Why There’s A Need for Preferred Deals

Advertiser Generic is planning their marketing campaign and they are looking to target a specific user type (as they should). As they look around for the best mediums to access them, they come across Publisher Generic.com. Besides for Generic.com having stellar content,  their audience includes Advertiser Generic’s target audience.

If Advertiser Generic runs their campaign by targeting their audience in an open auction, they may or may not appear on Publisher Generic site. And even if they do, they may not have good placement, like above the fold, or the spots with the best click-through rates. That inventory is reserved for Preferred Deals, aka PMPs.

Additionally, when targeting in the open exchange, advertisers may find excellent inventory one day and that isn’t available the next day. Possibly, because they were outbid or placed in a private deal. Without consistency, advertisers risk not reaching their campaign goals.

The open auction leaves everything to the algorithm. This creates needless risk for Advertiser Generic who could reach their targeted audience in an environment that makes them look good and reach their KPIs. Imagine it as the difference between meeting someone in a gas station concession versus a three-star Michelin restaurant (hey, they both sell food). There’s a better and more effective and direct way to advertise, say hello to preferred deals.

A Preferred Deal by any other name would smell as sweet

Preferred deals, otherwise known as PMPs or Private Auctions or Fixed auctions look to be the future of digital advertising. Right now, close to 53% of the open inventory (ad space) on the open internet is conducted through PMPs.  eMarketer forecasts the percentage to increase over the coming years due to the benefits of PMPs.

So what is a preferred deal and should you get in on it (short answer–yes, but you’re smart so we’ll explore why.)

A preferred deal is a direct contract between the advertiser and publisher or agencies for purchasing premium advertising inventory/space. While negotiated person to person, they are executed programmatically for efficiency. This process bypasses the open marketplace.

Why bother with Preferred Deals?

But wait, you’re wondering why people are going back to personally negotiated contracts, wasn’t programmatic supposed to solve all the time waste?

Preferred deals combine the best of both worlds. It includes the relationship building of the original advertising model, with the super targeting powers of programmatic. It also cuts the DSP and SSP’s fees because the main function of each of these platforms is already accomplished by the PMP, all that’s needed is the platform to execute it, so they’ll lower their fees to be a part of it. Fewer middlemen mean more money in both the advertiser’s and publisher’s pockets.

PMPs benefit both the advertiser and the publisher. There are different benefits to each side, so let’s take a minute to understand what’s going on here and how it all works.

How Preferred Deals works

There are two popular ways to structure a preferred deal: Guaranteed Spend or Secured Inventory.

For a guaranteed spend, the advertiser approaches the publisher and says, “Hey, I have a pretty budget, and I want to spend it all on you. In return, I want you to give me a really good price per CPM (cost per mille, aka, cost per 1000 views, aka impression, aka ad):

Or vice versa, in a secured inventory, a publisher can say, “Hey, I have some premium ad space, look how valuable it is on my home page and best-performing pages. I promise to give it to you if you pay me well for it (aka a higher CPM than usual).” A publisher may also make certain high-value inventory available only through preferred deals.

In both of these scenarios, both publisher and advertiser win, though some benefits are more obvious than others, let’s explore them.

A Guaranteed Spend deal favors the advertiser in that they get a lower CPM than usual and are assured of reaching their campaign spend targets. But don’t think the publisher comes off poorly. They have a guaranteed revenue, and as we all know, a bird in the hand is worth more than two in the bush.

Secured Inventory is the inverse of Guaranteed Spend and favors the publisher monetarily. In this case, the publisher’s site is premium real estate that everyone is dying to be seen on. Like classic real estate, it often comes down to location, location, location. With highly coveted space, the publisher closes off the inventory to the open market. If you want access to it, you gotta pony up the dough, but boy will it be worth it (at least that’s the point).

This sounds great, so why doesn’t everyone do it? 

Well, slowly they are, but there are a few considerations and obstacles for all companies jumping on board.

Pros/Con of Preferred Deals for Publishers

For the Publisher considering a guaranteed spend, there’s always the niggling question of, “Can I make more in the open market.” It’s a valid concern. A publisher is closing itself off to certain opportunities and there is always the chance that they can get a better CPM, particularly if it’s a top-tier website. Publishers need to choose their risk tolerance and priorities.

Part of the website’s considerations should be the monetization goals for the site. What type of partnership will help them reach those goals? Another consideration is brand safety. It’s important that advertising partners are aligned with the website’s values. Compromising with a lucrative deal will alienate users and the website will lose value in the future.

Traffic size is also a consideration. A publisher may have stellar content for a highly targeted user. However, advertisers may pass over them for sites with larger audiences if their traffic is not significant enough. In those cases, joining a network of similar sites can enable a mid-tier website to compete with the big boys.

Pro/Con of Preferred Deals for Advertisers

On the Advertiser side, their ultimate goal is reaching their targeted audience. So their questions are, will I reach them, and it is a good environment to meet them. If the answer is no to either, no amount of discounted CPMs or homepage banners are worth it. There’s also the question of how much do they want to invest in one space? In that case, structuring a deal to access a package of websites like Next Millennium offers, is a good idea. 

Advertisers should also consider Google’s announcement of discontinuing third-party cookies in 2023. This may sound like a long way off, but a smart advertiser plans. Without third-party cookies, targeting users will be a significant challenge. Publishers with robust first-party data, that are also part of a conglomerate of websites whose data can be cross-referenced are in a good position. Because advertisers can use that data to reach their target audience. Next Millennium is ahead of the curve in anticipating a cookieless world. We have a large network of websites and pooled data to meet any advertisers’ needs.

There’s also the question of volume, how much do advertisers need to invest to procure a deal. This is not an issue for larger brands, but smaller brands may not have the budget necessary for these deals. In that case, such advertisers may be excluded from PMPs. Enlisting an agency may help that problem as agencies represent many clients and have more collective buying power.

Brand safety is also a concern for advertisers. They need to ensure the site their ads are being served on is appropriate for their brand and don’t compromise its values. In the open market, advertisers need to set up systems, like black and whitelists to protect their brand. This consistent concern is fully addressed in PMPs because their ads are served more exclusively and frequently on one site or a network of sites.

Not an all-or-nothing proposition

Publishers can choose to make only certain parts of their inventory available through PMPs, thereby driving quality advertisers to seek out those placements.  While other less competitive placements would be available on the open exchange. Publishers may also choose to make inventory available on the open market if it’s not purchased through a preferred deal. In that case, advertisers may take a chance to buy premium space at a possibly lower CPM. Nothing is guaranteed though, and by going that route advertisers may not achieve their campaign frequency goals, nor get it at a CPM that is significantly different from the one offered through the preferred deal.

Deal’s Done – Now What

Once a PMP deal is signed and filed it’s time to sit back and wait. Both publishers and advertisers need to give the campaign time to run its course. When it’s completed, that is the time to analyze the results and possibly tweak for next time around.

At Next Millennium Media, our approach to PMPs is to leverage our extensive listing of publishers and offer prime ad inventory with high-impact ad units to selective advertisers. In the end, it’s a win-win for all.