The Developer’s Guide to Programmatic: Part 5 – Private Exchanges

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In the last segment of the Developer’s Guide to Programmatic, we explored the revenue-generating possibilities of programmatic and made the case that programmatic allows developers to cast a wide net for possible advertisers.

While that’s an attractive proposition, there is a case to be made for exclusivity as well. A publisher may feel for whatever reason that it wants to maintain tighter control over which companies can run in-app ads. They might also believe that by limiting potential advertisers to only the highest quality advertisers, they will make more money because the average CPM (cost per thousand) could be higher for their exclusive inventory.

This is the rationale for private exchanges. While much of programmatic is based on the premise that providing access to unlimited advertisers will provide the best revenues, there is room within programmatic to experiment with private exchanges. The idea of private exchanges is prevalent in the industry now and accounts for about a third of all real-time bidding-based display ad spending, according to eMarketer.

How it Works

As the name implies, a private exchange isn’t open to everyone. Such an exchange can be open to just one advertiser or a handful. Or a few publishers can take part in a private exchange that’s open to a few advertisers. Publishers can also still make direct deals via a private exchange. In any of those cases, programmatic offers a means of buying and selling that’s more efficient than direct selling and puts to rest trappings of analog deal-making, like insertion orders.

To facilitate these types of private marketplaces, publishers and buyers use Deal IDs. These unique identifiers let publishers put inventory in an an invitation-only area. At Fyber, private exchanges are another option that publishers can leverage.

Why use private exchanges in the first place? The key element is control. Publishers have a lot of say as to what type of private exchanges they run and take part in. Publishers might assume that they can swing better deals for their premium inventory by keeping low bidders out of the equation. Low-end advertisers can also reflect poorly on an app and hurt the user’s experience. By choosing a select group of advertisers, mostly premium, you will have more control over the user’s experience. Also, because a select number of advertisers are still bidding on inventory, publishers can enjoy higher eCPMs that are driven up by the auction process. On the buy-side, advertisers also have a better idea of what they’re buying and can be assured that their ads will appear in a safe environment.

Hybrid Approach

There’s no reason to list all inventory on either a public or private exchange. One common approach is to use both for different reasons. A private exchange might be used for premium inventory and a public exchange might be viewed as an effective means of monetizing non-premium inventory. The end result is that the publisher is able to maximize inventory and cultivate relationships with high-end advertisers at the same time.

In the industry, private exchanges have been likened to Sotheby’s while public exchanges are compared to eBay. Both have their strengths, so why not use both, for different goals?

Want to learn more?

This concludes our 5-part series. If you want to learn more, read our past articles: Understanding the Value Chain, How Programmatic Works, How RTB Works, or reach out to us at [email protected] or by contacting your Account Manager.

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