Private Marketplace Vs. Open Marketplace: Which One is More Profitable

Honestly, the internet is full of all “click-bait” titles and content. They take you round and round something while rarely and seldom talking about the biggest truth. One such topic around which these click-bait articles dance is -  Open Marketplace - Fall From Grace. 

Yes, of course, if something doesn’t work for YOU, it is a bad solution altogether. But does the problem lie in the solution or in how you have tried to leverage it? 

The open marketplace has often been accused of being inefficient by both the players - publishers and advertisers alike. Whereas direct deals are considered the holy grail, we can also find many a season, the whole market flux towards the Private Marketplaces (PMPs) too. 

Today, we will be investigating just this. Is Open Marketplace, aka Open Exchanges, really full of fake promises, low-quality ads, and inventories, and the only market you should use to sell the remnant inventories? We will compare this against the private marketplaces to make the comparison on fairgrounds. After all, both are products of programmatic advertising and use real-time bidding. So, let’s dig in. 

But, just in case- 

Programmatic Advertising

Programmatic advertising is the automated buying and selling of the ad spaces and ads in real-time between publishers and advertisers using data and technology. Several elves work behind the scenes here to facilitate the process.

Today is not the day when we will go into the minute details of how things function. However, let’s have a quick glance at the different ways ad spaces are bought and sold under programmatic advertising:

Open Marketplace

An open marketplace, a.k .a. open exchange, is a dynamic trading ground where publishers offer their inventories (advertising spaces), and any interested advertiser can bid. The inventories/impressions are bought and sold in real-time. 

Pros:

• Competition - The real blessing. Irrespective of your business’s size or stage, OMP gives you access to the ocean of demand. Of course, you will need to refine the best out of the lot, yet there's a high probability that none to a very few of your inventories will remain unsold. Plus, as the demand increases, so does the CPM that advertisers are willing to pay for your inventory.
• Data: Real-time data is a blessing in disguise here. Right from tweaking the campaign targeting to increasing or decreasing the floors, you can use real-time data here to do all. Data management platforms come complimentary with the open marketplace ecosystem. You can use several advanced technologies to unify and analyze the data related to each impression in real-time and personalize the experience. This way, you are keeping both - visitors and advertisers happy.
  
• Positive KPIs: KPIs like fill rate are often high here owing to the competition. However, always remember that the performance of your open exchange strategies depends highly on the quality of the inventory you provide and the pricing mechanism you use. Adjusting floor prices while maintaining the quality of the inventory surely brings good results.
• Setup: As compared to PMPs, you have fewer things to manage. OMPs can be seamlessly integrated with the existing programmatic platforms and require minimal infrastructure investment. Being scalable, the setup responds quickly to audience growth or changing market conditions without complex renegotiations or platform adjustments.

Cons:

• Control: Too many platforms are involved in this game, often giving rise to black boxes. Especially when your partner is not right. To make real benefits in this marketplace, you need transparency and control. However, publishers often find themselves having little control over who is buying the ad space and what kind of ads are being displayed. A bad choice can also lead to distasteful ad placements (done by partners too focused on inflating numbers).
• Fraud: As many get involved in the game, there is a probability that scammers might get past through security, and you suffer with low-quality or spammy ads. The point to note here is that this con too directly depends on the way you or your partner has built up the setup. A strong setup is defined by their efficiency in keeping these fraudulent activities at bay. 
• Seasonality: The revenue flux is quite unpredictable here. Despite the intense competition, you might not be making the exact revenue you expected. Reason can range from recession to market fluctuations. This makes financial planning more challenging for publishers. 

‍

Private Marketplace

Private marketplaces are closed trading grounds where only invited partners can participate in the auction of ad spaces. Unlike open marketplaces, PMPs allow publishers to curate their advertiser pool, ensuring a more controlled environment for their ad spaces. Real-time bidding occurs within the private pool.

Pros:

• Exclusive demand: You are connected with premium advertisers who are willing to pay higher prices for your targeted, high-quality inventory. This selectivity fosters a more lucrative and reliable revenue stream, as advertisers in PMPs are often more committed and offer better rates for the inventory they are interested in.

• Enhanced control: Of course, you enjoy significantly more control over who advertises on your platform. You can always find a better match between ad content and your audience. This control extends to maintaining brand integrity by ensuring that only appropriate and high-quality ads are displayed.

• Premium pricing: Your data, your inventory, preferably your rule. You can negotiate directly with chosen, brand-aligned advertisers, often securing higher CPMs than in the OMP. This is especially beneficial for premium inventory and brand-sensitive audiences.

Cons:

• Exclusive but limited: Compared to the vast pool of advertisers in the OMP, PMPs restrict your potential audience exposure. This may result in unsold inventory if demand from the selected group of advertisers is not sufficient.

• Complex setup: Setting up and managing a PMP requires more effort and resources than participating in an open marketplace. Publishers must negotiate deals, manage relationships with advertisers, and ensure the technology is in place to support these private auctions.

• Advertisers’ dominance: Success in a PMP heavily relies on the strength of relationships with advertisers. A limited or weakening advertiser pool can directly impact revenue potential.

• Lower fill rates: Due to the selective nature of PMPs, there's a risk of lower fill rates compared to the more dynamic open marketplace. Publishers need to balance the premium pricing and quality control benefits against the possibility of having unsold inventory.

Open Marketplace Vs. Private Marketplace

‍

As per an article by Blockthrough -

“Instead of being robotic, botnets now piggyback on existing malware-infected computers, mimic human behaviors, and reverse engineer detection solutions. They can copy IP addresses, browsing times, cookies, mouse movements, and keystrokes. The result is that PMPs buys are now just as susceptible to fraud as non-PMP ones. Our research uncovered that 40% of domains had more fraud on private buys than outside PMPs.”

Unlocking the Synergy

The open marketplaces (OMPs) versus private marketplaces (PMPs) debate is too old and too false to be true. It's a flawed dichotomy holding you hostage to a limited view of programmatic potential. This binary thinking forces you to choose between scale and quality, reach and revenue, efficiency and control.

I believe the profitability of any business depends on how you approach it. Despite the known competition and efficiency, if publishers are gaming their open marketplace setup with made-for-advertising (MFA) sites or just remnant inventories, then, of course, the profit will be minimal. Premium quality is always sold at a premium price in any industry. And thus, the real reason behind the profit can be the availability of premium inventories.

Change the game for a bit. The current market shows that most of the publishers prefer a 70-30 setup, where 70 goes to PMP, while the rest of the inventories end up in OMPs. Try balancing it. Go for a 50-50 setup with your inventories, and observe the result. You might end up making more. 

The real profit and your interest lie beyond the black and white. The key lies not in choosing one over the other but in orchestrating a harmonious synergy between the two. Employ a hybrid strategy utilizing both OMPs and PMPs to benefit from the unique advantages of each. This allows you to maximize reach, optimize pricing, and maintain brand control. 

‍