Private Marketplace or Preferred Deals Explained

Private Marketplace or Preferred Deals Explained

What’s a PMP Deal and where does it fit in?

PMP is short for a “private marketplace” deal — it’s traditionally a deal made directly between a publisher and an advertiser or agency for programmatic inventory. Sometimes PMPs go by the name of “Preferred Deals.”

image of a min with laptop thinking about what is a private marketplaceA private marketplace PMP is managed through an SSP (Supply Side Platform). Unlike an open auction, contact must be made between the publisher and the bidder, and the parties negotiate rates and segments and other terms.

Just because contact is made does not mean a deal will be struck. PMPs typically run at a higher priority than the managing SSP’s open auction.

However, unless the line items are modified, the PMP actually pushes that SSP’s open auction down in priority, while the PMP competes with all other price priority demand.

You cannot modify AdX PMPs (Google Ad Exchange) to run at a higher priority while still running an AdX open auction line item. Whenever DFP sees two AdX line items that are both eligible for the same impression, it will randomly pick one.

 

Do you want to get into running Preferred Deals & your inventory on Private Marketplaces, but don’t know where to start? Sign up to MonetizeMore and we can help you set up your DFP to coordinate with your direct sales.

 

Common Pitfall: Loss of Open Auction Revenue with Preferred Deals

So there’s no way to solicit both an open auction bid and a PMP bid for an impression on AdX. This means that if a PMP wants the impression, the open auction doesn’t even get the opportunity to bid for it. Most pubs running PMP deals programmatically don’t properly test whether they’re actually getting the lift from their PMPs.

They just look at sheer revenue and say “oh, we made a lot of money with PMPs.” There’s a fallacy in that because the pub could also have made a lot of money by literally doing nothing and letting the impressions sell on the open auction.

Most pubs, once learning how to do statistical lift testing on PMPs, abandon their PMP strategies as net negative ROI.

Bidders Can Take Advantage of Publishers

The most common scenario is that the bidder will estimate what they believe they’ll need to bid on the open auction to get the impression, and the PMP rate is fixed, so they will just choose whichever is cheaper and buy it there.

So not only is the publisher spending resources on PMPs, the publisher is even losing money on those impressions. PMPs do not raise bid pressure. They limit competition instead.

One of the common pitches behind PMPs is the elusive promise that the bidder gets pricing certainty, so they’ll bid more. In practice, after talking to dozens of major publishers, because the platform does not force a minimum volume commitment, this is simply not the case — bidders rarely if ever increase their bid volume due to a PMP.

How Do I Test a Private Marketplace Deal?

You’ll need a developer to do this. To find out whether the PMP is actually netting you money, take that same segment of traffic that the bidder is bidding on, and randomly KVP (Key value pair) it as “pmp3283_enabled” = 1 or 0 at 50% of that segment’s traffic (use the PMP’s ID as the name for the KVP).

You can use a smaller percentage than 50%, but both sides need to be statistically significant. Then on the PMP in AdX, require that it has the KVP set to 1.

Now you can run a report that shows you what your CPMs are when the KVP = 0 vs 1, and whether this bidder is actually providing non-negligible lift.

After setting this up manually and guiding numerous publishers through reporting, the overwhelming majority of PMPs provide negligibly or even net negative lift when compared to solid open auction strategies.

Google allows publishers to auto-test and auto-optimize private auctions against the open auction, but not PMPs.

At MonetizeMore, we backlogged a feature to integrate this testing directly into our platform, but after so many failures in doing it manually, we just decided it does not provide value.

Add on the increased resources to pay a PMP manager to reach out to bidders, and now pubs are usually spinning their wheels with PMPs, wasting time and money on something that doesn’t generate ROI. So our feature to make PMP testing easy… ice boxed indefinitely.

How Does Header Bidding Play Into This?

Header bidding only makes this worse for PMP performance. The PMP still gets to cheat priority levels against the open auction on the source SSP, but the PMP is typically running at the same priority level as all header bidders.

So the only reason the PMP frequently won before header bidding was that it reduced competition and bid pressure — header bidding adds that bid pressure back in, and the PMP rarely wins.

Sales Overhead

To start a PMP, the publisher usually needs to reach out to a bidder. A programmatic salesperson is usually responsible for this in environments where publishers use PMPs.

Although SSPs usually take a smaller revenue share (usually ~10 percentage points) for PMPs than open auction, the programmatic salesperson who arranged the deal is typically taking that cut and potentially more (usually 8-15 percentage points) as commission.

This is especially PMPs can run negative ROI — revenue officers and ad operations directors will frequently seek to take advantage of the lower SSP revenue share on PMPs, without accounting for the sales commissions.

Conclusion

With Preferred Deals & Private Marketplaces, there’s a lot of overhead for publishers to get started. Sign up to MonetizeMore and let us help you set up your DFP to set your priority and negotiate terms with advertisers.

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Kean Graham

CEO and Founder at MonetizeMore

Kean is the resident expert in Ad Optimization covering areas like Adsense Optimization, DFP Management, and third-party ad network partnerships. Kean believes in the supremacy of direct publisher deals and holistic optimization as keys to effective and consistent ad revenue increases.

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