Less is more – when it comes to publisher-controlled programmatic advertising. Greg Carroll, UK Country Manager, StickyADS.tv, (pictured below) in this piece talks about the trend towards private exchanges and programmatic-direct.

Programmatic video is entering a new era. As agencies see the benefits of trading programmatically, premium publishers are increasingly embracing it due to the availability of more publisher-focussed technologies, giving them control and therefore trust in programmatic ad trading. This signals the ongoing proliferation of programmatic media trading, which is expected to account for 70 to 80% of all UK digital ad spend by 2018.

The early days of programmatic were led by open exchanges, which meant publishers could not control the way they monetised video – their most valuable asset – as essentially a third party was doing it for them. However, new models have now emerged to address this, so publishers and broadcasters are increasingly choosing to build their own private video exchanges to maintain control of their inventory, select who they want to do business with and, as importantly, how.

So, why is the private exchange model creating a stir within the industry, and why are two parties better than three?

Cut out the middleman
With an open exchange model, the ad exchange sits between the publisher and the buyer, meaning publishers have limited visibility into who is buying their inventory. The private exchange model reverses this trend through disintermediation of the market, allowing publishers to maintain control over their sales relations and build direct relationships with agencies and brands. Publishers can invite buyers to join their exchange and agree mutually beneficial terms, perhaps guaranteeing certain buyers a first look. This invitation-only method nurtures direct connections with buyers – rather than via a chain of intermediaries – and enables publishers to make their premium inventory available to a specific pool of buyers rather than an unregulated, uncontrolled ocean of demand.

Increase transparency and control
Issues such as ad blocking, viewability, and ad fraud are driving industry-wide demand for increased transparency, resulting in initiatives such as the IAB L.E.A.N. Ads programme. This growing need has encouraged agencies to foster even closer relationships with premium publishers than ever before. So, it is up to the publisher to employ a private exchange to manage these relationships, rather than trying to manage numerous, unwieldy tags; which amongst other things significantly increase latency and negatively affect competition, and therefore eCPM. Shifting towards private exchanges provides publishers with full transparency into sales including the auction process, the buyers involved, bid density, and pricing. When publishers can see exactly who is bidding on their inventory and at what price, they can gain a deeper understanding into how much each impression is worth. These insights can then be used to inform decision-making and future strategy ­­– for example, publishers can see what buyers would have been willing to pay at auction if the publisher’s existing commercial agreements hadn’t taken precedence.

Keep monetisation in-house
A publisher’s core asset is its inventory, so maintaining control of monetisation is crucial. This is particularly relevant to premium video inventory, which is especially scarce in the UK. By building and operating private exchanges, publishers can maintain control over their inventory monetisation strategies by introducing business rules tailored to their individual needs. Dealing directly with buyers eliminates arbitrage commission, allowing publishers to preserve their margins and maximise yield on premium video assets. Private exchanges enable publishers to achieve higher CPMs than open exchanges because the inventory becomes more exclusive. Whilst there is certainly immediate incremental revenue when using open exchanges it simply devalues it, as naturally the buyer will just go where it is cheapest. Controlling where the inventory is seen, building those relationships with the demand side and controlling them will always result in a much larger win, even if it takes slightly longer to achieve.

Maximising Efficiency
The traditional waterfall or daisy chain approach to programmatic bidding means passbacks, and results in latency and wasted impressions. Equally important is that it also means a lack of competition for the impression. The standard display advertising model of employing multiple SSPs and networks will not work for video, amongst other reasons, simply because there is a lot less video. So when you don’t differentiate your video strategy and simply reintroduce the ‘race to the bottom’ mentality you always lose. Private exchanges that use server-to-server technology ensure the impressions are seen by all demand partners simultaneously and so increase efficiency, maximise revenue, and deliver a frictionless programmatic process and a race to the top, not the bottom.

As TV broadcasters and premium publishers increasingly embrace programmatic, adoption of the private exchange model will continue to grow. The rise of programmatic video is inevitable and private exchanges empower publishers to foster direct buyer relationships whilst maintaining control of their core assets and margins. This model is fast becoming publishers’ preferred route for selling video inventory as they increasingly realise that in the programmatic world two is company, three’s a crowd.