The Changing Handshake Of Programmatic Deals

Programmatic NegotiationsAs private marketplaces have taken off, buyers and sellers have struggled to figure out exactly how to negotiate deals and, once a campaign is live, how to optimize so it actually delivers the expected value. None of the existing models quite work.

Traditionally, sellers optimize direct-sold deals and buyers control programmatic ones. With private marketplaces, the buyer controls the levers but the seller has the insights.

Private marketplaces also change pricing models. Sellers use a rate card to start direct deal negotiations, which can be too expensive for programmatic buyers. However, prices associated with open marketplace auctions can be too low for sellers.

To succeed at private marketplaces, communication must bridge these gaps in pricing and optimization. Buyers and sellers must share data and goals to find a price that works for both sides and send a campaign on a track to success.

Negotiation In The Private Programmatic Age

The best way to negotiate private marketplaces, said MediaMath VP Sam Cox, is when the seller states her costs, the buyer states his goals and they find a price in between. If the two sides can’t agree, they should simply walk away.
This “principled negotiation” is more advanced than traditional bartering, where buyers and sellers find a price in the middle without stating what they’re actually willing to buy or sell for, and it’s more advanced than estimates based on open marketplace or rate card pricing.

In the early days, people might have taken an open marketplace and doubled it to get a rough estimate of the proper price, recalled Chip Schenck, VP of programmatic at Meredith, who was then at PubMatic.

“The biggest mistake,” Cox said, is “publishers pricing arbitrarily without understanding downstream economics of the advertiser.” But in order to understand those economics, sellers must get buyers to share information, and it takes time to build that trust.

Often advertisers don’t share KPIs with publishers. This might happen because brands want to win the negotiation by not revealing how it values a publisher’s inventory, or due to internal restrictions – some brands don’t even share true KPIs with their agencies.

“Buyers will push for flat-rate pricing on PMP [private marketplace] deals without communicating campaign goals,” said Purch CRO Mike Kisseberth. “Sharing goals … up front can help the publisher identify the right inventory for a price that will maximize performance.”

About.com CRO Brian Colbert noted some advertisers, like financial services providers with hard CPA goals, are starting to be more upfront about sharing their goals.

“Without knowing if their CPA is $200 or $100, it’s hard to guide them to the right PMP,” he said.

It’s Not Just About The Price

When packaging deals, publishers should try to expand conversations beyond just price. Many open marketplace buyers have been purchasing unsold, bottom-of-barrel remnant inventory.

Publishers can raise the value of the inventory by adding in their data about performance, context or audience. Or they can give buyers priority so they can pick up more of the site’s valuable audience. But sometimes publishers, unfamiliar with the mechanics of programmatic, don’t add in these extras that can make a deal sing.

“Publishers need to be really clear about what inventory is available,” said Rich Sobel, SVP of audience-on-demand solutions at VivaKi. “Setting up a run-of-site isn’t that exciting. It’s talking about the available data that goes along with it.”

“A lot of the conversations media teams are having are which publishers sit on data that may be of interest to them,” added Vincent Bareges, director of publisher development at Amnet.

The best private marketplace deals have extras that aren’t available on the open marketplace, like publisher data, premium content sections like a home page or financial section, guaranteed viewability and an earlier look at inventory so a brand can find more coveted users.

Publishers must be proactive about identifying and using those “extras” for buyers.

Purch uses the open marketplace as a pricing starting point, looking at its programmatic history to find the best-performing inventory for various audience segments. Private marketplace buyers get the best tranches of inventory. Even if the prices are higher, so is value.

That’s something that advertisers can get behind.

“Publishers need to be realistic about pricing,” Sobel said. “There are times that a $20 CPM makes sense and times that a $2 CPM makes sense.”

Not understanding the market value of inventory is a top publisher mistake, Kisseberth said: “Under- or overpricing inventory impacts both yield and performance.”

Meredith sets its private marketplace rates based on closing prices in its premium auction, Schenck said, which varies seasonally. If an advertiser tries to negotiate for prices lower than the premium auction, the deal likely won’t succeed because the advertiser’s bids will be too low to win auctions.

Notably, Meredith’s private marketplace is meant to achieve branding goals, not the direct-response campaigns often assigned to programmatic teams.

“We would take DR deals, but we warn them that we are more expensive than most people and we wouldn’t perform as well,” Schenck said. “We set up to skate where the puck was going,” anticipating broader adoption of programmatic among brand advertisers.

Optimizing Private Marketplaces

Even after buyer and seller agree on pricing and a set of inventory to test, the deal can fall apart if the buyer’s DSP either doesn’t bid on inventory or win the auction.

Just as pricing a deal requires transparency on both sides, so does getting that deal off the ground. Figuring out what’s holding a deal back requires ample communication. Publishers usually don’t know a buyer’s targeting or KPIs, making optimization a challenge.

“Oftentimes, we’ll get the data telling us if we performed or didn’t perform after the campaign,” About.com’s Colbert said. “It’s disheartening. If they had told me, we could have optimized into a different placement.”

Managing a private marketplace takes time, which is in short supply. Media buyers may choose to focus attention where it counts.

“You don’t share everything with everyone,” Sobel said. “If there’s a more strategic relationship between the publisher and marketer, you’re going to do things above and beyond. With relationships, there are always some that matter more than others.”

To set up deals properly, Meredith asks its buyers about frequency capping, data overlays and the number of publishers the budget will be spread across. In return, it tells advertisers how many other campaigns are competing, where the auction is closing and how often it will optimize and check in.

Those initial communications help Meredith and its clients avoid troubleshooting before the deal even goes live, Schenck said.

When the deal goes awry, a buyer may ask for a price drop. Meredith has a 14-item troubleshooting checklist it uses before lowering the price.

“Our strategy is not about driving most yield, it’s making sure our top 100 clients are most successful in the auction,” Schenck said. “It’s incumbent on us to make sure they get everything they need, they’re successful and they’re performing.”

Meredith monitors deals and tells advertiser how specifically it can succeed, such as winning 7% more impressions if it raises its bid by 20 cents. “We are fully transparent about pricing, all the bidding and everything [buyers] need to know to optimize better in the DSP,” Schenck said.

Getting private marketplaces to work on the buy side means reorienting away from an open marketplace mindset.

“The good thing about [open] programmatic is when something isn’t working, you can optimize away without any obligation,” Sobel said. “But when you’re doing something with specific publishers, you need the deals to work, and the publishers need to know what the optimization levers mean to me.”

Buyers have more incentive than ever to make private programmatic deals work as marketers push for quality. That’s an opportunity for publishers to partner with buyers and figure out how to best achieve those goals.

“Buyers have a confidence crisis right now. ‘Is the ad really available? Is the ad of high quality?’” PubMatic President Kirk MacDonald said. “The value of the brand, context and environment, along with data, becomes the new negotiation point.”

“The open exchange isn’t that exciting anymore,” Sobel added. “It’s good for testing, but we find that having relationships matter. Viewability issues and impression fraud – we don’t want to deal with that [on open].”

 

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