Programmatic Sales Models

Programmatic has helped the entire industry to move beyond low-quality inventory channels. Indeed, rapid expansion has allowed Programmatic to forge onwards with its conquest of the digital market. In the US, Programmatic already occupies more than half of the cost of media advertising; while in the EMEA, Programmatic accounts for a third of the market. Over the course of the past few years, the Programmatic ad spend has increased four-fold. What is more, new tools, trends and business models have come along, which have significantly facilitated the success trajectories of Publishers.

What are Programmatic Sales Models?

Programmatic allows advertisers to buy advertising inventory in real time with the possibility of showing an ad to a selected target group, and within a specific context. This means that Advertisers can use data to determine whether they need a particular ad impression — and if they do, they can determine the price they are willing to pay for that impression.

However, the process of achieving KPIs starts prior to acceptance of the incoming deal, the uploading of creatives, and so on. First of all, this process begins while the Advertiser assesses which transaction type will be more relevant for a particular campaign; and why they need to focus only on this type of transaction over others. Here we present Programmatic Sales Models; and we ask how such models can benefit your business in different cases.

First of all, Programmatic Sales Models are divided according to the main criteria:

• pricing; auction or fixed price,
• access – open-access versus invitation-only,
• the presence or absence of guaranteed impressions.

Based on the criteria above, we can distinguish 4 different Programmatic Sales Models:

• Open Auction
• Private Marketplace
• Preferred Deal
• Programmatic Guaranteed

The first difference between these models is the type of pricing. Impressions can be auctioned on an exchange and buyers can bid for them. Alternatively, the site and the buyer can conclude a direct transaction, without an auction, in which case the price is fixed (predetermined).

The Auction Sales Model (including either Open or Private Auctions) has served Advertisers well by covering their core need, which is to reach a given audience. However, after practicing blind buying, buyers, tired of this practice, began offering impressions at a fixed price: the result being that advertising is often not shown to the real target audience.

The presence or absence of the auction immediately divides the entire field of Programmatic into two large parts: auction types of buying, and Programmatic Direct Transactions. At the same time, the auction type includes Open Auction and Private Auction.

Open Auction is a real-time bidding model, where any Publisher and Advertiser can participate while prices are determined in real-time. In a nutshell, Publishers allow access to media inventory in ad exchanges at a minimum CPM price, while Advertisers bid against each other until the highest bid wins. A Private Auction is a similar model to the Open Auction, except for the access which Publishers set for only selected Advertisers; while other buyers do not even see this

On the other hand, Programmable Direct Transactions are divided into:

• Programmatic Guaranteed – programmatic deals with a guaranteed volume of impressions and at a fixed price;

• Preferred Deal – programmatic deals without a guaranteed number of impressions, but with a fixed price.

Let’s delve into the specifics of both transaction types:  

• Preferred Deal – a fixed-price transaction without a guaranteed number of impressions. The invitation fixes the price, inventory (sites and sections), formats, audience segments and other parameters agreed between Advertiser and Publisher. Once a buyer has accepted a deal, they can buy impressions that the marketplace directs to that same deal.

• Programmatic Guaranteed – this is a model in which both the price and the volume of impressions are fixed and known by both sides – Publisher and Advertiser. In fact, this is the implementation of direct sales through the Programmatic ecosystem. The main purpose of this model is to automate the direct sales of the site, reduce costs, increase the efficiency of media planning, and increase the speed of the advertising process.

Do we need so many Programmatic Sales Models?

Let us now address why there are so many Programmatic Sales Models and explore what purpose each of them serves. The industry has been working on these models for many years in order to solve the needs of both Advertisers and Publishers in terms of buying and selling media inventory; the ambition being to completely (or almost completely) replace the traditional direct way of media buying. The fundamental difference between the models is their priority in terms of ad serving and the major competition which coalesces around the user who sees the ad first.

Programmatic Sales Models by ad-serving priority:

On the Open Auction, quite often we can find traffic leftovers, which Publishers have failed to sell within the highest transactions; but this does not always mean that this is low-quality traffic. The positive aspect of this kind of traffic is that there is a lot of it, and this allows buyers to acquire coverage at a fairly low cost, which allows buyers to find audiences from large and small segments, as well as to obtain an adequate cost of the final CPM for the client.

When it comes to a Direct Programmatic Deal, this involves direct negotiations with the Publisher in order to buy traffic through the DSP. Thanks to this, the quality of traffic can reach a new level – prices increase, but the buyers take control over the placements where they are showing ad on.

In the hierarchy of ad serving from the Publisher’s perspective, the priority is always given to transactions with a fixed and/or guaranteed volume of impressions – Direct Sales and Programmatic Guaranteed. Firstly, regardless of the price, the Publisher must provide the Direct Advertiser with a requested number of impressions. Secondly, these transactions tend to have the highest price and include the most premium ad slots.

Everything that comes after Programmatic Guaranteed can be generally called a residual inventory and sells by way of a “waterfall” priority. The first in this regard are Preferred Deals. However, when the site has several Preferred Deals, then the deal that has a higher price will always get priority. This is fair enough, because if all the buyers are hunting for a certain number of users, and if there is an intersection between buyers in the purchasing of a particular user’s display, then the winner will be the one who is willing to pay more. In this case, there is no real-time auction, but rather fixed early-determined prices compete against one another. Anything that is not sold through Preferred Deals enters a Private Auction, and then, in an Open Auction.

The Publisher’s perspective

The main goal for the Publisher is to maximize profit by making recourse to the flexibility afforded by Programmatic, and managing what the inventory is offering for sale, and at what price. Nowadays, Publishers can offer a holistic approach to Direct and Programmatic Sales Opportunities for Programmatic Buyers. In order to activate any type of solution via the header, the implementation must support deal IDs outside the mediation layer. Deals can be set up on a one-to-one basis between a seller and a specific brand buyer, or in some cases, on the basis of a one-to-many, where a publisher will allow any buyer in a specific platform to participate in a guarantee. There are many prognoses and thoughts on how Programmatic transactions affect direct cooperation between the Publisher and Advertiser, and the most accepted prognosis is that such cooperation should eventually take the bulk of traditional sales.

Publishers allow buyers who are hunting for a limited pool of particularly valuable users to pay a premium to the price and get their audience more likely. Thanks to Preferred Deals and Private Auctions, publishers are able to start selling through different transaction types while maintaining control over who buys their inventory and how. That is why the appearance of different sale models was the first reason for raising the premium platform number on the market (and it keeps growing year-to-year).