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Categories Advertising

Will private exchanges bring premium inventory into the RTB market?

Private exchanges may well hold the key to unlocking the full potential of real-time bidding.

Kellogg’s recently reported that more than half of its media now runs through RTB (Real Time Bidding) platforms, with a greater focus on private exchanges with key publishers. The FMCG brand is one of the pioneers of a growing trend, and private exchanges may well hold the key to unlocking the full potential of RTB.


According to IDC, RTB display advertising will accelerate at a 59% compound annual growth rate until 2016, making it the fastest growing segment of digital advertising in the foreseeable future. But since RTB first reared its head, brands have been suspicious of the quality of inventory being made available by publishers, with many using RTB to shift remnant – or unsold – space, meaning advertisers can’t necessarily be sure on which part of a site their ads will appear.


To truly leverage the possibilities of RTB, publishers clearly need to have the confidence to make their premium inventory available in an RTB environment – and not worry about it conflicting with other sales channels. This in turn will attract brand spend.


One solution to this stalemate is private exchanges (or private marketplaces). A private exchange simply involves a publisher making a segment of its inventory available to a select group of advertisers via an RTB platform, creating a controlled environment (sometimes referred to as a ‘gated community’). It allows advertisers to form an exclusive partnership with a publisher while still being able to target person-by-person, in real-time, at scale, using high quality inventory.


It means advertisers, agencies and trading desks get direct access to a pool of inventory before it is available publicly, enabling them to protect their brand by knowing where the ads will be served. By providing buyers with this level of control, they can identify the most valuable impressions and pay accordingly, with bid criteria based on factors such as historical bidding patterns and whether first-party (ie publisher) or third-party data is being used.


In turn, the publisher maintains control over availability, volume and the lowest price they are willing to sell inventory for, ensuring their RTB sales don’t undermine their direct sales, while arguably generating increased competition for their premium impressions.


It certainly seems to appeal to advertisers. A 2011 study by Pubmatic/Digiday showed that 74% of brand advertisers would increase RTB budgets if they had direct access to publisher inventory in this way.


Autotrader is one of the first publishers to respond to this growing demand. It began using RTB in 2011, and its head of display advertising Naomi Hahn was recently reported as saying that the company is starting to use first-party data to build targeted audience segments for advertisers, adding that the company saw this forming a major part of its private exchange strategy over the coming year. It will see the company create categories including an insurance ‘intender’ category - based on people who have previously visited insurance-related pages on the site, or who have recently bought a car. Hahn explained that the creation of the insurance segment was prompted by trading desks saying that they had insurance clients prepared to pay a good price for first access to such an audience. She identified geo-targeting as another area that is alive with potential, with large retail advertisers clamouring for local data based on postcodes.


First-party data was also recently cited by The Rubicon Project’s commercial director, Oli Whitton, as one of the “most exciting” new additions to the private exchange space, giving advertisers a more granular way of targeting publishers’ audiences without compromising a publisher’s major asset - data.


Private exchanges are not just a burgeoning area in display. In March this year video and brand advertising platform, Smartclip launched SmartX Platform, to enable private exchange selling on an RTB platform, while last year Samsung partnered with OpenX Technologies to launch Samsung AdHub Market, selling mobile inventory in a closed environment.


It is early days, but private exchanges look set to create new market dynamics that remove any association between RTB and ‘cheap inventory’ and make it easier for brands to monetise premium inventory. Condé Naste is one publisher that has recently shown a vote of confidence, making its premium inventory on brands including VanityFair.com and GQ.com available through the RTB private exchange that it launched two years ago. As more publishers follow suite, the confidence of brands to spend in this space will inevitably increase.

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