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4 Questions That Can Impact Your Digital Buys

15 Nov

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According to eMarketer, in 2017 advertisers will spend 38.3% of their ad budgets on digital media – in excess of $223 billion on a worldwide basis. Yet, in spite of the significant share-of-wallet represented by digital media, there is generally little introspection on the part of the advertiser.

Looking beyond the “Big 3” [ad fraud, safe brand environment and viewability concerns], the lack of introspection begins much closer to home. Simply, in our experience, client-agency Agreements do not adequately address digital media planning / placement roles, responsibilities, accountability or remuneration details.

Standard media Agreement language does not adequately cover digital media needs – specific rules and financial models need to be included in Agreement language that covering each potential intermediary involved in the buy process and to guarantee transparent reporting is provided to the advertiser. It is our experience that Agreement language gaps related to “controls” can be much costlier to advertisers than the aggregate negative impact of the Big 3.

And, regardless of Agreement language completeness, a compounding factor is that too few advertisers monitor their agencies compliance to these very important Agreement requirements.

To assess whether or not your organization is at risk, consider the following four questions:

  1. Can you identify each related parties or affiliate that your ad agency has deployed on your business to manage your digital spend?
  2. Does your Agreement include comprehensive compensation terms pertaining to related parties, affiliates and third-party intermediaries, that handle your digital ad spend?
  3. Is your agency acting as a Principal when buying any of your digital media?
  4. What line of sight do you have into your ACTUAL media placements and costs?

If you answered “No” to any of the questions, then there is a high likelihood that your digital media budget is not even close to being optimized. Why? Because the percentage of your digital media spend that pays for actual media is likely much lower than it should be, which is detrimental to the goal of effectively using media to drive brand growth.

Dollars that marketers are investing to drive demand are simply not making their way to the marketplace. Often a high percentage of an advertiser’s digital media spend is stripped off by agencies, in-house trading desks and intermediaries who have been entrusted to manage those media buys. A recent study conducted by AD/FIN and Ebiquity on behalf of the Association of National Advertisers (ANA) estimated that fees claimed by digital agencies and ad tech intermediaries, which it dubbed the programmatic “technology tax” could exceed 60% of an advertiser’s media budget. This suggests that less than 40 cents of an advertiser’s investment is actually spent on consumer media.

A good place to begin is to ask your agency to identify any and all related parties that play a role when it comes to the planning, placement and distribution of your digital media investment. This includes trading desk operations, affiliates specializing in certain types of digital media (i.e. social, mobile) and third-party intermediaries being utilized by the agency (i.e. DSPs, Exchanges, Ad Networks, etc.). The goal is to then assess whether or not the agency and or its holding company has a financial interest in these organizations or are earning financial incentives for media activity booked through those entities.

Why should an advertiser care whether or not their agency is tapping affiliates or focusing on select intermediaries to handle their digital media? Because each of those parties are charging fees, commissions or mark-ups for services provided, most of which are not readily detectable. This raises the question of whether or not the advertiser is even aware charges are being levied against data, technology, campaign management fees, bid management fees and other transactional activities. Are such fees appropriate? Duplicative? Competitive? All good questions to be addressed.

When it comes to how an agency may have structured an advertiser’s digital media buys, there is ample room for concern. Is the affiliate is engaged in Principal-based buying (media arbitrage)?  Is digital media being placed on a non-disclosed basis, versus a “cost-disclosed” basis where the advertiser has knowledge of the actual media costs being charged by the digital media owner?

Evaluating your organization’s “risk” when it comes to digital media is important, particularly in light of the findings of the Association of National Advertiser’s (ANA) “Media Transparency” study released in 2016, which identified agency practices regarding non-transparent revenue generation that reduces an advertiser’s working media investment.

The best place to start is a review of your current client-agency Agreements, to ensure that the appropriate language safeguards are incorporated into the agreement in a clear, non-ambivalent manner. Once in place, monitoring your agency and its affiliates compliance to those contract terms and financial management standards is imperative if you want to assure compliance, while significantly boosting performance.  

“Today, knowledge has power. It controls access to opportunity and advancement.” ~ Peter Drucker                                                                                                                    

Interested in learning more about safeguarding your digital media investment? Contact Cliff Campeau, Principal, AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this important topic.

 

Lawsuits Expose the Seemly Underbelly of Programmatic Digital

25 Sep

fraudsterAt the rate things are progressing in digital media and programmatic trading, the tenuous relationships between advertisers, agencies, ad tech providers, exchanges and publishers are about to come unglued.

While many in the ad industry have had their doubts about programmatic digital, this sector has grown unabated for the last several years. According to eMarketer in 2014 advertisers invested 28.3% of their ad budget in digital media. Their projection is that this will grow to 44.9% in 2020, likely topping $100 billion in total spend. eMarketer estimates that 80% of U.S. digital display activity in 2017 will be transacted programmatically. 

Interestingly, since 2014 the industry has become much more attuned to the risks encountered by advertisers when it comes to optimizing (or should we say safeguarding) their digital media investment. Yet in spite of the findings regarding unsavory practices emanating from the ANA’s seminal 2016 study on “Media Transparency” advertisers continue to pour an increasing share of their advertising spend into this media channel.

However, not all advertisers are continuing to embrace digital media quite as readily as they once did. A handful of progressives, namely Procter & Gamble, have begun to rethink the share of wallet being allocated to digital media and programmatic trading. Marc Pritchard, P&G’s Chief Marketing Officer, has been very outspoken in summing up his company’s position quite succinctly; “The reality is that in 2017 the bloom came off the rose for digital media. We had substantial waste in a fraudulent media supply chain. As little as 25% of the money spent in digital media actually made it to consumers.”

Given Mr. Pritchard’s comments it has been quite intriguing to monitor the legal developments in two high profile lawsuits that have recently been filed.

In the first case, Uber is suing Fetch Media, its digital agency suggesting that it had “squandered” tens of millions of dollars to “purchase non-existent, non-viewable and/ or fraudulent advertising” on its behalf. Uber has further alleged that the agency “nurtured an environment of obfuscation and fraud for its own personal benefit” and that of its parent company, Dentsu Aegis Network. To be fair, Fetch Media has denied what it says are “unsubstantiated” claims by Uber which it claims is designed to draw attention away from their “failure to pay suppliers.”  Allegations include that the agency acted as agent for Uber in some markets and executed principal-based buys in others and that they earned and retained undisclosed rebates tied to Uber’s media spend.

The second case involves RhythmOne, a technology enabled media company and its partner dataxu, a programmatic buy-side platform/ applications provider. RhythmOne originally filed suit regarding $1.9 million worth of unpaid invoices. Dataxu filed a counterclaim alleging that RhythmOne “used a fake auction to consistently overcharge” them and suggested that RhythmOne also “procured inventory from other exchanges, and then marked it up,” both violations of their partnership agreement. As an aside, for the $1.9 million in payments that dataxu admittedly and intentionally withheld from RhythmOne, going back to January, 2017, it is likely that dataxu’s clients had been billed and remitted payment to them. Which raises questions as to how and when their clients will be made whole.

Of note, both of these lawsuits delve into a range of topical issues that pose risks to most programmatic digital advertisers:

  • Agencies executing principal-based buys, rather than acting as agent for the advertiser.
  • The retention of undisclosed rebates tied to an agency’s use of advertiser funds.
  • Non-transparent fees and mark-ups being tacked on to the actual cost of media inventory by multiple middlemen (i.e. agencies, DSPs, exchanges).

These are issues that advertisers should familiarize themselves with and address through the development of a comprehensive client/ agency contract. In addition, advertisers must vigilantly monitor supplier compliance with the terms of those agreements to insure full transparency and, importantly, accountability when it comes to the stewardship of their digital media investment.

As these two cases highlight it is dam difficult for an advertiser to accurately assess the value of digital inventory that is being proffered on their behalf by their agency and adtech partners. Beyond establishing what percentage of an advertiser’s digital dollar actually goes toward media inventory, these separate, but related legal actions demonstrate that it is not just a lack of transparency that advertisers must worry about, but a lack of ethics. When it comes to programmatic digital media the American artist, John Knoll, may have said it best;

“Any tool can be used for good or bad. It’s really the ethics of the artist using it.”

There are steps that advertisers can take to both safeguard and optimize their digital media investment. If you are interested in learning more, contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Increase Your Digital Coverage by 40% In One-Easy-Step

1 Aug

simpleisgoodConfucius once said that “Life is really simple, but we insist on making it complicated.”

Perhaps the same can be said of digital media buying. Too often it seems as though the onset and rapid growth of programmatic buying has created more problems than solutions. An expanded media supply chain with multiple layers of costs, increased levels of fraud, brand safety concerns, visibility challenges, a lack of transparency and perhaps most troubling, eroding levels of trust between advertisers and their agencies.

Growing pains? Perhaps. But something needs to change and this author would like to suggest one potential solution… abandon programmatic digital media buying altogether. Seriously? Why not?

Consider the following and the concept won’t seem so far-fetched:

  • In 2015, advertisers spent $60 billion on digital media, with close to two-thirds of that going to Google and Facebook (source: Pivotal Research).
  • According to the advertising trade group, Digital Content, today this duopoly is garnering 90% of every new dollar spent on digital media.
  • What happened to the magical pursuit of the long-tail and the notion of smaller bets being safer? Economics. The fact is that the notion of the long-tail simply didn’t work as researchers and economists found that having less of more is a better, more statistically sound pursuit. To wit, Google’s and Facebook’s market share.
  • Today, programmatic digital display advertising accounts for 80% of display ad spending, which will top $33 billion in 2017 (source: eMarketer).
  • Between 2012 – 2016 programmatic advertising grew 71% per year, on average (source: Zenith).
  • In 2018, programmatic will grow an additional 30%+ to $64 billion, with the U.S. representing 62% of global programmatic expenditures (source: Zenith).

Come again. Two publishers are getting $.90 of every incremental digital dollar spent and programmatic digital media buying accounts for 80%+ of digital media spend. What are we missing? Is there an algorithm that specializes in sending RFPs and insertion orders to Google and Facebook in such a manner that the outcome yields a 40% or better efficiency gain?

As we all know, there have been numerous industry studies, including those sponsored by the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA), which have suggested that at least 40% of every digital media dollar spent goes to cover programmatic digital media buying’s transactional costs (third-party expenses and agency fees), with only $.48 – $.60 of that expenditure going to publishers.

So, for an advertiser spending $40 million on programmatic digital media, if the law of averages holds true, $16 million will go to cover transactional costs and agency fees. That means that of the advertiser’s original spend, they will actually get $24 million worth of media. While we know that programmatic media can yield efficiencies, can it overcome that type of transactional deficit?

If that same advertiser eschewed programmatic digital and decided to rely on a digital direct media investment strategy, what would it cost them?

Assume that they hired ten seasoned digital media planning and investment professionals for $150,000 each (salary, bonus, benefits), they would spend $1.5 million on direct labor costs. Further, in order to afford their team maximum flexibility, let’s say that the advertiser allocated an additional $1 million annually for access to ad tech tools and research subscriptions to facilitate their Team’s planning and placement efforts. This would bring their total outlay to $2.5 million per annum.

If they were spending $40 million in total, this means that the team would be able to purchase $37.5 million worth of digital media. Don’t forget that placing digital buys direct will greatly reduce fraud levels that can eat up another 8% – 12% of every digital ad dollar, while also greatly improving brand safety guideline adherence. Compare that to the $24 million in inventory purchased programmatically.

So how efficient is programmatic?

Sadly, most advertisers can’t even address this question, because their buys are structured on a non-disclosed, rather than a cost-disclosed basis. Even if they had line of sight into what the third-party costs (i.e. media, data, tech) and agency fees being charged were, they wouldn’t have a clue as to the fees/ charges that sell-side suppliers were levying, further eroding working media levels.

A simplistic solution? Perhaps. But the fact that the industry continues to drink the programmatic “Kool-Aid” without any significant progress toward resolving the dilutive effect that programmatic transactional costs, agency fees and fraud have on an advertiser’s investment seems a tad irresponsible.

Ask yourself. What would you do if it were your money?

 

 

Is Programmatic Advertising Worth the Risk?

26 Jul

dreamstime_xs_50082776Conceptually, it is easy to understand the potential of programmatic media buying. It is obvious to most that using technology to supplant what is a manual, labor intensive process to drive efficiencies and improve media investment decisions could be a plus for advertisers, agencies and publishers (not to mention ad tech vendors).

The only question to be addressed is “when” will the benefits of programmatic outweigh the costs and the risks to advertisers?

Proponents of programmatic will argue that this buying tactic has already generated economic benefit for advertisers when it comes to digital media buying. After all, streamlining the processes related to the issuance and completion of RFPs, buyer/ seller negotiations and preparation of insertion orders clearly saves time and reduces labor costs for all stakeholders.

No one would argue this premise. However, reducing labor costs associated with traditional buying is but one component of programmatic buying costs. Consider the broad array of programmatic buying related fees and expenses currently being born by advertisers:

  • Data Management Platform (DMP) fees
  • Demand Side Platform (DSP) fees
  • Data/ Targeting fees
  • Pre-Bid Decisioning/ Targeting fees
  • Ad Blocking (pre/ post) fees
  • Verification fees
  • Agency Campaign Management fees

It should be noted, that there are “other” non-transparent charges and fees linked to sell-side platforms (SSPs), bid processing, real-time bidding auction methodology and principal-based buys (media arbitrage) that are born by advertisers and limit the percentage of their digital media spend that actually goes toward inventory.

In a recent Ad News article by Arvind Hickman, the author referenced studies conducted by both the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA) that demonstrate the magnitude of these programmatic fees and expenses. The WFA study determined that $.60 of every dollar spent on programmatic digital media buying goes to cover “programmatic transactions and fees.” The ANA study suggests that advertisers could be paying between $.54 – $.62 of every dollar on digital supply chain data, transaction fees and supply side charges.

Bear in mind that neither of these studies addressed the impact of media arbitrage or ad fraud. Industry studies, focused on assessing the level of digital ad fraud, fielded by the Association of National Advertisers (ANA) and WhiteOps found that fraudulent non-human traffic in the form of bots was “more prevalent in programmatic environments.” According to the research, display ads purchased programmatically were “55% more likely to be loaded by bots” than non-programmatic ads.

And yet, in-spite of the challenges still being faced with programmatic digital media buying, this media investment model is being rapidly rolled out to out-of-home, print and television.

Who do you think will bear the learning curve costs and risks associated with expanding programmatic to other media categories? The answer, is primarily advertisers and to a lesser extent, publishers.

We certainly understand that programmatic is the future of media buying. That said, rushing headlong into this arena, without satisfactory levels of transparency and or fraud prevention, combined with the upfront costs of the industry’s investment in technology, that are ultimately passed through to the advertiser, are both risky and costly to advertisers.

Is there a need to reach and take risks in order to secure positive progress? Yes. But, it might be best to follow the approach advocated by one of this country’s greatest military leaders, General George S. Patton:

“Take calculated risks, that is quite different than being rash.”

What if You Discovered That Your Digital Dollar Netted You a Dime’s Worth of Digital Media?

12 Feb

dreamstime_xs_2601647In 2014, the World Federation of Advertisers conducted a study which demonstrated that “only fifty-four cents of every media dollar in programmatic digital media buying” goes to the publisher, with the balance being divvied up by agency trading desks, DSPs and ad networks.

Fast forward to the spring of 2016 and a study by Technology Business Research (TBR) suggested that “only 40% of digital buys are going to working media.” TBR reported that 29% went to fund agency services and 31% to cover the cost of technology used to process those buys.

Where does the money go? For programmatic digital media, the advertiser’s dollar is spread across the following agents and platforms:

  • Agency campaign management fees
  • Technology fees (DMP, DSP, Adserving)
  • Data/Audience Targeting fees
  • Ad blocking pre/post
  • Verification (target delivery, ad fraud, brand safety)
  • Pre-bid & post-bid evaluation fees

It should be noted that the fees paid to the above providers are exclusive of fees and mark-ups added by SSPs, exchanges or publishers that are blind to both ad agencies and advertisers. What? That is correct. Given the complex nature of the digital ecosystem, impression level costs can be easily camouflaged by DSPs and SSPs. Thus, most advertisers (and their agencies) do not have a line-of-sight into true working media levels…even if they employ a cost-disclosed programmatic buying model (which is rare).

Take for example the fact that a large preponderance of programmatic digital media is placed on a real-time bidding or RTB basis, and a majority of that, is executed using a second-price auction methodology. With second-price auctions, the portion of the transaction that occurs between a buyer’s bid and when the clearing price is executed without advertiser or agency visibility, thus allowing exchanges to apply clearing or bid management fees and mark-ups as they see fit. So for example, if two advertisers place a bid for inventory, one at $20 per thousand and the other at $15 per thousand, the advertiser who placed the higher bid of $20 would win, but the “sale price” would be only one-cent more than the next highest bid, or $15.01. However, advertisers are charged the “cleared price,” (could be as high as $20 in this example) which is determined after the exchange applies clearing or bid management fees. How much you ask? Only the exchanges know and this is information not readily shared.

Earlier this month Digiday ran an article entitled, “We Go Straight to the Publisher: Advertisers Beware of SSPs Arbitraging Media” which profiled a practice used by supply-side platforms (SSPs) that “misrepresent themselves.” How? By “reselling inventory and misstating which publishers they represent.” The net effect of this practice allow the exchanges an opportunity to “repackage and resell inventory” that they don’t actually have access to for publishers that they don’t have a relationship with.

Let’s look beyond programmatic digital media. Consider the findings from a Morgan Stanley analyst, reported in a New York Times article in early 2016 that stated that, “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” What is significant here is that until very recently, these two entities have self-reported their performance, failing to embrace independent, industry accredited resources to verify their audience delivery numbers.  

The pitfalls of publisher self-reporting came to light this past fall when Facebook was found to have vastly overstated video viewing metric to advertisers for a period of two years between 60% and 80%.  

By the time one factors in the impact of fraud and non-human viewing, and or inventory that doesn’t adhere to digital media buying guidelines and viewability standards, it’s easy to understand the real risk to advertisers and the further dilution of their digital working media investment.

Advertisers have every right to wonder what exactly is going on with their digital media spend, why the process is so opaque and why the pace of industry progress to remedy these concerns has seemingly been so slow. Sadly, in spite of the leadership efforts of the Association of National Advertisers (ANA), The World Federation of Advertisers (WFA), The ISBA, The Association of Canadian Advertisers and the Interactive Advertising Bureau (IAB) there is still much work to be done.

The question that we have continually raised is, “With advertisers continuing to allocate an ever increasing level of their media share-of-wallet to digital, where is the impetus for change?” After all, in spite of all of the known risks and the lack of transparency, the inflow of ad dollars has been nothing short of spectacular. According to eMarketer, digital media spend in the U.S. alone for 2016 eclipsed $72 billion and accounted for 37% of total media spending.

There are steps that advertisers can take to both safeguard and optimize their digital media investment. Interested in learn more? Contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation. After all, as Warren Buffett once said:

“Risk comes from not knowing what you’re doing.”

Principal-Based Buying: A Wolf in Sheep’s Clothing?

29 Apr

dreamstime_xs_36536323Recently, Ad Age ran an article entitled: “Risky Business: Why Media Agencies are Betting on Principal-Based Buying.” To be honest, my first reaction was, what in the world is principal-based buying? It didn’t take long to figure out that it was simply a new descriptor for media arbitrage.

Clever, principal-based buying sounds so much more appealing and less subversive than media arbitrage. However, arbitrage is arbitrage, regardless of what moniker that is placed on the act of purchasing media and reselling said media to advertisers. According to Merriam-Webster, the definition of arbitrage is clear:

The nearly simultaneous purchase and sale of something in one place and selling it in another in order to profit from price discrepancies.”

We certainly understand the primary allure of media arbitrage to agencies; the potential for higher margins than what traditional remuneration models would allow for. Let’s face it agency holding companies are publicly traded entities with a fiduciary obligation to drive shareowner profitability.

Simply, “principal-based” buying is a practice that is in clear violation of the principal- agent relationship, which has long been the driving concept behind client/ agency relations.

Forget the opacity, which is a hallmark of this buying tactic and the potential risks to advertisers seeking to optimize media value and boost working media ratios. The main issue with agency ownership of media is the potential impact on the objectivity of the advice, which it offers its clients.

Media time and space is a perishable product. It is also speculative in nature when it comes to projecting future value from a relevancy and audience delivery perspective. So what happens in the event an agency, indulging in arbitrage, has a significant ownership position in distressed, dated inventory? Could such a position create internal pressure on the agency’s media staff to move that inventory? In turn, might such pressure result in agency media team’s pushing that inventory off on clients, whether it represents the best fit at the best price?

Assuming that an advertiser knowingly engages their agency partner’s trading desk and believes that this relationship will yield a price advantage over traditional buying practices there are a few questions to consider; “How will you know? What methodology will you apply to vet the quality of the inventory and the price paid? Who will conduct that analysis for you?” In short, is this a proposition whose economic benefit to the advertiser can ever be accurately evaluated?

Sadly, while the agency community may shrug off the notion of ever having committed to a principal-agent relationship with its clients too often we find that agencies, which have embraced media arbitrage, have not disclosed this fact to their clientele… in spite of the position often taken in the trade publications.

In our agency contract compliance practice we find that in most instances there is not a separate letter of agreement between the agency’s trading desk operation and the advertiser, that the language dealing with “related parties” within the contract is inadequate to cover such a scenario and that there are no limitations in place regarding the percentage of an advertiser’s media buy that can be run through the trading desk.

Hopefully, those agencies that intend to engage in and or extend their use of principal-based buying will also commit to fully disclosing this practice and its application to each of their clients, well in advance of implementing this buying approach on those clients’ behalf.

From an advertisers perspective, it is imperative to assess the type of relationship that you desire with your media agency. If a principal-agent relationship predicated on full-disclosure and the fiduciary obligations, which underlie such relationships, are important to your organization, the client/ agency agreement will need to reflect that position. On the other hand, if there is interest in exploring principal-based buying consider contracting directly with the agency trading desk and establishing caps on the percentage of the budget, which can be invested through that operation.

                                   

Advertisers Can Shield Themselves From Digital Ad Fraud… Somewhat

19 Jan

Fraud PuzzleLet’s set the stage, so that we are all clear on the risks faced by advertisers when it comes to digital media in general and programmatic digital media buying in particular. Consider the following quote from Bob Liodice, President and CEO of the Association of National Advertisers (ANA):

The level of criminal, non-human traffic literally robbing marketers’ brand-building investments is a travesty. The staggering financial losses and the lack of real, tangible progress at mitigating fraud highlights the importance of the industry’s Trustworthy Accountability Group in fighting this war. It also underscores the need for the entire marketing ecosystem to manage their media investments with far greater discipline and control against a backdrop of increasingly sophisticated fraudsters.”

What prompted Mr. Liodice’s comments? Quite simply, the ANA and White Ops updated their 2015 “BOT Baseline: Fraud in Digital Advertising” study, which suggested that the ad industry would see $6.3 billion in digital ad fraud in 2015. In light of the fact that the Interactive Advertising Bureau (IAB) reported that digital ad revenue surged almost twenty-percent through the first half of last year, can we be surprised by the fact that the level of fraud escalated as well. To what, you ask. According to the ANA report, it is estimated that the level of digital ad fraud will grow to $7.2 billion in 2016.

The challenge for individual advertisers is to determine how best to insulate their organizations from digital ad fraud, while continuing to support industry initiatives focused on the same end.

For many advertisers the question is quite simply; “But where do we begin?” The answer as the late Stephen Covey once intoned is to; “Begin with the end in mind.” So what is the end goal? For most advertisers the aim is to focus digital media investment on media sources that can reliably drive the highest level of effectiveness using the best quality inventory at the lowest possible price.

One important component of this challenge is obviously the continued growth of programmatic digital media buying. It should be noted that of the estimated $60 billion in digital media spend, programmatic will account for $15 billion or 25% of the total spend. However, one must consider that programmatic buying represents a very high percentage of digital ad fraud, up to 90% according to some industry experts.

The range of tactics employed by entities and individuals seeking to profit from the growth of digital spending are many and varied, they include; click-fraud, the use of BOTs, hidden ads and impression laundering. However, the primary source of digital media fraud is in the form of URL masking, which makes it impossible for advertisers or their agencies to know where their digital ads are running. Studies have shown that nearly 45% of transactional digital URLs do not match the URL where the impressions were actually served… a sobering statistic to be sure.

In our experience there are three things that advertisers can do to mitigate the level of risk posed by fraudsters.

First and foremost, advertisers must improve the level of transparency between their programmatic buying partner and their own organization. This can be done by employing contractual language and controls which narrow the transparency gap that more than likely exists today. Too often, agencies simply introduce their trading desk operation to their clients, without amending their current agreement or allowing the advertiser to contract directly with the trading desk entity.

Contract language should provide limitations on the percentage of total digital media spending that can be allocated to programmatic and impart clear “signing authority” guidelines in the event those levels are to be altered. Additionally, the agency should be required to provide a staffing plan, which includes data scientists and data analysts, along with the team’s estimated utilization rates and hours by individual. Complement this by incorporating copies of the media verification and performance tracking reports that will be utilized to monitor impression delivery, ad viewability and fraud detection. Finally, we suggest requiring the agency to separate the costs for media, data and technology licensing from agency fees, each of which should be reconciled to actual.

The second line of defense for advertisers comes in the form of requiring their programmatic media buying partners to utilize a Media Rating Council (MRC) accredited digital technology/ platform provider. Firms such as Integral Ad Science and Double Verify, for example, have a range of tools that can integrate with pre-bid platforms to provide real-time impression authentication to improve the odds that an advertisers impressions will be delivered in a contextually relevant, brand safe and fraud free environment. When nefarious behavior is identified, these tools can block impressions from being delivered there and dynamically blacklist those sites. In addition, there are tech solutions now available, which can assess inventory hygiene within ad networks and exchanges, allowing advertisers to target higher quality impressions.

Finally, advertisers must apply their buy-side leverage and demand that their agency partners and third-party vendors work collaboratively to optimize their digital media investment. Those parties that cannot demonstrate that they are continuously improving their tools, methodologies and compliance monitoring processes should be dropped from consideration set. Voting with one’s dollar has always been and remains one of the best ways to incent the behavior and secure the types of results that diligent advertisers deserve.  

In the words of Samuel Johnson, the celebrated eighteenth century English writer:

What we hope ever to do with ease, we must learn first to do with diligence.”

 

 

 

Programmatic: Promising, but is the Benefit to Advertisers Real?

19 Oct

cautionIn 1997 rock legend David Bowie told his fans at a Madison Square Garden concert; “I don’t know where I’m going from here, but I promise it won’t be boring.” While his comments were a reflection on life after his 50th birthday, they could just as easily be used to describe the future of programmatic media buying.

Put yourself in an advertiser’s position and consider your reaction when your media agency approaches you with this enticing proposition;

Through our proprietary programmatic buying platform we have the ability to deliver quality, targeted inventory to precise segments of your target audience at a time and in an environment when they’re most receptive to your message and at rates that are a fraction of market pricing.” 

For many advertisers, the response to this enticing offer has been “sign us up.”

The programmatic revolution began with digital media, evolved to print and OOH and is now being implemented in the television marketplace. Many industry pundits consider programmatic to be one of the advertising industry’s most prominent developments. This algorithmic based method of connecting media sellers and buyers to conduct inventory transactions in an automated, real-time manner clearly holds much promise.

Benefits to advertisers are said to include; rate efficiencies, advanced targeting, message personalization and enhanced access to premium content. For media sellers the benefits allegedly include the ability to move less desirable remnant inventory and optimize CPMs across their inventory portfolio. Ad tech firms, such as demand side platforms, sell side platforms and ad exchanges, which here-to-for never existed earn transactional fees on programmatic activity and or licensing fees from organizations that utilize their technology tools. Agencies are able to leverage their clients’ “Big Data,” do more with fewer people and when programmatic buys are executed through their trading desk operations, there is incremental revenue to be gained from media arbitrage (buying low, selling high).

Assuming that each stakeholder realized the aforementioned benefits ascribed to this approach, programmatic buying, irrespective of the issues experienced to date in the digital media market, certainly holds the potential to be a win, win scenario for all of the players.

Unfortunately, the underlying technology behind programmatic buying is not fully understood by many in the industry. To be fair, programmatic digital media buying is a highly nuanced and complex process. It greatly impacts digital display ad spending in general and mobile in particular. It can involve real-time-bidding (RTB) or programmatic direct, where advertisers can still secure inventory guarantees, it can be applied in an open exchange or private marketplace and can include traditional banners or non-standard rich media and video.

Given that programmatic buying is still in its infancy, one might logically assert that a greater level of refinement is required to support programmatic buying’s current share of digital media spending, prior to even considering expansion of programmatic buying to other media. Supporting this perspective are some of the challenges which the industry is grappling with to improve the programmatic experience for digital media:

  • Reducing the level of non-human traffic and fraud
  • Minimizing the % of ad spend accruing to “facilitators” or middle-men
  • Serving up environmentally relevant programmatic creative across devices
  • Improving advertiser transparency

We agree that programmatic media buying holds much potential. However, the industry’s experience to date suggests that advertisers have born the bulk of the risk involved with this emerging technology and its application in the digital market.

So when the talk turns to the expansion of programmatic to other media segments one has to wonder if advertisers are ready to embark upon another investment spend scenario in media segments with much steeper learning curves and higher degrees of risk.

Relative to the digital market sector, television, OOH and print are much more complex when it comes to the variety of non-digital assets, lack of uniform inventory management processes and disparate mainframe environments. Throw in the fact that there are multiple ad tech providers already offering a variety of non-standard platforms/ technologies in an attempt to solve for these considerations and the near-term prospects appear quite challenging.

In a recent article in MediaPost, Joe Mandese shared insights on some of the pioneering work being conducted in programmatic/ addressable TV by Mitch Oscar, Programmatic TV Strategist for US International Media (USIM) and his peers. During the interview, Mr. Oscar shared results from one client’s programmatic TV ad buys, which suggested they had generated “improved results and efficiencies” relative to conventional TV buys.

Compelling to be sure, however, one must pause to consider the observation that the data shared by Mr. Oscar indicated that the “mix of networks and dayparts were all over the place and it was difficult to find meaningful patterns from it.”  Further, when USIM asked the programmatic TV suppliers to document what actually ran, “it generated a report with 163,866 lines of code covering 3,563 pages, something most traditional TV buyers and advertisers might not consider practical to evaluate.”

Hopefully advertisers, agencies and media property owners take a more measured approach to expanding programmatic buying to other media segments to avoid some of the pitfalls currently being experienced in digital media. Perhaps we can all benefit from the words of St. Jerome, the Catholic priest, historian and theologian, who once intoned:

“The scars of others should teach us caution.”

 

What is the True Cost of Opacity? (part 1 of 2)

29 Apr

icebergPart 1 in a two-part look advertiser concerns regarding “transparency” and the impact it is having on client-agency relations.

Ad industry concerns regarding the issue of transparency and the trust which exists between advertisers and their agencies have taken a new, decidedly negative turn over the course of the last month.  What had been largely an “in-house” debate focused on items such as AVBs, programmatic buying, media arbitrage and concerns over digital media viewability was thrust into the limelight as the result of one Wall Street analyst’s recommendation that ad agency holding company investors “sell their shares.”

The recent revelations about the utilization of media rebates or AVBs in the U.S. marketplace and the resulting firestorm in the advertising trade press seems to have been the tipping point that spurred Brian Wieser a Senior Analyst from Pivotal Research Group to downgrade the stocks of IPG, Omnicom, WPP and Publicis and to recommend that investors exit the category. Mr. Wieser’s recommendation provoked an additional round of denials by some holding company CEOs regarding the practice of agencies accepting rebates in the U.S. and spurred some debate amongst the holding companies about the transparency of their revenue realization processes. One notable CEO, Sir Martin Sorrell of WPP reiterated his company’s policy regarding rebates and encouraged WPP’s competitors to be more forthcoming on that front; “We said what the model is in the U.S., the way it’s a non-rebate model. We’ve made that quite clear. I would urge greater transparency in what’s happening to net sales and revenues, then we would have less black box and more open box.”

While the topic of rebates seems to have garnered a lion share of the attention, when it comes to transparency the rebate issue carries with it much less financial risk than the challenges associated with the rapidly evolving digital media landscape. Consider the fact that various research studies have suggested that digital media advertisers may be losing 50% + of their investment to click fraud, bots, piracy and excessive fees related to supply chain complexity.

Given that digital media now ranks second only to television in terms of media spending and that it continues to grow at double-digit rates the potential for Wall Street commentary regarding advertiser investment in this area could be much more problematic. For instance, at the recent ANA conference on “Agency Financial Management,” Peter Stabler, Managing Director, Senior Equities Analyst with Wells Fargo Securities raised concerns about one particular aspect of the digital media space… agency trading desks. Specifically, Mr. Stabler cited the inconsistent manner in which holding companies report on trading desk operations, the potential for the proceeds from trading desks to inflate revenues and create margin dissolution and the potential for conflict-of-interest concerns between advertisers and their agencies.

If there is a silver lining to this maelstrom, now that the genie is out of the proverbial bottle, perhaps the highly charged nature of these issues can serve as a galvanizing force to bring clients and agencies together to address these issues in an objective manner… without the emotion and finger-pointing which has characterized the discussions to date. Let’s face it, the last thing either party wants is to see their market capitalization rates decline because analysts and investors have concerns about how they transact business and or the state of client-agency relations. 

While the individual issues raised are substantive, many feel that they have taken on additional import as a result of an erosion of trust between clients and agencies. Thus, shoring up the strength of these strategic relationships could yield significant asset value both in the context of issue resolution and the ongoing business of building brands and generating demand. As automotive pioneer Henry Ford once said;

If everyone is moving forward together, then success takes care of itself.”

In our opinion, the best place to begin is to develop a sound client-agency letter-of-agreement, which clearly articulates both parties expectations and desired behaviors. Further, the agreement should specifically identify the level of disclosure required by the client of the agency, their related parties (i.e. holding companies, sister agencies, trading desk operations, in-house studios, etc…) and their third-party vendors. We believe that this is a critical first step in establishing accountability standards and controls.

Is Agency Ownership of Audience Measurement Providers a Good Idea?

13 Feb

transparencyRecently, WPP indicated that they were planning to take a large equity stake in comScore, one of the world’s largest online campaign measurement providers. This is in addition to WPP’s recent investment in Rentrak, a television audience measurement service, an organization in which WPP is now the largest institutional shareowner.

With WPP’s continued push into the campaign measurement space, advertisers may begin to question the consequences of an agency holding company’s ownership of audience delivery measurement resources. After all, these campaign measurement service providers gather and analyze data and publish ratings which are utilized to assess the efficacy of the agency’s media purchasing efforts on the advertiser’s behalf.

More broadly, based upon the business activities in which the agency holding companies now routinely engage in, one might legitimately question whether or not the designation of “agent” is even an apt description of the role which advertising firms play in support of their clients. Activities such as media arbitrage or reselling if one prefers, joint media and technology ownership deals with publishers, participation in AVB or volume rebate programs offered by media owners to agency holding companies tied to transactions entered into on behalf of their clients, all raise a legitimate question about “Whose” interests agencies are beholden to.

What recourse do advertisers have? After all, there are often distinct advantages to utilizing large agency holding company brands. Independent agencies, which while unencumbered by questions regarding their fiduciary focus, sometimes lack the scale or depth of resources required to perform in certain situations. Enlightened protectionism in the 21st century requires advertisers to aggressively push for enhanced transparency, improved controls and the unimpeachable right to audit their agency’s contract compliance and financial management performance. In the oft quoted words of President Ronald Reagan; “Trust, but verify.”

As a sound first step, it is essential for advertisers to understand their agency partners’ affiliate relationships. Secondly, it is imperative for advertisers to fashion contract language which requires their agencies to provide full disclosure when an agency affiliate is being utilized on their behalf, how that affiliate is compensated and by whom and whether or not the rates charged by that affiliate are competitive with comparable providers in the market. Whether in the context of ad serving, programmatic buying, trading desk operations or campaign measurement, an advertiser has a right to know when their agency has engaged an affiliate firm. This affords client stakeholders the opportunity to raise any questions or concerns they may have regarding such a selection and its impact on the agency’s objectivity. 

Once affiliate firms have been identified, tracking what percentage of an advertiser’s budget is being spent collectively at the agency holding company level can prove enlightening. More importantly, understanding the value of their account to the holding company based upon total revenues enhances an advertiser’s negotiating position when considering agency remuneration options going forward. 

As the ad industry has grown in size, generating approximately $521.6 billion in revenue in 2014 (source: MAGNA GLOBAL), it has also grown in complexity which is due in large to the rate and rapidity of technological change. Thus, it comes as no surprise that relationships among industry stakeholders have evolved, becoming more complex in their own right. The industry has begun to come to terms with the plurality of such relationships where partners may simultaneously be competitors or buyer agents may also function as sellers. However, “coming to terms” doesn’t mean blind acceptance. Rather it requires a new level of discourse and enhanced controls to protect advertisers and their investment.

Interested in learning more about agency network “affiliate management?” Contact Cliff Campeau, Principal at Advertising Audit & Risk Management, LLC at ccampeau@aarmusa.com for a complimentary consultation on the topic.  

 

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