Understanding Programmatic Advertising: The 4 Types of Deals

Programmatic advertising has completely changed how digital ads are bought and sold. Instead of time-consuming manual negotiations, advertisers can now use automated, data-driven tools to buy ad space in real-time. It’s faster, smarter, and more efficient.

But not all programmatic deals work the same way. There are four main types: Open Auction, Private Auction, Preferred Deals, and Programmatic Guaranteed. Each one comes with its own benefits and limitations—for both advertisers and publishers.

Let’s break them down in a way that’s easy to understand.

1. Open Auction (Real-Time Bidding – RTB)

Open Auction, a type of Real-Time Bidding, is the most common type of programmatic buying. It’s a public marketplace where any advertiser can bid for available ad space in real time. The highest bidder wins the impression.

How it works:

• A user visits a website or app.
• The publisher’s ad server sends an ad request to an ad exchange.
• The ad exchange holds a real-time auction where multiple advertisers submit bids.
• The highest bidder wins, and their ad is displayed.
• The entire process happens in milliseconds.

Why it works:

• Maximum competition: Since the auction is open to all advertisers, publishers can achieve the highest possible CPMs.
• Scalability: Advertisers can reach a wide range of audiences without manual negotiations.
• Real-time optimization: Automated bidding ensures efficient budget allocation based on performance data.

Challenges you face:

• Brand safety concerns: Ads may appear on sites that do not align with the advertiser’s brand values.
• Lack of exclusivity: Since multiple advertisers compete for the same inventory, there’s no guaranteed ad placement.
• Higher fees: Ad exchanges and SSPs take a percentage of the transaction, reducing publisher revenue.

2. Private Auction (Invitation-Only RTB)

Think of Private Auction as a more exclusive version of Open Auction. Only selected advertisers are invited to bid on premium ad inventory. Publishers typically invite a select group of advertisers to bid on high-quality impressions.

How it works:

• The publisher sets up a private auction with specific advertisers.
• Advertisers bid in real-time within a restricted environment.
• The highest bidder wins, but only among the invited advertisers.
• The winning ad is displayed on the publisher’s site or app.

Why it’s great:

• Premium inventory access: Advertisers get access to high-quality placements not available in Open Auction.
• Greater control for publishers: Publishers can choose which advertisers participate, reducing brand safety risks.
• Higher CPMs: Since the inventory is exclusive, publishers often achieve higher rates.

Things to keep in mind:

• Limited demand: Since only selected advertisers participate, competition is lower compared to Open Auction.
• Less flexibility: Advertisers need to be pre-approved, which may limit campaign reach.
• Setup complexity: Private auctions require additional setup and negotiation compared to Open Auction.

3. Preferred Deals (Fixed-Price, Non-Auction, Non-Guaranteed Buying)

Preferred Deals give advertisers first dibs on premium inventory at a fixed CPM—but there’s no obligation to buy. If you like what you see, you can grab the impression before it goes to auction. If not, it moves on.

How it works:

• The publisher negotiates a fixed CPM with an advertiser.
• The advertiser gets a first look at the inventory before it enters auctions.
• If the advertiser accepts the impression, they buy it at the pre-negotiated rate.
• If they decline, the impression moves to the next eligible deal type

Why it works:

• Exclusive access: Advertisers can secure high-value inventory before it becomes publicly available.
• Fixed pricing: Both parties agree on a predetermined CPM, ensuring price stability.
• Flexible buying: Advertisers are not obligated to buy every impression, providing control over spending.

Challenges you face:

• No guaranteed volume: Publishers cannot rely on a fixed number of impressions being sold.
• Higher CPMs: Since advertisers are paying for premium access, prices may be higher than auction rates.
• Limited scalability: Since deals are negotiated one-on-one, this method lacks the automation of RTB auctions.

4. Programmatic Guaranteed (Fixed-Price, Reserved Inventory)

Programmatic Guaranteed combines automation with direct buying, allowing advertisers to secure a set number of impressions at a fixed CPM. Unlike Preferred Deals, advertisers are committed to purchasing the agreed-upon inventory.

How it works:

• The publisher and advertiser negotiate a deal.
• A fixed CPM and impression volume are agreed upon.
• The impressions are reserved for the advertiser, but inventory availability is contingent on user behavior and targeting criteria being met.
• The campaign is executed automatically through the programmatic platform.

Why it works:

• Guaranteed delivery: Advertisers secure a set number of impressions, ensuring campaign consistency.
• Brand safety & transparency: Advertisers know exactly where their ads will appear, reducing risks.
• Efficient direct deals: Automation eliminates the need for manual IOs (Insertion Orders) and streamlines execution.

The downsides:

• Less flexibility: Once a deal is locked in, advertisers cannot change the agreement.
• Upfront commitment: Advertisers must commit budget in advance, reducing adaptability to real-time performance changes.
• Limited scale: Since deals are one-on-one, they don’t provide the vast reach of Open Auctions.

How to Choose the Right Deal Type

Each type of programmatic deal serves a different purpose, depending on the advertiser’s objectives and the publisher’s monetization strategy:

Making the Most of Programmatic Advertising

Understanding the four types of programmatic deals is essential for both advertisers and publishers. Each method offers distinct advantages, from scalability and cost-effectiveness to premium inventory and guaranteed pricing.

Advertisers should choose deal types based on their campaign goals, budget flexibility, and brand safety concerns. Publishers, on the other hand, must balance revenue optimization with control over their inventory. By leveraging the right programmatic strategy, both parties can maximize the effectiveness of their digital advertising efforts in today’s fast-evolving ecosystem.