CTV Inventory: Open Exchange vs Private Marketplace Deals

Ann Kraus: Hi everyone and welcome to the Simpli.fi webinar series. I’m Ann Kraus, senior manager of training, learning, and development here at Simpli.fi. And this month, our discussion will be on OTT CTV inventory. And with me for this discussion is James Moore. He is the chief revenue officer here at Simpli.fi. Thanks for joining me, James. James Moore: Oh, you’re welcome. Thanks, Ann. Ann Kraus: So let’s get right to it and start talking about when people talk about OTT CTV, the topic of inventory seems to be pretty hot right now. There seems to be two sides. We’ve got people who are calling it PMP, or private marketplace deals, and then there’s the programmatic inventory. Can you describe the difference between those two? James Moore: Sure, I’d be happy to. But I think I would start by just kind of saying that actually the way I view it, private marketplace deals versus open exchange are kind of the two different categories that I think more accurately represent the two distinct types of inventory that exist programmatically. Actually, both of them are made available programmatically. Programmatic by definition simply means automated media buying. So any inventory that’s being made available in a technology that can be accessed by buyers is by definition programmatic. James Moore: And so, whenever a buyer is utilizing a company like Simpli.fi to access inventory, they are engaged in a programmatic media buying process. And then once they access that inventory, they’re going to see inventory that’s being made available through what’s commonly referred to as open exchange buying, which is real time bidding type media buying. And then, there’s a subset of RTB, which is private marketplace deals. And really private marketplace deals are just what they say they are, which is they’re private, which means they have a little bit more exclusivity than an open exchange buy. James Moore: Typically an open exchange or an SSP is built to have some controls that the publisher, which is in this case, the publisher is anybody who’s creating television content that can be streamed online, that is ad supported. So it’s typically the TV and cable networks that are creating, the same people who are creating that content and linear are the same people who are creating that in connected TV and OTT. So when they go through an open exchange, they’re able to establish things such as pricing floors and other controls around how that inventory is bought and sold. James Moore: With a private marketplace deal, they get a little bit more control. It’s by definition of invite only, which means they get to approve the agencies and/or brands that are going to be buying that inventory. It gives them some additional controls. It’s not true always, but it’s often the case that they will take inventory that they value more highly or more premium, such as newer content or more popular content, and put it in these private marketplace deals where they’ve got some tighter controls. And again, it’s not always true, but oftentimes the pricing floor or the minimum price for inventory is quite a bit higher than what you would see in an open exchange environment where people are kind of bidding based on what the market might bear. Ann Kraus: So if we’re all going to still try to get to the same audience, why would a publisher then choose necessarily to not go open exchange and to only go private marketplace? James Moore: Well, I would even take it one step further and just kind of say, why would they actually sell their inventory programmatically at all, right? So every TV and cable company, we work with many of them, as you know, have large and diverse sales teams, either direct sales teams or third parties who have for years established direct connections with advertisers, brands and agencies to sell linear advertising. They, of course, are doing everything they can to maintain direct relationships with those same buyers to also sell them connected TV and OTT content. James Moore: But the reality is this, programmatic advertising or automated [inaudible 00:03:50] buying is the fastest growing type of a methodology for by an advertising, and it has been for the better part of 10 years, and it shows no sign of slowing down. So when you look at a company like Simpli.fi, we’re just one programmatic media buying platform. On any given month, we have 130,000 campaigns in support of nearly 20,000 brands. So there are more brands and more agencies who have chosen to access and buy inventory through this automated means than probably those TV and cable teams could ever access directly on their own. James Moore: And, of course, in addition to selling their inventory directly, they want to be able to sell their high quality content directly to the brands and advertisers who have chosen to buy their inventory through these automated meetings. And so, they want to get that inventory into platforms like us to tap into all the advertising demand that we have. James Moore: Now, having said that, I think that it is relatively new for TV and cable companies to see the vast majority of the viewership switch to streaming eyes versus linear eyes. I think that they have a long history of pricing their inventory based on how many people view that inventory and the recency of whether it’s a new show or an old show and that sort of thing. And so, they’re able to maintain some of those historic norms in a private marketplace deals by putting different pricing levels on certain inventory, in different values on certain content, because content is king in the TV world. James Moore: However, in the open exchange world, they’re going to get exposure to all advertisers who are looking to buy OTT and CTV, not just those who have elected to participate in the private marketplace that they’ve approved. And they’re going to be able to sell that inventory at a higher velocity or fill rate at whatever price in the market bears. And if that inventory is deemed valuable or performs well, or whatever other metrics the advertiser has on their side for gleaming whether that content is great, then they’re going to sell an awful lot of advertising at a very high price through that method as well. Ann Kraus: So can an advertiser then choose what would be good for a PMP deal for advertiser or open exchange? In your experience, have you seen that it’s better for one or the other? James Moore: Yeah, no, I think it’s a fair question. And if you look at all CTV campaigns that are running through Simpli.fi today, about 50% of our delivery has taken place across private marketplace deals. And about 50% of our delivery has taken place across open exchange inventory. And so, that is an aggregate. But depending on the goals and objectives of the campaigns, the campaigns for some might be running almost 100% on private marketplace deals, while others might be almost running almost a hundred percent on open exchange. We have to look at the goals and initiatives that the advertiser has on the campaign. We have to look at the budget that are associated with that campaign. Any other variables that we need to take into account that our brand or the agency or our media group specific that we need to take into account would define it. James Moore: And I don’t know that I would say one performs particularly better than another. What I would say is that in private marketplace deals, there tends to be a higher minimum pricing floor. And so, it tends to over-index in terms of value for brands who want to align with particular content. James Moore: So if you like the concept of aligning your brand with a certain category of content or a certain show, or a certain publisher, then you’re going to do that, then you’re likely to pay a premium in order to get those impressions on those shows and on those channels within that private marketplace deals. And so, that obviously means that there is value with aligning with the specific content above and beyond however the ad might perform, which tends to, I think, logically align itself with brand exposure or just contextual alignment of your brand with content. James Moore: On the other hand, if you’re a performance marketer, the simple definition is that performance marketing with direct response measurement, whether it be somebody filling out a form fill, doing an online purchase or physically visiting location, is a really simple equation. It’s dollar spent times conversions received, and the higher the cost of the inventory, the higher the bar in terms of number of conversions that it would need to produce in order to validate that it was worth paying the higher price. James Moore: And so, oftentimes what happens on deals that are more performance sensitive, we as a platform are fairly agnostic on it. We’re bidding across private marketplace deals and open exchange inventory, but at the price that the market’s prepared to bear with the budget. It’s simply may ROIs or return on ad spend might be better to convert at a lower price point than the advertiser was prepared to pay. And that may be south of what the floor was on the inventory that was in the private market was steals, and maybe they get no impressions at all. James Moore: So really the goals of the campaign really dictate where those impressions go. And part of our job as a programmatic media buying platform is to not be judge and jury on the quality of inventory, but to simply just kind of define the available inventory that exists in the universe, listen to the goals of the campaign, and then position the campaign to take the best possible path to get the outcome that was desired. Ann Kraus: You mentioned earlier about linear TV maybe not fully embracing or understanding streaming and the open exchange versus private marketplace. This sounds familiar to me. It sounds a lot like when targeted advertising and mobile were first introduced. Is history kind of repeating itself here? James Moore: Well, I don’t mean to date myself, but the scruff on my face used to be dark and there used to be hair on my head, and I’ve been in this business for a long time. And so, there’s something very similar about what’s taken place in 2020, 2021, 2022 that feels like a theme that has happened more than once in this industry. When I first got into programmatic media buying way back when, back then there was no mobile and there was certainly no connected TV. So really it was selling banner ads on websites. And back then, there are obviously big publishers, Forbes, ESPN, they’re big publishers. James Moore: And each one of those publishers had a direct sales team. They are used to selling their homepage and their newest content, the content that gets the most eyeballs, at a premium price. And if you want the beyond the pages that had the most eyeballs, you would go through this direct buying sources to get access to that content. And they would say, “You know what? We’re going to sell you the newest and the biggest and the best inventory. And that programmatic thing over there is remnant. It’s the stuff that we couldn’t sell.” James Moore: But the thing is, is programmatic media buying is more than just monetizing inventory. It’s about empowering buyers to be able to make buying decisions one ad impression in a time, and to not be defenseless at the point of sale. So as you know, we have all kinds of audience data associated with consumer. So at that moment, when an advertising is being sold on a website, we’re able to define has this person been searching for a diamond ring for the last five days because they’re thinking about buying a diamond ring? Have they visited some jewelry stores? So we see GPS coordinates saying they visited a jewelry store. We have all of that content. James Moore: And so, if one of my clients is a major jewelry store chain or a local jewelry store chain, it wouldn’t really matter whether they were on the homepage of Forbes or whether they were reading an article that was published three years ago that only gets 300 views a month, at that moment if I’m able to get the right ad unit in front of that consumer, that jewelers ad in front of that consumer viewing that content, it didn’t matter how many people were visiting that page. At that moment, that consumer was premium. James Moore: So at the end of the day, programmatic has always been about this idea that audiences are premium, and that content by a nature is largely one of those things that you execute across because rather than buying content hoping to reach an audience, you’re buying audience and then you’re letting that dictate the content you serve across. And then as you were able to embrace the power of digital relative to traditional advertiser, we’re able to see, did they physically take action? Did they visit a location? Did they fill out a lead form? Did they make a purchase? And as we did that, it turned out that it just didn’t matter that more and more the audience was premium and that the right ad unit to the right consumer at the right time is what delivered the highest return. James Moore: And so, over time, we saw more and more digital advertising move over into the open exchange environment and a decrease in private marketplace deals and a decrease in direct sales of a publisher sales through websites. Then the world went mobile. We saw the exact same thing. We saw an explosion of mobile ad networks out there selling direct sales, private marketplace deals, higher price premium. But at the end of the day, the same kind of theory proved itself out, and more and more inventory began to migrate programmatically by an ad impressions one at a time, access to the entirety of the internet, proven return on ad spend. James Moore: So here we are in 2019, 2021, TV advertising is now being made available. It’s still being sold direct, as it should, tipping into programmatic and private marketplace deals, seeing what kind of demand the market’s prepared to pay for that inventory, how performance sensitive are the advertisers compared to how they used to be when they were buying strictly linear advertising. And ultimately, I believe over time that history will repeat itself a third time, and we will continue to see more and more connected TV and CTV inventory migrate into programmatic media buying platforms. More of what’s in private marketplace deals will become available in open exchange environments as controls are put in place to protect the publishers, because at the end of the day, it’s hard to replicate the speed and efficiency of selling inventory in an open marketplace and environment where you can access literally hundreds of thousands of brands in a millisecond who get to define that your inventory is worthwhile at that moment, and that they’re prepared to pay for it. James Moore: It’s just really efficient for media buyers. And it ends up becoming really efficient for publishers to sell their inventory. There will always be direct sales. There will always be private marketplace deals. There’s a great place for that in this business. But I do think that we will continue to see the migrations that we’ve seen over and over again, over the last 10 to 15 years. Ann Kraus: You mentioned performance as well. And it does seem to be that that’s another of OTT CTV, is deciphering just how well it worked, right? And how well it performs. So based on what you’ve seen and based on what you’ve said so far, would you say that the PMP might be better for awareness, whereas open exchange might be better for that attribution or those conversions? James Moore: I would just say it differently. I would go back to kind of my original statement, which is right now, when you run a campaign on Simpli.fi, we’ve got over a thousand always on private marketplace deals. And so, when we’re serving ad impressions, we are serving ad impressions, both private marketplace deals and open exchange environment. And ultimately, it really depends on the goals of the campaign. With connected TV, we’re seeing all kinds of things, reaching frequency, incrementality versus people who are not able to access that content via linear TV or cable subscription. We’re seeing completion rate. And then you start to move into more digital centric measurements, such as form fill or cost per lead, such as cost per visit cost per incremental visit cost, per action in an e-commerce environment, actual sales and credit card transaction values and actual dollars and cents. James Moore: And so, I think I go back to that original equation, which is ultimately return on ad spend is dollar spent on advertising divided by number of conversions that you can validate are a result of that advertising. And ultimately, it is in the publisher’s interest to sell that inventory at the highest possible cost because they have to pay the people to create the content, the actors, the producers, everybody like that. And it’s in the advertiser’s interest to try to access that inventory at the lowest possible cost because the lower they’re able to acquire that inventory for the highest number of conversions, the better their ROI is going to be, so it’s this constant dance. James Moore: As private marketplace deals tend to over-index with inventory that the publishers deem premium and that they put it pricing floors that are well above the normal bidding price of the general population, I think it naturally then backs into this conversation that they tend to over-index on branding and exposure campaigns, brand recall, branding, brand alignment, and that sort of thing, simply because of the ROI associated with the elevated cost of that inventory divided by the metrics which you’re measuring. And then campaigns that are more direct response centric are going to over-index against open exchange inventory. James Moore: But, I say this with a giant asterisk, at the end of the day, that’s where the technology is making the decision, but the technology can be pulled what decisions to make, and that’s the beauty of programmatic advertising. On any given order from any one of our clients, they can define for us what matters in terms of inventory or what matters in terms of objective. And ultimately it will take shape in terms of the mix based on that feedback, which could be extensive or quite high level. Ann Kraus: That’s great. Thank you so much, James. And thank all of you for joining us. We appreciate all of your time. If you would like some more information on Simpli.fi’s OTT CTV solution, please just check out our website at simply.fi, or you can send an email to hi@simply.fi.