Tag Archives: Association of National Advertisers

Who Says Advertisers Don’t Want Transparency?

26 Nov

transparency“No one wants full transparency.”

It was alleged that this intriguing pull quote echoed the sentiments of agency buyers at a gathering of agency executives dealing with the topic of “Transparency in Media Buying.” The event, hosted by Digiday in London, provided participants with complete anonymity with regard to their name and or company affiliation in order to encourage an open exchange of information on the topic. Understood.

Participants shared a range of thoughts as to why advertisers weren’t truly interested in media transparency. The ideas proffered by this group included:

  • A belief that advertisers were concerned about the costs associated with revamping how digital media is purchased.
  • Advertiser concern related to the impact of “overhauling how much” they spend on media.
  • A general lack of advertiser interest in the “mechanical” detail that underlies the media acquisition and delivery process.

There are two major problems with this perspective.

The first is the belief among digital media supply chain participants that advertisers should bear the financial burden related to the poor decisions made by agencies, ad tech vendors and publishers with regard to how media buys were executed, tracked and reported on. For years these intermediaries knowingly shirked their fiduciary responsibility to serve the advertiser’s best interest and to safeguard their media investment. To come back now and suggest that if advertisers want a return to normalcy it will cost them more in fees and the actual rates paid for media inventory is preposterous. Did these firms reduce their fees and costs to advertisers while they were participating in media arbitrage and purchasing low quality, high risk inventory (often without the advertiser’s knowledge)? Of course not. They padded their respective bottom lines at the expense of advertisers.

Secondly, the notion that advertisers aren’t interested in the mechanics and science behind the planning, buying, stewardship and performance analysis of media buys seems to be misguided. Or at the very least, not representative of the views held by a majority of advertisers, many who have cited media transparency as one of their most important concerns in industry survey after industry survey. Additionally, Gartner Research recently released the results of its “CMO Spend” survey and noted that chief marketing officers at advertiser organizations in the U.S. and UK were focused on areas such as email marketing, online media management and digital analytics as their top tech priorities. This further underscores advertiser interest in leveraging technology to improve transparency and drive media performance.

Perhaps the clients represented by the agency personnel at the Digiday event are different than those with whom we interact with on a regular basis or those who participate in industry surveys.

Or perhaps the more accurate sentiment is that no one on the agency, ad tech or publisher side wants full transparency. Either way, if the media supply chain doesn’t recognize and begin to address client concerns and the corrective actions that advertisers are already taking the risk of revenue contraction and ultimately disintermediation is real.

One only needs to read the Association of National Advertiser’s (ANA) October, 2018 study; “The Continued Rise of the In-House Agency” to understand the cost to intermediaries of not taking advertisers’ best interest to heart:

  • 78% of ANA members surveyed had an in-house agency in 2018 versus 58% in 2013 and 42% in 2008.
  • 90% of the survey respondents indicated that the workload of their in-house agencies had increased in the past year, including 65% for whom the workload had increased significantly.

Media supply chain stakeholders may want to heed the words of 20th century Russian-American writer and philosopher Ayn Rand:

“We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

 

AARM Formalizes Its Relationship with the ANA

1 Nov

thAARM | Advertising Audit & Risk Management becomes a member of the Association of National Advertisers (ANA), joining more that 1,000 leading suppliers, agencies, law firms, media companies and consultants as a Marketing Services Provider (MSP).

 

Advertisers: What Does the Department of Justice Know That You Don’t?

19 Oct

FBI LogoIt has been two years since the Association of National Advertisers (ANA) published its blockbuster study on media transparency in the U.S. marketplace. Among the study’s findings were that the use of media rebates paid by publishers to agencies was “pervasive” and that there was a “fundamental disconnect” regarding client-agency relationships and the agencies assumed fiduciary obligation to act in an advertiser’s best interest.

Later that same year, December of 2016, the Department of Justice (DoJ) announced that it was conducting an investigation into the practice of “bid rigging” by agencies for TV and video production jobs. The bid rigging was allegedly being done to favor the agencies in-house production groups over independent production companies. This was done by urging outside production vendors to artificially inflate their bids, creating a reason and a paper trail for supporting the agency’s decision to award the production job to their in-house studio, which coincidentally bid a lower price for the work. At least four of the major ad agency holding companies were subpoenaed as part of this ongoing investigation.

One year after the release of the ANA media transparency study the ANA conducted research among its members that found:

  • 60% had taken “some” steps to address the study’s findings
  • 40% had not taken steps or weren’t sure if their companies had taken action
  • 50%+ of those that had taken steps indicated that had revised agency contract language
  • 20% of those that had taken steps had conducted audits of their agency partners

Given the $200 billion plus in estimated U.S. media spending (source: MAGNA, 2018) and the $5 billion U.S. commercial production market the aforementioned numbers are stunning in that more advertisers have not taken action to safeguard their advertising investment by implementing controls and oversight actions that mitigate risks and improve transparency.

It would appear as though the Department of Justice is taking these matters more seriously than many advertisers. The reason that the DoJ and FBI have undertaken probes of U.S. media buying and creative production bidding practices is quite simple… fraud, price fixing and bid rigging are prohibited under federal law.

The question is; “Why haven’t more advertisers, whose media and production dollars are at risk, been more proactive in constructively addressing these issues with their agency partners?”

The fact that the federal government has determined that it was necessary to launch two separate investigations into U.S. advertising industry practices is a clear signal that marketers should reinvigorate their oversight and compliance efforts. The stakes are high and the risks have not abated since the aforementioned practices first came to light.

If federal investigations into ad agency practices in these areas isn’t enough to spur advertisers to action, perhaps the words of Jon Mandel, former CEO of Mediacom in an interview with Mumbrella following his whistleblowing presentation regarding media agency “kickbacks” at an ANA conference in 2015 will provide the necessary incentive;

Clients need to stop suspending disbelief. The agency is supposed to be a professional providing you with proper advice not tarnished by their own profit. Marketers need to know the limits of that.

 

 

Will Programmatic Ever Address Advertiser Transparency Concerns?

20 Aug

dreamstime_m_35343815It has been two years since the Association of National Advertisers released its study on media transparency issues impacting advertisers within the U.S. media marketplace.

While much has changed, there remain reasons for concern. Most perplexing is the fact that with all of the intermediaries in place between advertiser and publisher, few seem to be looking out for the advertisers’ best interests.

The reasons for this lack of an advertiser-centric perspective are many and include greed, a lack of knowledge, insufficient oversight processes and often times indifference up and down the programmatic digital media supply chain.

Thus, it was with great interest that I read a recent article on Adexchanger.com entitled; “Index Exchange Called Out for Tweaking Its Auction.” In short, the article dealt with the fact that Index Exchange had altered its auction processes, without notifying advertisers, ad agencies or DSPs. Ostensibly, the exchange’s motivations for this move was to boost its market share, although in fairness, they claimed that they believed their approach reflected “industry practice.”

Of note, Index Exchange made the aforementioned change more than one year ago, employing a technique referred to as bid caching. In short, bid caching is where the exchange retains losing bids in an effort to run advertiser content on subsequent content viewed by the consumer. From an advertiser perspective there are a number of issues with this practice, as detailed by author Sarah Sluis of the aforementioned article on Adexchanger:

  1. Buyers will bid higher prices for the first page in a user session. Thus, if the losing bid is retained and the ad is served deeper into a user session, the buyer will have overpaid for that inventory.
  2. Any delay between the initial bid and the ad actually being served, using a bid caching methodology, increases the chance that the DSP will have found the user elsewhere, resulting in the campaign exceeding the pre-determined frequency caps.
  3. Brand safety definitely comes into play, because even though the ad is served on the same domain, it is on a different page than what was intended.

What is truly remarkable about this scenario is that buyers just learned of this practice and, according to Adexchanger, “not from Index Exchange.”

How many advertisers were negatively impacted by Index Exchange’s unannounced move? What were their agency and adtech partners doing in the placement and stewardship of their buys that an exchange’s shift in auction approaches went undetected for more than one year? Unsettling to be sure.

Ironically, this exchange had implemented a similar move previously, adopting a first-price auction approach, which was known to publishers but not announced to buyers.

Advertisers would be right to raise questions about the current state of programmatic affairs; exchanges not notifying the public of shifts in auction methodology, agency buyers and DSPs unable to detect these shifts to adjust their bid strategies, ad tech firms not catching the shift to safeguard brand ad placements, and publishers that were aware, but settled for the higher CPMs resulting from the shift, rather than informing the buy-side.

This is disheartening news, particularly when one considers the percentage of an advertiser’s dollar that goes to fund each of their intermediaries (at the expense of working media). Yet, advertiser fueled growth in programmatic digital media continues unabated.

Clearly a case of buyer beware. Advertisers that have not already reviewed their supplier contracts or enacted the “right to audit” clauses of their agency and adtech supplier agreements may want to make plans to do so as they begin finalize their 2019 digital media budgets. As the old saying goes:

The buyer needs a hundred eyes, the seller but one.”

 

Don’t Start There

25 Jul

contract complianceMost would agree that the days of conducting business on a handshake are long gone. Make no mistake, honesty, forthrightness, trust and respectability are still qualities that we look for in our professional relationships. However, when it comes to transacting business the protection afforded to all parties is greatly enhanced with the use of a contract versus a verbal agreement marked by a handshake.

A verbal contract isnt worth the paper its written on.” ~ Samuel Goldwyn

The good news when it comes to the advertising industry, most client-agency relationships are governed by a contractual agreement. That said, there is one common mistake made by many advertisers when it comes to contracting with their agency partners… they start with the agency’s base contract.

Unfortunately, this creates a handful of challenges beginning with the fact that by its nature, agency contract templates are not client-centric. Then, when the advertiser turns the draft agreement over to counsel for review the document will likely require major modifications or, depending on counsel’s degree of advertising industry knowledge, there is a risk that key terms and conditions, which safeguard the advertiser’s interest will not be included in the agreement.

For advertisers, getting the contract “right” is important for two reasons. Firstly, the client-agency agreement establishes the legal nature of the relationship (e.g. principal-agent), while clearly articulating both stakeholders’ roles, responsibilities and rights. Secondly, the agreement establishes expectations and guidelines related to key aspects of the relationship, including; agency performance, staffing, remuneration, reporting, audit and record retention and intellectual property and data rights.

Over the course of the last several years the nature of client-agency relationships has certainly evolved with the advent of emerging technologies, changes in the regulatory environment and a move away from principal-agency relationships, which once held agencies to a much higher fiduciary standard. Thus it comes as no surprise that the complexity of the legal agreements that govern these relationships has increased dramatically.

Larger advertisers certainly benefit from working with marketing procurement departments and in-house counsel that are adept at contracting with a myriad of marketing vendors. Many organizations have developed standardized marketing vendor Master Services Agreements (MSAs) that can be used across their agency network, with some modification. These are typically “evergreen” agreements that don’t need to be renegotiated on an annual basis. Complimentary annual Statements of Work (SOW), which include key deliverables, agency staffing plans and remuneration program details are designed to be reviewed every year.

Additionally, the Association of National Advertisers (ANA) and The Incorporated Society of British Advertisers (ISBA) have both developed comprehensive, client-agency contract templates for use by their members that reflect industry “Best Practice” trends in this area. For small advertisers, or relationships with smaller, independent agency partners, the ANA and ISBA contract templates may not be wholly appropriate, but will provide a worthwhile guide for key terms and conditions that will certainly be applicable.

In our experience, advertisers will be much better served by taking this approach as opposed to accepting or attempting to retro-fit an agency’s base contract.

Of course, once the contract has been executed, marketing and advertising team personnel have an obligation to their organizations… monitoring contract compliance and financial management across each of their agency partners. The first step in this process, one which is often overlooked, is to socialize the agreement. Since an agreement is intended to serve as the basis for the client-agency relationship, it is important to share a summation of this agreement with those client-side individuals responsible for managing these important relationships.

As it relates to ongoing contract compliance monitoring tactics, these can include the tracking and reviewing agency time-of-staff commitments, retainer fee “burn” rates, budget control and project status reports and annual fee reconciliations. Progressive advertisers compliment these efforts with periodic business review meetings (i.e. quarterly or semi-annually) and by conducting independent agency contract compliance audits every year or two.

Good contracts can be the building block for great relationships. The time and effort invested in fashioning them and insuring compliance to them will yield dividends and across an advertiser’s agency network.

 

 

 

 

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.”

It’s Only Money…

5 Jun

digital mediaThere was one particularly startling revelation that came from the ANA’s recent Agency Financial Management conference in San Diego. During the presentation of this year’s “Agency Compensation Trends” survey results it was noted that the ANA found that almost half of the members it surveyed had not reviewed the findings of the ANA’s 2016 Transparency study.

Think about that. If an organization did not review the Transparency study’s findings, that means that there must not have been any resulting internal dialog with or among marketing’s C-Suite peers, no direct interaction with their agency network partners, no review of existing Client/Agency contracts, no improvements in reporting and controls in which to illuminate how an advertiser’s funds are being managed.

This, in spite of the level of trade media coverage regarding transparency issues ranging from rebates, discounts and media arbitrage, to the Department of Justice investigation into potential ad agency bid rigging practices or the level of ad fraud, traffic sourcing or non-disclosed programmatic fees on both the demand and sell side of the ledger.

There is only one conclusion that can be drawn from this remarkable revelation…many marketers simply don’t care how their organization’s advertising investment is being allocated or safeguarded. Unfortunately, we regularly see the ramifications of this attitude of indifference in our contract compliance audit practice:

  • Client / Agency agreements that haven’t been reviewed or updated in years
  • Failure among clients to enact their contractual audit rights with key agency partners
  • Limited controls regarding an agency’s use and or disclosure of its use of affiliates
  • No requirement for agency partners to competitively bid third-party and affiliate vendors
  • Lack of communication to media sellers regarding ad viewability standards
  • Failure to assert an advertiser’s position on not paying for fraudulent and non-human traffic
  • No requirement for publishers to disclose the use of sourced-traffic
  • Incomplete instructions on buy authorizations to media vendors, minimizing or blocking restitution opportunities
  • Poorly constructed media post-buy reconciliation formats that lack comprehensive information and insights

Interestingly, there have been many positive developments from key industry associations such as the ANA, 4A’s, IAB and public assertions from leading marketers such as P&G and L’Oréal to further inform and motivate marketers on the topic of transparency accountability. Yet, given the materiality of an organization’s marketing spend and the publicized risks to the optimization of its advertising investment, many organizations have not yet taken action, tolerating the risks associated with the status quo. As the noted British playwright, W. Somerset Maugham once said:

Tolerance is another word for indifference.”

The failure to proactively embrace transparency accountability can pose perilous risks to an organization’s marketing budget which in turn directly impacts its company’s revenue. Many would rightly suggest needlessly.

In these instances, the fault for the increased level of attendant financial risk, fraud and working media inefficiencies lies squarely with those companies that have adopted an attitude of indifference toward these very real proven threats. One cannot blame an ad agency, production house, tech provider, publisher or media re-seller for taking advantage of the status quo and acting in manners that, while not in the best interest of the advertiser, are not expressly contractually prohibited.

The good news is that advertisers can address these issues head-on in a quick and efficient manner, mitigating the risks posed by transparency deficiencies. It all begins with a review of existing Client/Agency contracts and engaging one’s agency partners in dialog regarding the adoption of industry best practice contract language to facilitate an open, principal-agent relationship. The Association of National Advertisers (ANA) has a wealth of information on this topic and can also recommend external specialists to assist an advertiser with agency contract development and or compliance auditing.

Interested in safeguarding your marketing investment? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a no-obligation consultation on this topic.

Is Your Contract Worth the Paper It’s Written On?

25 May

partnershipThe Association of National Advertisers (ANA) recently released its study on programmatic media. The study was conducted in conjunction with the Association of Canadian Advertisers (ACA), Ebiquity and AD/FIN.

While the study provided fascinating insights into programmatic media performance and costs at the transactional level, there was one particular item that stood out:

88% of the advertisers that were interested in and 75% of the advertisers that signed up to participate in the study could not or had to opt out.

Why was this? According to the study’s authors, “because of a myriad of legal, technical and process roadblocks put up by players in the ecosystem.” Long story short, those advertisers did not have contractual language providing them with clear data ownership or usage rights with their agency, trading desk and or ad tech partners.

The obvious question to be asked is, How can an advertiser’s programmatic media transactional data not belong to the advertiser? After all, it was their media investment that funded the buys. It was their agency partners who invested those funds on their behalf (or not). So, who could possibly own that data if not the advertiser?

What would you do if your agency partner denied your organization access to programmatic performance data that you had requested. Data that would shed light on your programmatic media performance and costs (i.e. third-party costs, agency fees, tech fees, data fees). It certainly seems short-sighted that an agency would deny their clients access to this data, both in the context of the ANA study and for providing transparency into how their programmatic investment is being stewarded to disclose what their true working media percentage is.

Sadly, this is but one example of Client/ Agency contract language omissions that create disclosure and accountability gaps, which can lead to legal and financial risks for advertisers. Other examples include:

  • No requirement for an Agency to disclose or competitively bid in-house production resources or affiliate companies.
  • Media arbitrage deals in which the Agency is marking-up media by an undisclosed amount on inventory that it owns stemming from principal-based buys it has made.
  • Agencies acting as principals, rather than agents, when investing the Client’s creative production funds. One example might be the Agency or its production studio filing for and retaining incentives offered by states and municipalities for shooting or post-production work completed in their geography.

Marketing spend is on the rise and is certainly considered a material expenditure, which can represent 12%+ of a marketer’s revenue base (source: 2015 CMO survey).

And yet too often, an advertiser’s contractual audit rights are not broad enough to ensure unmitigated access to the data files, records and reporting necessary to evaluate an agency’s compliance with the agreement and or their financial management performance. This can and should include:

  • An advertiser’s right to select an internal or external auditor of its choice (i.e. contract compliance, media performance, financial management).
  • The right to audit the agency and its related parties (i.e. holding company, affiliates, related entities, etc.).
  • Assertion of the advertiser’s right to limit or eliminate an agency’s non-transparent revenue (i.e. AVB’s, rebates, non-disclosed fees, mark-ups, float income).
  • The right to audit principal inventory and or mark-ups.

Contracts are also a great vehicle for communicating performance guidelines for items ranging from brand safety and viewability policies to fraud monitoring requirements and an advertiser’s policy on not paying for bot traffic, all of which are designed to safeguard an advertiser’s investment.

From our perspective, it makes sense for advertisers to engage in dialog with their agency partners to talk through contract terms and conditions, such as these, to secure their perspective and ultimately their buy-in. After all, the contract is a document that will govern most aspects of the Client/Agency relationship. Thus, open dialog that leads to a transparent relationship can form the basis for a trusting partnership that will last for many years to come.

As Stan Musial, the legendary baseball hall of fame member of the St. Louis Cardinals once said:

The first principle of contract negotiations is don’t remind them of what you did in the past – tell them what you’re going to do in the future.”

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.”

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