed. As you can see Unilever spent the most of the bunch and bought the most impressions, while Kellogg’s spent the least and bought the fewest impressions. Average CPMs is where things get really interesting – Kellogg’s had the highest average CPMs by a large margin. Target’s were lowest. The differential between the two was $6.82.
Kellogg’s high average CPM and relatively lower spend and impression volume indicate the brand likely targeted very specific targets and placed a premium on said targets. With brands like Froot Loops, Corn Flakes, Nutri-Grain, and Morningstar Farms, you can draw your own conclusions on the types of targets they might seek. Froot Loops for the Mom not averse to buying sugary cereal for her kids, Morningstar Farms for the cost-minded vegan in Brooklyn. Targets like that don’t come cheap.
Improving the Value of Private Marketplaces
As more brands enter programmatic and publishers put more inventory into programmatic channels, we expect to see spend volume and share of private marketplaces grow. We recommend the following to publishers and brands eager to get more from the PMP channel:
- Investigate the audience. Brands do a great job at identifying key segments and PMPs are a programmatic spend channel that rewards that type of analysis. However, brands and publishers could do a better job at identifying mutual audiences – publishers need to know what types of segments brands want to target and successfully package such segments into private marketplaces. The onus is on the brand to communicate their audience desires and identify publishers that could serve the audience they seek. Some brands we work with have “host-a-publisher” days where they invite a list of hand-picked publishers to their offices for a deep dive into audiences and the viability of a private marketplace around such targets.
- But don’t limit yourself to audience. Sure, demographic and audience targets are great, but context is a helpful tool to hinge a private marketplace on too. Many premium publishers offer private marketplaces for inventory on pages where audiences are highest and most captive. For example, Conde Nast channels inventory into private marketplace during “moments”, or times when audiences surge during pivotal moments in pop culture (e.g., Vanity Fair’s article introducing Caitlyn Jenner to the world).
- Experiment with scarce or novel formats. Private marketplaces are a great proving ground for innovative programmatic strategies or securing new types of inventory. For instance, native and video are the perfect formats for brands to experiment with in private marketplaces and we’ve seen a good deal of brand spend dedicated to doing just that. Good native requires interaction between brand and publisher and most publishers are discerning about the types of brands they sell native space too. Additionally, many publishers are experimenting with programmatic video in the controlled private marketplace environment.
- Regularly review PMP performance with exchange analysts. Publishers and brands alike should study PMP performance at the end of each quarter or after a large campaign push with experts who understand the vicissitudes and complex dynamics of a programmatic exchange. The exchange analyst team at Index Exchange sits down with publishers each quarter to see what worked, what didn’t, and how to make inventory more marketable for the next quarter.
- Communicate. Much like anything in business, communication in private marketplaces is critical. If you’re a publisher, consider setting up a slack channel with your exchange and big PMP brand spenders, for always-on communication and as a forum for troubleshooting.