Welcome to this week’s Fry-Fry Up and we hope everyone enjoyed the recent Easter break. This week have we decided to give you our response to the announcement by the IAB last week of a “Programmatic Fee Calculator to Help Marketers See Where Digital Dollars Go”. As the auditing of media and programmatic spend is one of REAL Programmatic’s core services, we were obviously very interested, excited even, to see this initiative by the IAB.
Encouraging brand marketers to take more control of their programmatic spend, and urging them to demand more transparency and accountability from their agencies and their group-owned trading desks are issues that we have been pushing strongly, particularly since releasing our first White Paper on the State of Programmatic late last year.
So, we asked our resident programmatic guru, Jonathan Despinidic, to road-test the calculator and put it through its paces. His verdict? Well, after a good play around with the IAB Fee Transparency Calculator his view is that its accuracy is dependent on getting the detailed input information from your agency. He feels that this tool will give brand marketers the ability to start extracting more accountability, not just from the programmatic activity undertaken by their agency, but also their agency group-owned (internal) trading desks.
Even without having access to the right input data, his view is that the calculator can serve as a very effective indicator of ‘agency transparency’ per se. Clearly, the more variables you are not able to enter into the calculator, the less transparency is being demonstrated by your agency. That’s useful knowledge on its own.
Transparency is the key to unlocking the true potential of programmatic. Ad Age accurately highlights that publishers are typically seeing only 45% of the $10.1 billion dollars spent on Programmatic in 2014 in the US alone, with the other 55% going to technology providers and other associated players.
This is an alarming situation that we see happening every single day. Alarming not so much in that there are ad-tech partners and other service providers taking a slice of the pie, but more the fact that over half of your programmatic spend is literally disappearing without trace – swallowed up in a haze of smoke, mirrors and industry mysticism. But more specifically, we have to say, by agency group-owned trading desks.
Since launching Real Programmatic six months ago, we have seen some truly unbelievable practices and been able to save our clients a significant chunk of money along the way. What this calculator does is further emphasise that the new digital advertising trading model contains a dynamic that is not so much about driving greater efficiencies as it is about generating huge profits for agencies at the expense of their clients and, ultimately, the consumer. Whether they admit that or not!
There is a reason, for instance, as to why WPP is investing so heavily in various ad-tech related businesses. WPP are throwing millions upon millions of dollars into technology companies and resources because they can clearly see the opportunity for huge profits. They have recently invested $25m into AppNexus and another $25m into their proprietary data management platform.
Xaxis is a company that is now billing over $1bn globally as a media trading desk, and investing a further $54m into it’s technology platforms. All this from an agency-owned trading desk, clearly defining themselves as principals, with their agency having a vested interest and mandate to ‘blindly’ spend big ‘internally’.
Bruce Falck, CEO of Turn, in a recent opinion piece on Ad Exchanger commented “The reality is that advertisers have one primary agenda: to put the right messages in front of customers at the right time. Publishers have another: to make as much money from advertisers as possible. These two goals intersect at many points since happy advertisers tend to return to publishers to buy more advertising.”.
While slightly out of context, this puts into sharp relief where agency group technologies and businesses, namely trading desks, sit within the industry, and their objectives. It’s easy to see that an agency acts on behalf of an advertiser, and is rewarded, ultimately, by how well it does in selling more of the advertiser’s products and services. Likewise, publishers are incentivised to create compelling content in order to attract an audience that advertisers want to reach. Then there is the agency trading desk. Where does it sit on the agency-advertiser spectrum? Whose interests do they serve? From where we sit, they appear to have their fingers in everyone’s pies – agency, publisher, tech partner, ad network and so on.
Our aim is not to single out any one company for blame, because transparency is an industry-wide issue, but for the purpose of this exercise let’s look at a recent announcement by Xaxis, that they’ve opened a new shop called “Connect” – supposedly a “transparent” media trading desk, aimed at clients that don’t want to participate in blind arbitrage. We predict that in 12 months time Connect will be operating as little more than an agency purchasing proprietary media from Xaxis at inflated rates and with little detail. Thus, we will have witnessed the addition of yet another round of ticket clipping and revenue generation at the expense of actual spend of media.
The new CEO of Xaxis, we can’t remember his name, featured in an interview where some ‘hard’ questions relating to transparency were put to him. His answers were about as strong as a gentle breeze on a summers day. Take, for example, this little gem: “if the buyer wants to buy Xaxis media for $1 and opts in, signing a paper saying they want to access Xaxis or add Turbine segments … they would see Xaxis at $1. They would see our price, but they wouldn’t see if there was margin or technology costs built into it.” [italics added]
Transparency? There may be some marketers who buy this, but the simple truth is that agencies belonging to big agency groups (GroupM, for example) will nod appreciatively at his comments and label him the saviour of technology-based media buying. But we all know, or should know, that his comments merely expose the corner of a file that no one wanted you to see.
Anyway, enough Agency Trading Desk bashing. Where does this leave the CMO, the Marketing Director and the Marketing Exec looking to execute effective campaigns for an acceptable ROI?
Unfortunately, unless you’re prepared to challenge some of these agency practices, you’re still going to be groping around in the dark. So check out the IAB transparency calculator and take that first , all-important step towards shining some light onto your programmatic media relationships. Better yet, give us a call and we’ll battle the forces of darkness with you!
Until next week…
Jonathan Despinidic is Co-Founder and Consultant of REAL Programmatic. REAL Programmatic offers a range of services, from education and training modules for advertisers to digital and programmatic 101 courses, and advanced consultancy advice on in-housing of programmatic for brands. – link to training landing page.
Find us on Twitter @RProgrammatic
CEO: Andrew Norris (email@example.com)
Co-founder & Consultant: Jonathan Despinidic (firstname.lastname@example.org)
Co-founder & Director: Justin Boersma (email@example.com)