Use of agency trading desks declines 15%

By Nicola Riches | 4 September 2014

A lack of fee transparency by the programmatic trading desks of global agencies has spurred brands to reduce their spend with them, and they are instead increasingly moving budgets to independent agencies, according to a report by the World Federation of Advertisers.

The use of agency trading desks had declined by 15% year-on-year as advertisers increasingly turn to independents, according to the WFA. The global body said the legacy of ad network models persisted in the market, and brands were now actively pulling budgets as they want to pay less fees to ad agency trading desks.

“Many ad networks built their businesses on the idea of keeping a substantial share of the advertisers’ investment. In many cases this has been done without significantly adding value for the advertiser in terms of improved ROI, or other unique value, the WFA said in a new report titled the WFA Guide to Programmatic Media.

“While in an agency trading desk model, typically still more than half of the advertiser spend goes to middle man fees, an opportunity exists for better control over how this money is invested."

Although agency trading desks remain the dominant players with 69% of marketers surveyed by the WFA using them, usage of independent trading desks has more than tripled from 8% to 30% this year.

Alongside a survey of global marketers, the WFA has issued a set of guidelines highlighting how brands can improve the return they get from investment in programmatic platforms.

The report sets out four key recommendations: asking the appointed trading desk partner to clarify their position in the market; gain ownership of media investment data and its by-products such as audience data and key insights; taking greater contractual control of the technology stack they chose to use to prevent wasted commissions and finally, create a media investment strategy based on understanding of the media asset and the psychology of the other investors.

The WFA argues that even small changes to an existing system can deliver significant improvements in terms of data ownership and marketing performance.

The publication of today's guidelines coincide with the unveiling of a survey undertaken by some of the world’s largest advertisers, highlighting the steps they have taken to maximise value from the trading technology this year.

Based on responses from 43 of the world’s biggest spending marketers, who account for annual spend of US$35bn, the survey found that approximately 10% of total digital media investment is now going through programmatic channels, with 44% of that targeted at online display. This is double the scale of investment via programmatic platforms recorded year-on-year.

The survey also found that programmatic’s share of digital budgets is expected to climb significantly in the next 12 months, with 83% expecting video to grow and 77% predicting rises in mobile activity.

Much of the exposure to programmatic has been via open exchanges and real time bidding, where 69% of respondents have been active, however 42% have also used private exchanges with fixed prices and 31% have participated in invite-only auctions on private exchanges.

“Advertisers are taking concrete actions to manage the switch to programmatic and understand this new form of trading, “ said Stephan Loerke, Managing Director of the WFA. “This guidance is designed to continue that process and ensure that WFA members learn from best practice and are able to develop the transparent solutions that digital media buying requires.”

For more on the issue of transparency within the industry, pick up the next print edition of AdNews where our Big Picture feature takes a look into the murky world of media. The magazine is out tomorrow (5 September). Subscribe here or get it on iPad.

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