Programmatic Advertising 101: The Rise of the Private Marketplace (PMP)

Each month, Basis Technologies’ Programmatic 101 series tackles a different facet of programmatic advertising—from best practices for buyers, to competitors in the space, to trends you should know. Check out last month's post to learn about the evolution of programmatic bidding strategies!

According to eMarketer, 2020 was the first year that that the percentage of programmatic spend was higher in private marketplaces (PMPs) than in the open exchange. By the end of 2022, PMP spend will represent 17% of total programmatic digital display ad spending, compared to 13% being spent on the open exchange.

eMarketer's findings make it clear that the landscape is changing. But why are advertisers funneling more digital spend in PMPs than in the open exchange? Isn’t the benefit of programmatic supposed to be efficiency and scale, not one-to-one deals? To understand this shift, let's dig into the differences between the open exchange and PMPs.

The Open Exchange vs Private Marketplace Deal (PMP)

Our discussion hinges on two types of real-time bidding (RTB) transactions: the open exchange and PMPs.

The open exchange is a public real-time bidding auction that any buyer or seller can participate in. With access to multiple exchanges, scale is usually not an issue, and bids remain relatively low since there's so much inventory. Advertisers can layer first-, second-, and third-party data to target very specific audiences. This type of transaction is most commonly used when a brand's goal is to find their customer wherever they go on their web journey.

A PMP deal, on the other hand, is an invite-only marketplace where publishers make their premium inventory available directly to select buyers. Unlike the open exchange, the scale for PMPs can be quite limited, due to either inventory or the the low match rate of third-party audience data.

Using A Private Marketplace Deal Strategically

To recap, the open exchange is like general admission at a concert, while PMP deals are like VIP tickets backstage. If the main benefits of the open exchange include scale and cost-efficiency, what are the situations in which PMP deals make more sense? Read on for four examples:

1. The Target Audience Indexes High Against Content or Publisher-Owned Data

Whether you sell health insurance or pet accessories, advertisers need to "fish where the fish are." PMP deals allow brands to cherry pick their site list, while still using the automation of RTB, and tapping into first-party data that isn’t reliant on cookies.

2. There are Specific Creative or Content Needs

Since PMP deals can be customized based on the advertiser’s needs, they offer more control over inventory. For example, let’s say you're a cannabis brand looking to run specific high-impact units across a specific publication. You can work with the vendor directly to ensure that you only bid on ad slots that are available.

3. The Client has Strict Brand Safety Parameters

PMP deals are characterized by greater transparency and control, which means that ad fraud is less of a concern. All of these factors ensure increased brand safety.

4. Minimum Spends are Too High for Site Direct

PMP deals are often compared to the site direct buy of traditional advertising. The difference is that since this inventory can be bought programmatically and has a dynamic CPM, advertisers can side-swipe site direct minimums while maintaining an overall efficient eCPM.

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Now that we know a bit more about PMP deals, let's return to our original question: Why are advertisers spending more programmatic dollars in PMPs than in the open exchange?

In short, the shift is because PMP deals speak to programmatic's past of direct buying, its present need for transparency, and its future reliance on cookieless targeting solutions.

Hungry for more? Check out Basis’ Programmatic Advertising Essentials Certification to gain a fundamental understanding of the programmatic ecosystem and how PMP deals play a part in it.