Stop Calling ‘First Look’ A Private Exchange

by Andrew Casale (VP Strategy)

When evaluating and eventually buying private exchanges, there still seems to be considerable confusion from desks, and the DSPs powering buys about the practical usage of this channel. In my view the confusion is fueled by the lack of standards for the usage of the term ‘private exchange.’ There are several widely used tactics that create very different value to the buy side that, in my view, need to be better differentiated. And, only one tactic is fitting of the “private” label. I’ll compare two of the more commonly used approaches to the model and how they differ.

“First look” is a tactic widely offered by sellers who operate private exchanges. It effectively means prioritized access and prioritized bidding. Impressions are made available to the open RTB market and then cleared via a second price auction. Meaning the highest bid received from DSPs participating in the auction is cleared at the second highest price set by the sell side platform (SSP) representing the publisher.

However, publishers also want to incite buying and offer up rewards in return for commitments, and this is where the first look tactic comes in. Instead of the winning impression going to the highest bid, if a bid comes through from a preferred or prioritized buyer, that buyer wins the impression at whatever the pre-negotiated floor or fixed price is. The buyer is guaranteed to get the impression whether they would have paid more for it or not in the open auction. This privilege is typically granted in return for a commitment – perhaps a guaranteed quarterly or yearly spend that the buyer has made to the publisher, or just a commitment in spirit that the buyer will push more budget towards the publisher. Since RTB is still clearing a minority of display impressions (estimated at 25% of all impressions), price may be important but fill is equally important, if not more.

Depending on the buyer, the first look model is either very interesting or not interesting at all. Some buyers would rather take their chances in the open market and see what impressions they can get at presumably the lowest price, with no committed budget. Others have such a narrow targeted audience who they absolutely have to reach – and that’s when it is worth paying a higher average clearing price, and even commit some budget, to be guaranteed access to those valuable audience segments.

On the other hand, there are private exchanges in market today that are actually private exchanges. Meaning their impressions do not go to the open market to bid. These impressions are only made available to select buyers who have a pre-negotiated deal with a publisher. These private exchanges represent the rare case where a buyer can’t just take their chances on the open market and see what they get, as they’ll never access the publisher’s impressions. Every conversation that I have been privy to between a buyer and a publisher who operates in this capacity has been extremely positive because it brings something to the table that everyone wants – unique, unduplicated, differentiated impressions. Despite the massive size of the supply pool today, buyers are still seeking unique and premium inventory because their needs are not entirely satisfied by what they have access to today.

I’m not suggesting one approach is better than the other. Depending on the publisher, the optimal model will differ. My intent is to reorganize what we define as a private exchange. Doing so adds more credibility to both the usage of first look tactics and true private exchanges, as expectations will be set at the outset and less confusion will arise. This may hopefully serve to remove some of the fuel from the continued debate over this model.

How Publishers Can Maximize Value In An RTB World

by Andrew Casale (VP, Strategy)

The introduction of real-time bidding (RTB) has dramatically changed the mechanics behind inventory valuation. Publishers must take a closer look at their sales channel partners to maximize value. RTB, a data-driven buying model, allows advertisers to bid on qualified display media in real-time, at the impression level.

Publishers must maintain control over impressions to assure that inventory value is retained, direct sales channels preserved and the audience experience is upheld.

RTB requires the introduction of additional relationships, such as demand side platforms (DSPs) and agency trading desks, which could further dilute a publisher’s control in the transaction. A DSP aggregates impressions from various sources and adds a layer of user data to identify specific audiences required by advertisers. DSPs then work with channel partners, like ad exchanges, to regulate the type of inventory entering the marketplace.

Publishers need to understand these relationships and work with their channel partners to incorporate them into the parameters. This means asking partners the right questions:

How closely do you work with DSPs?

Channel partners that have the closest integrations with their DSP partners will be able to provide the most flexibility when it comes to implementing mechanisms to augment controls over who and how they are bidding on your inventory.

How granular do your advertiser controls get?

Advertising is an integral part of the user experience, along with actual content, of course. Publishers need to be able to filter out irrelevant ad categories, problematic brands and even some creative that may diminish the value of the content on a page and deter users.

How can you avoid channel conflicts?

The rate of a buyer’s bid is largely dependent on the exact location of an impression. Channel partners should give guarantees that advertisers, brands and verticals that pose a channel conflict can be selectively blocked and that this setting is proactively maintained –even when inventory is sold at the exchange level.

What is the vetting process for your advertising partners?

Publishers expose their inventory to a larger swath of advertisers when utilizing RTB, which theoretically improves eCPMs. However, just because an ad partner can promise more advertisers doesn’t mean any advertiser will do. Ad partners should vet advertisers before including them in the process. Publishers should investigate the degree of controls they have over who and what is eligible to run on their site.

How do you motivate bidding?

To maximize RTB results, the marketplace must be saturated with buyers, and those buyers must be confident they are getting value for money. Partners must know where buyers see value — because sheer volume or sole reliance on third-party data is not a good enough answer.

How do you optimize bid solicitation?

RTB partners are required to make decisions about hundreds of bidders in milliseconds, and it takes multiple partners for RTB to run smoothly. Monetization partners should have protocols in place that allow for smooth communication between all parties with minimal errors and overhead.

Can I set reserve bids?

Auctions inherently attract buyers looking to get the most for their money, but publishers should be able to protect their brand value by setting reserve prices. This gives publishers a say in how inventory is priced, without introducing inefficiencies into the process.

What is the value of a private exchange?

Factors like reputation and publisher caliber carry less weight in the RTB world than publishers are used to, which can lead to below-par inventory valuations. In some cases, it may be beneficial to strike a deal within the RTB framework with an advertiser you already know is highly interested in your publication. This tactic gives publishers some control in a market that typically has complete control over inventory value.

RTB is becoming a vital part of selling online, so publishers should remain vigilant when introducing partners into the mix.