This is a free excerpt from the AdNews Monthly print magazine cover feature. Over the course of May we will serialise the feature into bite-sized chunks. To read the full article now download a digital version of AdNews or subscribe to the premium print edition here. These topics will also be discussed at AdNews Live! Tackling Transparency on 27 June. Tickets are now on sale.
Programmatic trading desks
Much of the transparency debate centres on opaque programmatic trading practices at media agency holding group trading desks. Agency holding groups that run trading desks buy digital inventory in bulk and then sell it on to clients with the promise of a heavily reduced price.
In many cases, clients agree to allow agencies to take whatever margin they achieve, provided a guaranteed price is delivered. Estimates of how much margin agencies skim range from 30% to upwards of 90%. One marketer said the average margin would be around 50% of the total cost.
At the AANA’s The Media Challenge event, Ebiquity’s chief strategy officer, Nick Manning, said for every dollar spent on programmatically traded advertising, only about 40 cents goes towards advertising, with even less being seen by a human.
The rest is sliced up by media agencies and a range of ad tech services in between that help optimise the investment through targeting and other insights.
“There is no doubt that agencies, for a short period, benefitted a lot from how they were using trading desks to generate additional margin,” a senior marketer revealed.
“That ‘opaqueness’ is linked back to the fact that it was just too complex (for marketers to understand); almost a dark art that was digital buying for a number of years where there was probably a few who knew what they were doing in terms of making more money off clients.
That has now been addressed with some larger clients moving it in-house or to a model where they are paying for head count and not paying for a percentage or commission or volume that goes to a trading desk.
The “opaqueness” still exists, the marketer added, for a mid-range of clients who do not have the time to look into it or have a media controller to manage that aspect of marketing.
It is important to recognise that while media agencies were making money, they were also delivering benefits and efficiencies to clients. Many feel that the margin is irrelevant if programmatic trading is delivering results that add value to the business.
“My view is that if we are making more money as a business and driving more customer growth, and the agency is making more money, then I’m OK with that as long as it’s done in a transparent manner,” the marketer added.
However, Slingshot’s Rutherford believes more transparency around digital margins would be a massive stake in the ground.
How to improve programmatic
A marketer at one of Australia’s largest bluechips told AdNews they insist upon full transparency with their media agency partner across the programmatic trading ecosystem. This involves the client holding a direct relationship with suppliers like predictive marketing platforms and audience analytics companies.
“We negotiate those terms and we do it in a manner where we allow those parties to get access to first-party data. We then turn the keys over to the agency for them to use that trading platform,” the marketer said.
“We simply pay for the resources of our agency executing those platforms when we go to market.”
The movement to in-house part or all of programmatic trading has been building over the past five years. It’s a trend that is likely to continue, with tech giants and management consulting companies, like Accenture, circling.
One marketer, who has also worked agency-side, predicts within five years 40% of advertisers will have in-house trading desks. Another marketer said that over the next six months there will be a mixture of clients becoming more savvy while ad tech companies like Rocket Fuel and Quantcast will become much more savvy in locking clients in.
Check out the entire Transparency Series here.
You can hear these subjects tackled at the AdNews Live! Tackling Transparency event on 27 June. Tickets are now on sale. Speakers include Tim Egan, regional product marketing manager at Facebook and Tony Bell, national digital sales director at The Guardian Australia. More to be announced this week. Early Bird discounted tickets are available until 26 May. Buy tickets now.
This article is part of a series on Transparency which originally appeared in AdNews in print.
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