Interesting timing on this eMarketer report given all the conversations we have had over the last 2 days with a diverse group of publishers.

Private Marketplace Ad Spending to Surpass Open Exchange in 2020 – eMarketer

 This year, for the first time, programmatic ad spending on private marketplaces (PMP) will surpass that on open exchanges. PMPs—a subset of real-time bidding (RTB) in which some sort of private deal exists between a publisher or a small group of publishers and select ad buyers—will see double-digit growth throughout the forecast period. Growth in PMP ad spending will outpace that of the open markets by about 3 to 1 in 2020 and beyond.

Many of the factors limiting open market investment are driving dollars into PMPs, which buyers and sellers deem safer and more compatible with their long-term strategies.

Also driving investment in PMPs over the next 24 months are:

While PMP’s clearly have a benefit in creating more effective direct connection. They are not the overall answer for creating the much needed overall efficient marketplace. While we do believe part of the answer is in 1st party data. Better discovery, planning to transact don’t address the bigger issue around efficient market making for both buyers and seller and sorting and segmenting the real-time swamp of liquidity. So we can better understand pricing disparities the prevent better market mechanics. We are finding publishers are plugging into too many PMP’s thinking it’s going to increase their yield and CPM value. But it is causing a repeat of the same, to many, too much inefficient liquidity issue.

To much liquidity is not a good thing and as these connections become over commoditized in the sea of tier 1, 2 and 3 demand partners all taking advantage of the market inefficiencies. It still dilutes the value of the audiences and doesn’t equate to creating a more efficient marketplace.

Less is more. We need to think and act like Wall Street and mimic how the street makes efficient markets. If your listing on the NY Stock exchange you don’t want 10 lead market makers. You want one who all the traders access.

I spoke with a large tier one supply partner yesterday. Who is now plugged into 30 PMP’s and it has not yielded much more. If anything it just made things more complicated. Now they are looking at stripping down to 2-4. Which is the right step for 2020.

Another issue is that most PMP’s like all the other platforms still have not addressed the needs for better real-time trading tools, trading intelligence and making an efficient market like a NASDAQ level 2 trade station. They are still black boxes and dont have the tech or teams like wall street to make a meaningful impact. We need tools and tech that take in vast quantities of real-time data, simplify it and make it actionable. The same way all buyers and sellers have in the financial markets.

A great example:

A large diverse tier-one media partner told us yesterday they plugged into one of the largest PMP platforms for broadcasters in Aug and are seeing zero results. Audio is the fastest-growing new inventory, and they have over 10mill/month avails for their premium audio content. Yet they only see $100 a day.

I asked if they could see pricing metrics so they knew if they lowered their $10cpm to $8cpm that their fill rates would increase exponentially. They said “no”.

They see random trickle buys from TheTradeDesk who said in their last earnings call that audio is their fastest-growing channel. We said “great” Do you have a way to engage them via the PMP or have a market maker on the PMP side that can help you build the liquidity demand for you premium brand inventory.. the answer again is NO. its a black box.

We need to remember “More is not more”. “less is more”. While PMP’s offer a part of the solution. They are not the complete solution to the industries overall need for market efficiency, transparency and technology that removes the fragmentation friction, and creates an ecosystem. We don’t need to have another stampede to the latest shiny object. We need to take a step back and address the overall vertically and horizontally integrated market supply and demand economics. Which will yield better unit economics for both sides of the marketplace.