Programmatic Buying is Coming to Video

There is a school of thought that believes the dynamics fueling the rise of programmatic ad buying in display won’t apply to video. That’s certainly not the case when it comes to private exchanges.

Previously, premium publishers relied on direct-sales channels to sell their video inventory and only leveraged exchanges to monetize any unsold inventory. Now, the model is beginning to flip. There are still some doubters.

I’ve had several conversations with doubters about using private exchanges, and they usually give me the same three reasons why they are not using one. First, premium publishers don’t have any problems selling their inventory through their direct sales channel. Second, many are worried about control in an exchange environment. Finally, some publishers have technical limitations and simply can’t sell their inventory via an exchange. These reasons for not using private exchanges may have been more valid 12 months ago, but the benefits for premium publishers who use private exchanges have increased significantly since then.

For a premium publisher, a private exchange will not replace its direct-sales team but will act more like another sales channel. For example, premium exchanges can sell their inventory to a select group of advertisers first via a private exchange, and if the advertisers don’t bid on the inventory or fail to place a high enough bid, that inventory can still be sold via a publisher’s direct-sales team – a win-win for premium publishers.

Using a private exchange enables premium publishers to maintain full control over the buying process. Publishers grant select advertisers access to their inventory and set minimum prices and volume for the inventory, all in a brand-safe marketplace. In addition to maintaining control, publishers can further enhance their relationships with advertisers by layering data on the inventory. This enables advertisers to effectively increase their targeting efforts, resulting in increased CPMs and the likelihood that the advertisers will buy additional inventory in the future.

Selling inventory via a private exchange also helps premium publishers create more demand for their inventory. Private exchanges provide access to multiple DSPs and trading desks, which results in increased demand and clearing prices that are in line with and often exceed a publisher’s direct sales.

Forecasting is an industry standard by which publishers show advertisers their site traffic and sell against those forecasts. While this model works for many publishers, there have been instances when a publisher’s site experiences a spike in traffic and a publisher has the opportunity to take advantage of the increased traffic. For example, a news website, such as CNN, experiences spikes in traffic whenever there is a major breaking news event. Private exchanges allow publishers to take advantage of spikes in traffic allowing them to command higher prices on their inventory in real time. Most times, direct-sales teams would not be able to act quickly enough to take advantage of such an opportunity.

Finally, operational savings are created for publishers through the private exchanges. By enabling programmatic buying of their inventory, publishers can aggregate demand on a single real-time bidding platform within their private exchange. In an RTB environment, with campaign delivery and optimization responsibilities on the buy side, RTB will free a publisher’s operations teams to focus on more strategic tasks such as setting smarter price floors and managing the balance between direct and programmatic ad sales.

Premium publishers have already taken advantage of the benefits that private exchanges have to offer in terms of display inventory, but there are clearly more to be had -– especially in video. Using private exchanges to sell their premium inventory will not only provide publishers an additional sales channel and significant operational savings but will also help increase CPMs while ensuring brand protection.

Mike Shehan is CEO of SpotXchange, a video advertising marketplace.

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