Programmatic: victim or villain of the transparency debate?

Stephen Wright.

Transparency was the buzzword of 2016 and is already making headlines in 2017. Programmatic media has the highest predicted revenue growth for the year.

These two high profile areas are intertwined in many trade articles yet remain diametrically opposed in the sentiments they evoke. 

Transparency is steeped in negativity with fraud and deceitful practice dominating discussion. Programmatic offers nothing but positive opportunity for improved efficiency and effectiveness.

A perfect example of this conflicting dialogue took place at this week's IAB conference in the US when P&G chief brand officer Mark Pritchard laid down new rules for his agency partners that demand greater transparency in the programmatic space on both pricing and viewability. Programmatic was positioned at the heart of the divisive transparency debate.

So is programmatic being unfairly tarnished by the negative dialogue around transparency?

Is programmatic a victim of the strained advertiser-agency relationship or the root cause - the villain?

To answer this question we need to back track a little on the advertiser-agency relationship.

In Australia, mark ups, secret commissions and value banks have been around for many years. When media departments split away from creative agencies to become media independents, the slender margins on which an internal department operated were woefully inadequate for a standalone agency in an increasingly complex marketplace.

The emergence of new media with less structured pricing was fertile ground for supplementary revenue streams. The establishment of the trading group as a separate entity allowed agencies to fulfill contractual obligations with clients in a seemingly transparent manner because it was with the trading group that the supplementary revenue streams flowed.

Agency groups have been taking funds from media owners without full disclosure to their advertisers. It’s a part and parcel of the way the industry works.

Wherever a contractual relationship exists between advertiser and agency, and elements of pricing and added value are negotiated by a separate ‘non contracted’ trading entity, things will be opaque.

The vast majority of clients have contracts that begin and end with their agency relationship and don’t extend to group trading. And herein lies the problem for advertisers with programmatic media.

There is no fixed pricing mechanism to act as a ready reckoner and an advertiser has no contractual rights to access the raw price paid by the group trading desk.

All they ever see is an end price on their invoices. It is this that has riled P&G.

When they looked into the matter in the US they were humbled to discover that their agency was free to charge whatever it liked for inventory and remain 100% compliant with the contract.

There was no obligation for the agency to declare the rebates and mark-ups retained. It was a rude awakening and a reality that is shared by many other advertisers.

So returning to the question of whether programmatic is a victim of villain? It can essentially be both.

An unfairly maligned victim in some advertiser-agency relationships where appropriate commissions are being retained...but a fraudulent villain in others.

To determine where you stand as an advertiser there are a couple of simple questions to ask - the very questions asked by P&G.

Do I have a contract that allows me to clearly audit the raw prices paid by the trading desk of my agency?

Is my programmatic media activity regularly measured & reported to me and is the measurement independently verified by a third party?

If the answer to these two questions is 'yes', then you will already have confidence in your programmatic activity. You will be enjoying the full range of efficiencies that programmatic delivers.

For you programmatic is an unjustly maligned victim.

If the answer is 'no', then you could well be harbouring a villain, paying more than you should for your programmatic activity and relying on dubious reporting measures.

P&G is urging other advertisers in the industry to follow its lead. It’s time for ‘murky’ practices to cease….and for the industry to grow up. It’s time for action.

A fully transparent programmatic marketplace champions the efficiencies that programmatic delivers and will lead to a healthier stronger industry.

Stephen Wright is a director of independent agency Programmatic Media.

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