The ways in which media buyers and sellers transact could undergo a major shift in 2019 as big publishers opt to reduce the amount of inventory they offer through open exchanges.

For years, many publishers have relied heavily on open exchanges through which media buyers of all shapes and sizes compete on largely even footing for their digital ad inventory. But large media buyers and sellers are increasingly moving to conduct their business through programmatic direct and private marketplaces (PMPs).

For publishers, programmatic direct and PMPs offer the promise of better rates for their ad inventory, and helps them better regulate the quality and safety of the ads that appear on their properties.

For large media buyers, programmatic direct and PMPs are also appealing. As Robin O’Neill, group trading director at GroupM, explained to Digiday, “Anything that has us bidding on a like-for-like basis with everyone else in the market goes against our whole thing of scale being used to our advantage, which we don’t want. It doesn’t make sense for us to be competing [in online ad auctions]; therefore, we will look to remove ourselves from auctions and agree to pricing with publishers upfront.”

GroupM, the world’s largest ad company by billings, has been talking about reducing its media buys on open exchanges for years.

Publishers that will help it and other large media buyers do just that include The Guardian, News UK and The New York Times:

  • The Guardian’s CRO Hamish Nicklin predicted that “2019 will be the first year open marketplace buying will decrease and the proportion of money going into premium deals will grow” and last month revealed that “the amount of money I am getting from premium programmatic direct deals is triple-figure percentage growth compared to this time last year.”
  • News UK, which along with The Guardian is a partner in the Ozone Project, an alternative to open exchanges, has stopped selling inventory for its The Times subscription site through open exchanges.
  • The New York Times has ditched open exchanges in Europe. While Digiday notes that this was a result of the GDPR and not ideological concerns about open exchanges, it’s interesting to note that the company says “we have not been impacted from a revenue standpoint, and, on the contrary, our digital advertising business continues to grow nicely.”

How low can they go?

The big question for publishers is just how much they can reduce their use of open exchanges. Not all media buyers have the ability to participate in programmatic direct and PMP deals, or at meaningful scale, and in many cases, it’s still possible for media buyers to find better deals on the open exchanges.

Because programmatic direct deals and PMPs are unlikely to generate enough demand to exhaust supply, publishers will likely find that they still have to offer some inventory through open exchanges.

But by cutting back on their use of open exchanges, publishers have the opportunity to increase and better manage yield, and to generate more predictable revenue. It is also, in the eyes of at least some publishers, a simple way to address risks associated with GDPR non-compliance.

All of these suggest that the move away from open exchanges won’t be temporary.