The digital trade media is full of articles about advertisers taking programmatic “in-house.” Key reasons cited are the need for more control, transparency, and insights into available data. We are more than 20 years into the digital revolution and shifts in the programmatic landscape to address industry concerns are more than expected—they are understandable.
How Did We Get to Moving Programmatic In-House?
Let’s take a quick step back though to see how we got here. About a decade ago, publishers were starting to utilize SSPs and at that time, most relied heavily—if not entirely—on a single SSP system. The pricing model of choice at the time was a revenue share, which was driven by publishers who were looking to minimize risk with testing these new programmatic systems. Revenue share was often referred to as a “shared success model,” where the success—or more importantly, the risk—was not entirely on the publisher.
As publishers got more comfortable with programmatic and the SSP business model, they started utilizing two or three SSPs in a waterfall model. Even in this world, there was usually a primary SSP.
With header bidding, the cost and technical overhead to implement and utilize additional SSPs dropped significantly and publishers started using multiple SSPs. This led to improvements in yield for publishers. While this is all positive for publishers, there are some downsides of splitting inventory across multiple SSPs; namely, no SSP, alone, can achieve real economics of scale and therefore must hold fees higher. This means the ecosystem cannot become more efficient, resulting in the industry need for an alternative.
Cloud technology, provided by an SSP, aims to solve these issues. In addition, by operating a single SSP instance, publishers can get additional benefits, including:
1) Centralized reporting
2) Centralized block lists
3) Consistent ad quality technology
PubMatic is a strong advocate of transparency, more control for publishers, more resources for buyers and addressing industry concerns through product innovation. Here we will look at the move to take programmatic advertising in-house, addressing pros and cons, from the publisher and demand perspectives.
Publishers and the Move to “In-House”
As publishers bring programmatic technology in-house, they are faced with a few options in how to do this—building proprietary technology, merging with technology companies and partnering with an ad tech vendor.
With the third option, partnering with an ad tech vendor or SSP, we are seeing most publisher relationships are still built around revenue share models. This model has served the industry well, allowing publishers the flexibility to work with multiple partners with relative ease and minimal risk. Now, cloud-based solutions in ad tech are allowing publishers the benefits of the same enterprise grade technology at a fraction of the cost of a revenue share.
The improved economics are just one benefit. Cloud-based solutions, such as PubMatic Cloud, also provide accelerated time-to-market, full transparency, more control over user experience—and not to forget, increased control of business decisions.
PMPs and Cloud Technology
One great example of using cloud resources, in practice, is with PMP (private marketplace) technology. Publishers today are very active sellers of PMPs, generally building direct relationships with ad buyers. These deals are often built with brand budgets that include a targeting layer and transacted at a premium CPM. But the publisher can lose a portion of the advertising buy to an inefficient revenue share with the SSP used for delivery. Not ideal for the publisher!
PubMatic Cloud delivers an entirely different proposition for PMPs. The publisher gains access to state-of-the-art PMP technology from PubMatic and keeps virtually every dollar they sell. The business model is built around PaaS (platform-as-a-service), generating great results for ad buyers while charging publishers on a consumption or fixed-use pricing model (i.e., $X per month or Y cents per impression). Publishers can start to build their business on the PubMatic Cloud, own the relationships with PMP customers directly, and push more money to the bottom line.
This is especially important with the growth of PMP-Guaranteed, especially around video campaigns. No publisher wants to give up a 10 to 20 percent revenue share on a $30, $40 or $50 CPM video campaign. With PubMatic Cloud, publishers can increase monetization and have the confidence to scale their business on a PMP platform, trusted by publishers and advertisers.
Cloud-based solutions will energize internet publishers, give them ownership of platforms they believe in and can build on, and do it with a business model that drives important increases in overall revenue.
Demand Benefits from Cloud Technology
While this benefit is shared with publishers, DSPs also benefit by leveraging fewer integrations. DSPs spend significant resources maintaining and upgrading connections with each SSP – and many are looking to reduce this burden. Additionally, unless you are a major DSP, you are often getting pushed down in the queue to get to the next oRTB upgrade, which often can provide significant improvements to monetization.
PubMatic Cloud enables publishers to access up-to-date connections with buyers. Buyers benefit from this model, as well, as they will have fewer integrations to maintain, more consistent inventory quality, reduced bottlenecks, and less duplicated inventory.
PubMatic is committed to providing efficient infrastructure and quality products for our partners. To learn more about PubMatic Cloud and how it can benefit you, check out our product page.