Private exchanges and marketplaces are seen as a big step towards achieving scale for brand safe inventory in the European automated channel. With ATS London only a matter of days away, ExchangeWire talks to Jay Stevens, VP & GM, International, The Rubicon Project about private marketplaces and the benefits to publishers.

What is a private marketplace?

A private marketplace is a programmatic trading environment whereby a publisher makes available a segment of inventory to an advertiser or group of advertisers at defined floor prices. In addition, a publisher may further implement priority access controls, which, combined with the defined floors, give them a wide range of capabilities to mirror existing trading relationships.

What are the benefits of private marketplaces?

The benefits are numerous and shared by both the supply and demand sides of the industry. First and foremost, they reduce many of the operational overheads that plague our industry and make display significantly less efficient than other media, including other digital channels. A standard run of site buys which, from the time the advertiser hands the media brief to the agency to the time the campaign is trafficked, reconciled, billed and collected, requires more than a dozen pairs of hands and over 40 steps in the process. This is, in one word, ridiculous. How can we expect to grow our space if more than 25% of the cost of a campaign goes to operations vs. 2% in television? As a result of these inefficiencies in the market, most media plans consist of a couple of portals, a small handful of endemic publishers, a couple of ad networks and the agency's trading desk. In fact, it takes more than 15 hours for each new buying point that's added to a plan. Because of these challenges with planning and buying, most display spend is consolidated among only the biggest portals which means that unless you're a top 50 site, not only are you not getting a piece of the pie, but you're likely not even being invited to dinner. In the US, the 72% of display spend goes to the top 10 publishers and 92% goes the top 50. Given the average size of a brief in the UK, this issue is even more acute. The problem is further compounded from the demand side whereby minimum order values keep many potential advertisers on the sidelines, instead spending their online budgets on search and increasingly Facebook. Display has to become more efficient for the industry as a whole to grow and programmatic trading is the path forward. Display must become "democratised" for us to fully unlock the potential of the channel.

But display is growing, well on track to pass one billion pounds this year in the UK according to the IAB.

Yes and no. From the raw numbers, yes, you're right, display is up year on year, north of 25% according to the IAB/PwC, however, when you peel back the layers of the onion, it's clear that much of this growth that we're so excited about is going to Facebook. In the first half of 2010 the IAB estimated that they represented 3% of display spend, in the second half, they took 5%. Any guess on what it is today? The reality is that while display is growing, both Facebook and Google are taking an ever growing piece of that new spend coming into the market, and the rest of the publishers are largely working to maintain their existing share of plan.

Why are we hearing a lot about private marketplaces and private exchanges at the moment?

We're hearing a lot about private marketplaces because not only is RTB becoming more readily adopted by the agency trading desks and a number of ad networks to buy inventory more efficiently, but the capabilities of what's possible with this mechanic for programmatic trading are also improving. While DSPs use RTB as the means in which to buy inventory to make their direct response campaigns more efficient, the amount of data that can be passed back and forth in the bid stream between the DSP and the SSP, combined with the controls that are native features in the leading SSPs, enables publishers to initiate programmatic trading of standard ad units and safely open the door for increased automation and indirect sales.

How can a private marketplace improve overall yield?

Publishers can best take advantage of private marketplaces to fully leverage indirect sales channels. At its core, private marketplaces are about channel management, defining who is allowed to buy what inventory, when, and at what price. For the last decade, publishers have worked with ad networks as their only “reseller channel” and have used block lists as their only tool to manage potential conflict with their direct sales teams. Obviously a binary allow/disallow block list is a blunt instrument. It worked most of the time, but often meant that publishers left money on the table. With private marketplaces, publishers can set defined floors and regularly analyse bid landscape and direct sales data to determine the rules for their marketplace, set appropriate floors, and ensure that they optimise their yield from all advertisers. Private marketplaces allow publishers to focus sales teams on high value, high CPM, high impact sponsorship opportunities from high ROI advertisers as well as take larger share of plan from endemic advertisers who have already allocated some of plan to their agency's trading desk. Private marketplaces further enable publishers to capture spend from infrequent or category adjacent brands, who might only include a publisher on a plan if it's a particularly large brief or allocate a amount of spend to a publisher that’s just above their minimum order value and barely profitable. Lastly, publishers can see budget from quality advertisers who they may never have called on before, nor likely never will, but who are looking to target specific audiences.

What are the risks to publishers?

Historically, the risk to publishers has been two fold, one is data leakage and the second is rate erosion. The first risk can be mitigated through contractual terms and conditions and part of the reason why we’ve held all of our RTB partners to strict “catch and release” data privacy policies as part of their integration agreements with Rubicon. The second risk is also greatly minimised with the establishment of floor rates by advertiser, ensuring that publishers maintain rates from their best and most relevant advertisers. For this reason, not only do we advise publishers to establish hard floors but also leverage our Dynamic Price Floors (DPF) algorithms that analyse bid behaviours to automatically optimise