Private Marketplaces: The Death Knell For Publishers?

Editor’s note: Brian Fitzgerald is the president and co-founder of Evolve Media. 

Private marketplaces (PMPs) provide publishers with a new avenue for selling premium inventory to an exclusive set of buyers. Launched with the best of intentions, they’re an attempt to reconcile competing interests in an evolving marketplace. At first glance, PMPs appear to be a mutually beneficial arrangement for both publishers and advertisers. In practice, however, it’s far from a win-win situation — at least in the current market.

Open Exchanges

For marketers whose primary concern is ROI and performance, an open exchange for ad inventory is optimal. They simply seek inventory at the lowest price possible that matches their targeting criteria, ensuring that their performance metrics are met. This creates a bottom-line approach to evaluating and buying media, which lacks the nuance of human valuation.

With this uncompromising approach, there’s little room for real-world considerations, such as ad environment or positive brand association. Ad impressions are marginalized to the lowest common denominator. It should come as no surprise then, that publishers are choosing to withhold their premium inventory from the open exchange. This has created a dearth of quality inventory, leading some advertisers and agencies to seek additional solutions to attract quality publisher inventory to programmatic channels.

PMPs were launched to bring the efficiency of programmatic buying to a closed marketplace where sellers could carve off more premium ad placements, offer larger ad formats and provide better creative frequency control, all the while getting clients to reserve or guarantee spend against this sequestered inventory at higher CPMs.

The Trouble with Private Marketplaces

Currently, most PMPs or supply-side platforms don’t provide a reliable way for buyers to reserve or guarantee inventory for future dates at set prices. Rather they merely provide the ability to wall off inventory and allow buyers a first look at set, negotiated rates. So advertisers are not actually guaranteeing a spend against a premium block of inventory, instead choosing to pay a pre-negotiated CPM only when a cookie-match occurs. PMPs have evolved into marketplaces where buyers get a free first-look at higher-quality inventory, with improved placements, creative frequency and targeting capabilities — all without providing publishers any guarantee of payment against that inventory.

This prevents publishers from locking in revenue commitments that they need for content production and site operations for the year. Because publishers don’t have a guaranteed revenue stream, their ability to create quality content is under threat.

Why? Look to the marketplace.

For a marketplace to succeed, you not only need enough buyers and sellers to drive competition, but also an agreed-upon set of best practices to foster effective and sustained trading. That’s what’s missing from the PMP buying process. Instead, agencies and advertisers are trying to figure out how to differentiate their buying practices in order to gain an economic advantage, even if this creates inefficiency in the broader marketplace. Specifically, agencies are feigning interest in inventory in order to reserve a price, but not actually committing to reserving or buying that inventory.

Some would argue that advertisers and agencies have the upper hand and are driving the marketplace in a way that unilaterally benefits them. But if they can put themselves in this advantageous position, why wouldn’t they? Others would argue that if there weren’t such an overabundance of inventory, then publishers would have more leverage in the negotiation. This is true. However, the crux of the problem is that the marketplace is trying to merge two distinct value propositions – audience, and brand/sponsorship buying.

Advertisers and Publishers at Odds

Agencies and advertisers are enamored with the notion of matching buy to ROI, and using programmatic platforms to drive transactional efficiency. But the marketplace is evolving to a point where it is not practical to combine brand or sponsorship buying with programmatic. Buyer mindsets need to become more adaptive and attune to the value of buying media in well-lit environments alongside authoritative content. We can use science and automation to help, but we can’t allow a purely quantitative approach to dictate the process. We can’t lose sight of the fact that advertising is an art that is full of intangibles. Not everything can be boiled down to ones and zeros.

Currently, agencies are bifurcated, with sponsorship (the sexy, content-rich stuff) happening in silos across media-buying agencies, and audience buying happening at the trading-desk level, higher up within the holding company.

Now, there is a push to merge these two practices for the efficiency of buying everything programmatically. This is a genuine need, but for this to happen, we need a market that rewards publishers for creating great content, rich environments and market-leading solutions. We need recognition that premium inventory opportunities can’t be compared to scaled audience buying. Buyers need to be trained to value both the tangible and intangible qualities of different inventory.

As an industry, we need better methods of attributing brand value to engagement. All participants need to recognize that inventory needs to be reserved at a marketable rate, so that publishers can build operational budgets. Lastly, there needs to be a consolidation of buying practice so that demand is aggregated into holistic platforms and marketplaces. Despite the temptation of breaking off inventory for one’s exclusive benefit, the market needs a universal platform where competition thrives and sellers can secure the highest open market rate for their inventory in an efficient manner.

Surviving the Digital Publishing Apocalypse

I understand that this not is easy and that we will need to reevaluate our thinking, practices and solutions. And we can’t lay all of the work at the feet of the buy side. Publishers, both large and small, need to better quantify their value propositions and articulate the differentiation in their content, audience and offering.

That said, with the current trend of downward pressure on CPMs, consolidation seems like the only answer for independent publishers to gain some leverage. A little Darwinism might not be the worst thing for the publishing industry. As companies merge, there will be fewer, larger publishing groups in the marketplace — which means more sway with advertisers, streamlined operations, and better first-party data across content verticals. When oversupply is no longer an issue, publishers may be able to gain some (if limited) leverage in the conversation.

If the digital publishing apocalypse comes, and it might for many, this new breed of “platishers” (platform/publisher hybrids) will be the ones best positioned to weather the storm.

But for the sake of independent publishing, let’s hope that doesn’t happen. We don’t want to sacrifice diverse voices to learn a lesson in sustainability. The Internet is a rich ecosystem and a vibrant marketplace of innovation. More publishers means more content choice and more opportunity for passionate audiences to engage with the topics and communities they love.

But let’s face it: Almost all publishing is supported by advertising — and those advertisers need to start valuing quality content (and the enthusiastic audiences that content attracts) if we want the industry to thrive.