Although it’s long been known Canadian programmatic ad buyers have a much stronger preference for private marketplaces (PMPs) than their U.S. counterparts, now we have an idea of how much stronger — and it’s a lot more than most marketers would expect.
According to data from Index Exchange, more than a third (35%) of Canada’s total programmatic spend in the first half of 2015 went to private marketplaces (where buyers can bid on inventory before it makes it to the open exchanges) compared to just 9% in the U.S. To arrive at that number, Index reviewed 19 billion ad impressions that were sold in Canada in the second quarter of this year.
Share of programmatic spend going to open exchanges and PMPs
There are a few big factors driving this trend. One is that Canada has CPAX, a massive, centralized private marketplace for top publishers, while the U.S. market is more fragmented.
Timing is another issue. Lizzie Komar, Index’s director of research, said Canada adopted programmatic much later than the U.S., and many brands are starting with private buying rather than transitioning away from the open exchanges. Canadians prefer private exchanges “probably because Canadian buyers want more control over CPMs and over the quality of inventory,” she said.
Canadians also appear to be using PMPs for very different reasons than their U.S. counterparts. Index found the average price advertisers pay on PMPs in the U.S. was nearly triple what Canadians pay ($4 in the U.S. to $1.42 in Canada). Komar interprets that to mean that U.S. advertisers are using PMPs to access top-tier inventory that publishers won’t offer programmatic access to otherwise.
Meanwhile, Canadians are using PMPs to buy pretty much the same inventory they’d get on the open exchanges but in a safer environment with heavier oversight to prevent fraud and other bad behaviour. She points out that the average CPM on Canadian PMPs is roughly the same as on open exchanges.
The data also shows that Canadian advertisers rely much more heavily on their media agencies for programmatic, and that the number of advertisers using agencies is actually growing.
The U.S. is seeing the opposite trend as more marketers form direct relationships with tech vendors and third-party trading desks, or form their own in-house trading teams.
Canadian share of programmatic spend going to agencies, third-parties and other partners
Komar said the trends in private marketplaces and agencies may even be tied together. Because private auctions and programmatic direct deals can be pre-negotiated between ad buyer and seller, agencies can better leverage their buying power to negotiate lower rates for clients. Contrast that with open exchanges, where prices are determined by supply and demand, and large agencies and independent trading desks compete on a level playing field.
“Agencies make it a little easier for buyers to take advantage of private marketplaces,” she said. “I’m sure a lot of this is related to the fact that marketers are really handing over the reins to the people that are doing it on their behalf, and brokering those private marketplaces deals.”
There’s no question that agencies have been leading the charge on PMP adoption. Most of the major agencies operate their own PMPs where they can onboard publishers they work closely with.
Komar expects that as Canadian marketers get more comfortable in programmatic, they’ll move more in the direction the U.S. has, leaning less heavily on agencies and forming direct relationships with vendors. But at the same time, many analysts predict that the U.S. will follow Canada in adoption of private marketplaces.
