Programmatic is the process of buying and selling media in an automated way. Since each publisher’s ad inventory is unique, there are different ways of selling it––open and private auction, preferred deals, and programmatic guaranteed.
Today, we will guide you through the 4 types of programmatic deals and explain how they differ.
Table of Contents:
- Open Auction vs Private Auction vs Preferred Deals vs Programmatic Guaranteed (TABLE)
- Transaction Cost For Different Programmatic Deals (TABLE)
- Open Auction
- Private Auction
- Preferred Deals
- Programmatic Guaranteed
Open Auction vs Private Auction vs Preferred Deals vs Programmatic Guaranteed
Transaction Cost For Different Programmatic Deals*
In programmatic ecosystem, advertisers buy ads through adtech platforms. Each ad buying and ad selling platform retain a portion of ad spend to themselves. Publishers keep the remaining ad spend after all fees have been deducted.
|Tech fee on buyer side (agency / advertiser)||Tech fee on seller side (publisher)|
*Note, fees can differ slightly depending on the technology provider and negotiation outcome.
Bear in mind, both the buying and selling platforms retain a portion of ad spend. These fees influence the final CPM for the publisher. Most platforms, including Google, offer lower commissions for privately negotiated deals compared to open auction commissions. Therefore, both the publishers and the advertisers are encouraged to negotiate the best deal for them.
The open auction, or real-time bidding (RTB), is the most popular form of programmatic auction. In an open auction, publishers are letting hundreds of demand partners (DSPs) via SSPs bid on their inventory simultaneously. As a result, publishers can achieve maximum yield. Publishers set a minimum floor price per thousand ad impressions (CPM), and the highest bidder wins the impressions.
|1.||Versatility. Suitable for publishers of any size.||High fees. The costs of running an open auction and commission fees are the highest. Therefore, the remaining revenue share that reaches publishers is the lowest of all programmatic types.|
|2.||No unsold inventory. In an open auction, publishers almost always can find a demand for any unsold ad units.||Low eCPMs. In an open marketplace, publishers do not have a chance to negotiate prices. Advertisers often opt into a list of SSPs, so they don’t know which publisher’s inventory they’re buying. Therefore, they don’t have the incentive to pay higher CPMs as they do in private auctions.|
|3.||Revenue maximization. As demand increases, inventory becomes more valuable, which drives up the bid price and increases eCPMs for publishers.||No deal guarantee. If publishers set their floor price too high, they risk not selling all of their ad inventory. This will decrease the fill rate.|
|4.||Control. Publishers have control over floor price and can exclude unwanted buyers using blocklist.||Malvertising. Malvertisers reside in open marketplaces and push malicious ads whenever they see a chance. However, if you are a Setupad client, this is none of your worries. All our clients benefit from the strongest real-time firewall against malvertising by default.|
|5.||Good for new publishers. This method is particularly good for new publishers as no direct relationships with advertisers are required.|
Unlike RTB, publishers allow only selected advertisers to participate in a private auction. These advertisers will then bid on publishers’ inventory, much like in the open auction. Publishers also choose the minimum CPM floor price, and the highest bidder wins the impressions.
The inventory publishers offer in the private auction is often labeled as ‘premium’. For example, publishers may restrict impressions to first-party user lists only or a specific content type. Since publishers only allow trusted pre-approved advertisers, this is considered to be a safe and transparent method of media selling.
|1.||Transparency. In a private auction, publishers and advertisers are in a direct deal on pre-negotiated terms, which eliminates the risk of ad fraud.||High fees. The costs of running a private auction and commission fees can be high. Some SSPs may retain up to 25% of ad spend.|
|2.||Safety. It is safer to share data in a private auction because publishers and advertisers can identify each other at the point of sale.||Not for everyone. Small publishers (<100k monthly traffic) might not have premium inventory that advertisers are willing to buy.|
|3.||Higher CPMs. Advertisers are willing to pay more for premium inventory than for ordinary inventory sold in the open auction.||Missed opportunities. The competition is limited due to fewer participants, which results in publishers missing out on valuable deals.|
|4.||Control. Publishers only invite certain advertisers, which allows having more thorough control over ads displayed.|
The key feature of preferred deals is that there is no automated auction process. Publishers offer their inventory to selected advertisers at a negotiated fixed CPM. Advertisers have a chance to preview the inventory before they decide to buy it or not. This way, they get an exclusive ‘first look’ on inventory which isn’t available in private or open auctions yet. An advertiser can also initiate a deal with a publisher.
Publishers and buyers negotiate the terms of the deal directly. Once both parties reach an agreement, the buyer gets a ‘preferred’ opportunity to bid on that inventory when there’s an ad request. This, however, does not guarantee that the advertiser will always participate and bid on the inventory available. If no buyers purchase the inventory, it will go directly to the private or open market for auction.
|1.||Fixed Price. The publisher sets a minimum fixed CPM price, however, buyers may choose to compete with other buyers for an inventory. Therefore, publishers can potentially sell their inventory for a higher price.||Lower yield. Programmatic auction facilitates higher yield, but publishers are potentially missing out on valuable opportunities because there is no competition in preferred deals.|
|2.||Relationship-building. Publishers have a chance to build long-term relationships with certain advertisers with this method.||Not for everyone. Small publishers will simply not be able to attract advertisers willing to buy their inventory with this method.|
|3.||Flexible. Publishers are allowed to negotiate with as many buyers as they want, maximizing their chances to achieve the best price. Some publishers may even decide to offer certain inventory exclusively through preferred deals to avoid underselling.||Time. Publishers need to manually shortlist the potential buyers and negotiate the terms of the deal, which can be time-consuming.|
|4.||Unfilled Impressions. Because the buyer can decide not to buy the impression, the risk of unsold inventory is ultimately higher.|
In programmatic guaranteed, publishers and advertisers directly negotiate the terms of the deal that is reserved for that advertiser. The publisher then agrees to sell a fixed number of impressions to the buyer for a fixed price. Buyers are allowed to preview placements and choose which ones they want to buy. Despite there not being any auction, programmatic guaranteed is considered a highly cost-effective method of media selling.
|1.||Lowest fees. Programmatic guaranteed deals have the lowest fees because most intermediaries (such as SSPs and DSPs), which take up a portion of ad spend, are eliminated.||Remnant inventory. Most publishers will not be able to sell all their inventory using this method and will likely have to turn to ad exchanges to sell remnant inventory.|
|2.||Time. A study showed that programmatic guaranteed deals take 57% less time to set up and manage than traditional direct deals because most manual tasks, such as insertion orders, are automated.||Not for everyone. It will be tough for smaller publishers to attract premium advertisers to buy their inventory with this method.|
|3.||Transparency. Publishers and advertisers are in direct contact with each other, ensuring transparency and security from ad fraud. Publishers also fully control which ads will be shown on their website.|
|4.||Increased revenue. Programmatic guaranteed deals allow publishers to increase revenue by selling their premium inventory to trusted advertisers at a fixed high CPM without risk.|
Evidently, there is no one best method of media selling. However, smaller publishers generally don’t see huge success with direct deals because they do not have the same leverage and connections as big publishers. Open auction is, therefore, considered to be the most effective method for them.