Tag Archives: Digital Media

Has the Time Come and Gone for Digital Advertising Agencies?

28 Apr

digital trading deskWe all understand the concept of “specialization” and the potential benefit delivery for certain service providers in select industries. That said, the era of the digital media specialist agency may be drawing to a close.

Think about it, we have specialist agencies for programmatic advertising, paid search, organic search, social media, email, mobile marketing, website development, user experience, social, native and display advertising.

Why? What are the advantages that accrue to an advertiser from this level of specialization? More importantly, how many advertisers are equipped to engage with multiple media agency partners?

Integrating strategy and resource allocation decisions, coordinating roles and responsibilities and effectively managing relationships among several media agencies takes time, energy and money… assets that are tougher and tougher for marketers to come by. Not to mention, the additional costs incurred for overlapping agency services/personnel.

Specialist agencies aside, when it comes to digital media, advertisers are also contending with general market agencies, PR firms, multi-cultural, experiential and promotional agencies that are also involved with their digital marketing efforts. It is damn difficult for a marketing staff to coordinate and optimize digital communications along this many fronts, let alone integrate such efforts with an organization’s “traditional” media efforts. And, let’s face it, the task is not any easier (or cheaper) for an advertiser’s media agency-of-record to take the lead on this task and coordinate multiple disparate agencies working collaboratively and cohesively toward a common goal.

The ultimate question for advertisers may be, why take what is already a complex process and further complicate it by dividing efforts and resources across so many players?

In our contract compliance auditing and financial management practice we have seen advertisers pay a steep price for assembling agency networks that are too broad for their existing teams to effectively manage. This in turn leads to cost inefficiencies related to duplicative services and fees tied to the lack of clear role differentiation across agencies, and in turn, a reduction in working media. Say nothing of the impact on digital media effectiveness tied to communication and briefing gaps that inevitably arise in these scenarios. Perhaps there is a lesson to be learned from the words of William Blake, 18th century English poet and painter:

“The road of excess leads to the palace of wisdom”

We believe that the time has come for advertisers to give more serious consideration to streamlining their agency networks in general, and specifically to pare back the number of agency partners involved with their digital media efforts… beginning with “specialist” shops.

A great place to start is to evaluate the potential for centralizing media planning for traditional and digital media. This is a logical “first step” and will allow marketing organizations to better leverage their data, to improve their targeting and segmentation schema, enhance their resource allocation decisions and integrate all facets of their communication plans. Additional benefits from such a strategy include more collaborative and improved media briefings and streamlined communications across agency partners. Similarly, when it comes to media buying, focusing on fewer partners makes it easier to leverage an organization’s overall media spend, optimize sponsorship and value-add opportunities across media properties, and to minimize agency fees by eliminating redundant buying activities across partner shops.

Major holding company media agencies and larger independent media firms, with broad resource offerings and the scale to provide “one-stop” service certainly stand to benefit from consolidation. As do ad technology firms such as Adobe, Oracle and Google that provide advertisers with the tools to manage certain digital functions in-house. It should be noted that while the large media networks of a holding company will benefit, specialized, stand alone digital media shops within those holding companies may face challenges related to such a consolidation.

In closing, we wanted to address the topic of the “rise of the management consultancies” as legitimate competitors to traditional agencies. As it relates to media planning and placement, we believe that the large ad agencies and holding companies will retain an edge in this area for some time to come. However, vulnerability in the areas of strategic consulting and customer connectivity (i.e. data integration, user experience and system development) is where we believe consulting firms will continue to make significant inroads with CMOs as marketers seek to fulfill corporate mandates to assist in digitally transforming their businesses. As this is occurring, some agencies have announced plans to expand their resource offerings to compete with the likes of Accenture, IBM, PwC and Deloitte in this area. Realistically, at least in the near-term, agency constraints on talent and functional expertise represent significant hurdles before an attack in this area can be mounted… while concurrently defending their current base of business.

 

Seeing Their Way to Digital Media Growth

21 Mar

Vision MissionDigital advertising spend will surpass television in 2017. This according to eMarketer, which is forecasting that digital ad expenditures will grow to $77.3 billion, while spending for television will increase to $72.0 billion.

This growth comes in spite of continued advertiser concern regarding transparency and the fact that 40% to 60% of their working digital media dollars are being absorbed into inventory margin.

With this as a backdrop, we have noted a couple of interesting trends in the digital media space, that directly and positively addresses these concerns.

First and foremost, there have been a number of agencies that have embraced a more transparent model when it comes to digital media planning and placement. They are looking to directly appeal to advertisers’ opacity-busting inclinations and their desire to improve working media ratios.

What are they offering? In short, they are structuring their service and financial management models to eliminate the hidden fees, double charging, rebates, kickbacks and media arbitrage practices employed by a host of traditional media agencies operating in the digital space.

The common link among these progressive agencies is to take more of a consultative approach to working with their clients to solve for the best method to drive brand engagement and to improve consumer experiences. These shops fundamentally understand the importance of integrating customer relationship management (CRM) and online media to create personalized customer interactions across each stage of the marketing lifecycle.

Recognizing the rapid advances occurring on the data analytics and ad tech fronts, they are agnostic when it comes to their role as a full-service or managed service provider. These agencies have come to realize the importance of integrating first, second and third party data and that from a privacy and data governance perspective advertiser ownership of such data may be a more appropriate path forward.

Additionally, they are open to working with their clients to help facilitate direct relationships between advertisers and technology providers to eliminate duplicate costs and boost transparency. They have a comfort level with direct-bill third-party media payment processing models which afford advertisers the opportunity to see exactly what the net media cost is.

For advertisers’ who are comfortable using the agency’s technology stack, no problem. For those that are interested in migrating that ownership in-house, they will consult and work to design and implement an approach that will work best for their clients. This could include everything from identifying DMP, DSP and ad server options to suggesting viewability optimization, fraud prevention and modeling tools. This new breed of agency recognizes that cutting out the middlemen from these areas can greatly enhance an advertiser’s working media ratios.

The benefit of this approach is profound when one considers that according to a recent survey by Technology Business Research (TBR) among 240 ad technology users in North America and Western Europe, they found that “only about 40% of digital advertising budgets are currently going toward working media” and that “the second biggest allocation – 31% of budgets – was going to pay for technology” with the balance being applied to “pay for agency services.”

The second trend that is having a meaningful impact in the digital advertising space is the continued expansion of services offered by technology consultants including IBM, Deloitte, Accenture and McKinsey. These firms have made strategic acquisitions and or built resource bases in the creative design area which allow them to complement their technology integration offerings and provide comprehensive end-to-end solutions. These firms’ gains will likely be to the detriment of traditional advertising agencies as the roles of data management and digital media continue to grow in the coming years.

As Jon Suarez-Davis, Chief Marketing and Strategy officer for Krux recently stated: “Marketers want absolute transparency across the value chain.” Mr. Suarez-Davis’ opinion, based upon his experience on both the ad technology and client-side, where he managed digital media for the Kellogg Company, is that advertisers “would like to have the technology and other non-working costs (that aren’t related to impression delivery) separated.”

 As the comedian Bill Hicks, so accurately opined:

We are the facilitators of our own creative evolution.”

The agencies and consultants that understand this dynamic and have a willingness to morph their service delivery and compensation models to address advertiser desires in these areas will be well positioned to boost their relevancy and revenue growth potential in the coming years. Those that don’t may struggle to keep pace as advertisers take a more proactive approach to optimizing their digital media investment.

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.”

 

 

 

Sourcing Your Programmatic Buying Partner

14 Dec

3 rsWritten by Peter Portanova, Project Analyst for Source One Management Services

The concepts of reach and frequency have long guided the way marketers approach advertising, and when multiplied, they provide the calculation for Gross Rating Points (GRPs) to measure and evaluate the success of your campaigns. However, the rise of programmatic ad buying (automated buying based on real time data analysis of competitive rates) forces marketers to reconsider their historical understanding of success in marketing, and encourages the consideration of new and potentially more effective metrics.

GRPs are hugely important across a variety of marketing channels, exclusive of programmatic buying. The ideology that more GRPs means greater success is severely flawed, and by using such a calculation in a highly targeted and customized solution like programmatic buying, one misrepresents the technology’s true value. However, instead of arguing the utility of GRPs, it is more critical to consider alternative means of success in marketing and how embracing programmatic can revolutionize your approach to online advertising, while driving a variety of critical KPIs.  

Programmatic buying is growing quickly, and is responsible for billions of dollars in digital media placements. Programmatic buying is the intersection where data and advertising truly meet, with engineers, traders, and data-management platforms replace traditional sales planners. Agencies would like you to believe that their programmatic efforts reduce overall costs, but the truth of the situation is that, when viewed holistically, programmatic buying is actually more expensive.

Implementing programmatic buying efforts does have its merits, and agencies are quick to note that initial costs can be negated quickly. However, for programmatic buying to reach its maximum potential, marketers and advertisers must learn to move past the traditional reach and frequency mindset, and consider the long-term advantages of highly targeted placements. In fact, industry experts note that using programmatic buying to place more advertisements decreases transparency, which can lead to fraudulent placements. In using programmatic buying to deliver a highly targeted message to the right individual at the right time, brands are able to increase their visibility to the appropriate segments, increasing potential brand engagement.

Marketers must begin to understand programmatic buying from a holistic perspective. Why is this more expensive? Does it involve fewer people? Most marketers are shocked that programmatic buying proposals suggest fewer advertisements at a greater cost. While inventory is cheaper in programmatic buying compared to manual buying, there are substantial costs of doing business to implement and manage these efforts. In an article on AdAge, a media agency executive said, “Five full time employees are needed to spend $100 million national broadcast budget, while the same number would be needed for a $5 million programmatic buy.”

Understanding the discrepancy in FTEs and costs becomes more complicated when you also factor agency commissions into the equation. The employees required to manage a programmatic buy are in far greater demand, having a unique skillset that commands salaries 50-100% greater than manual buyers. The technology and the platforms do not eliminate the need for human input, and therefore it is critical to entice highly skilled employees for retention. Traditional full-service agencies have seen these employees move quickly to digital agencies that have a greater focus on new technologies, including programmatic buying.

The true cost of programmatic buying becomes noticeable when considering agency commissions that are charged to simply breakeven. The same agency executive interviewed by AdAge stated that, with a budget of $100 million, break-even points begin at 1% with TV, and quickly jump to 10-12% with programmatic. It is also worth noting that the 12% commission is only the break-even, with many agencies charging a rate of around 20%, to turn a meager profit.

There is a substantial cost of placing media through a programmatic partner. AdAge refers to these costs as an “intermediary tax” which accounts for all the transactions that take place to make a programmatic buy occur. With 7% to 20% taken by ad exchanges, another 10% to 20% taken by automated software providers, and then another 15% for the data-management platforms, there is potential that only $.50 of every dollar will reach the publisher. While these rates may seem expensive, there is value in using programmatic buying; however, the marketer should be fully aware of the intended use of programmatic, with no expectation that they are receiving a more targeted solution for a lower price.

While so far we have discussed mostly the potential benefits (and drawbacks) of programmatic buying, there is always a need to manage costs. Consider the following best practices when working with your agency to ensure greater transparency in your agreement.

  • Contract Language
    • When contracting with your programmatic buying partner, ensure that language exists around specific rates. Furthermore, consider a period where you can renegotiate these rates to be more favorable.
  • Redundant Services
    • Prior to considering your programmatic needs, understand the services you require and what you may need outside of traditional manual buying. When working with multiple vendors (which is common with programmatic buying), there is potential to be charged for the same service multiple times.
  • Liberate your Data
    • Unless specifically outlined, your data may not belong to you after working with a particular partner. If you are unable to retrieve your data during any part of the process, the supplier immediately gains tremendous advantage.
  • Understand your Options
    • Do you need managed service, or do you need self-service? In a self-service agreement, the vendor charges for the use of their technology, but does not charge for any resources associated with operating the platform. A managed option typically has charges for not only the technology, but also the management fees associated with run and execute a campaign.
  • Consolidate
    • Find a partner capable of providing you with a variety of services, and consolidate your marketing to that one agency. Using separate agencies to plan and execute your manual and programmatic buys is inefficient, and unless information is shared freely across agencies (it probably will not be), the effectiveness of both operations will be hindered. Consolidation also allows for better reporting and recognition of opportunities across channels.

As for the future of programmatic buying? It’s only anticipated to grow. EMarketer predicts total programmatic buying spend to exceed $20B in 2016. When it comes to digital marketing, there is no “one size fits all.” While programmatic buying is typically more expensive than other traditional tactics, there’s no doubt the method offers significant ROI in the form of operational speed and efficiency and increased scale and targeting. Like any other agency sourcing engagement, do your due diligence when looking for the right partner for your programmatic buying requirements. Beyond assessing agency scale, technology and data analytics, and skillsets, take steps to establish a strategic client-agency relationship. This begins with strong contract language that drives further value from your programmatic efforts and continues with fostering ongoing communication and transparency with your agency.

Peter Portanova is a marketing category enthusiast and Project Analyst for Source One Management Services. He is an expert at developing RFPs and executing strategic sourcing strategies for clients in a wide array of industries, specializing in navigating the complexities of the Marketing spend category. Click to learn more about Source One’s Marketing Category expertise.

Say What You Mean, Mean What You Say

30 Nov

Accountability FinalPerplexing may be the best way to describe advertisers actions when it comes to digital media reform.

Earlier this month, it was widely reported that television ad revenues enjoyed a near double digit percentage growth rate this October, its best monthly performance in two years. While TV revenues were solid, digital media grew in excess of 30% from October of 2014, continuing to increase its share of overall ad spending.

Ironically, one week later, the Association of National Advertisers (ANA) shared the results from a survey of its members relating to digital viewability concerns. The results were quite compelling with 97% of respondents agreeing that third-party verification of digital media owners’ inventory was warranted. Ninety-percent of those surveyed indicated that they were “not confident that their digital working media meets industry viewability standards.”

Most importantly, nearly two-thirds of the survey respondents indicated that absent digital media owners providing independent measurement, they would shift ad dollars to other media.

The obvious question to be asked, given that virtually all of the advertisers surveyed felt that their digital media viewability performance had not met industry standards; “Why did digital media revenues grow 30% year-over-year?” It should be noted that this increase was achieved within 60 days of the ANA fielding the aforementioned survey. Thus, advertisers’ actions seem to belie their words and would therefore cast doubt on the likelihood of any spending shift away from digital media.

The apparent malaise on the part of advertisers regarding digital media reform is precisely what those entities that profit greatly on advertisers digital media investment are banking on. Whether it’s sub-par viewability performance, lack of third-party verification or outright fraud, advertisers continue to trumpet their demands for improved accountability, yet refuse to regulate their media allocation decisions. This is in spite of several significant warnings, including a study conducted by the ANA in conjunction with White Ops which suggested that advertisers could lose in excess of $6.0 billion globally to ad fraud in 2015.

So it was with great interest that we read the Digiday article entitled; “Confessions of an Ad Tech Veteran on Fraud: Advertisers Need to React to What’s Happening.” In the article an anonymous ad tech veteran suggests that there is a sense of “apathy” among advertisers when it comes to digital media. His belief, which comes from speaking with advertisers, was that advertisers know that there is fraud, but that they view this as part of the cost of using digital media.

He alleges that there is a “fine line” between agencies protecting their clients and deceiving advertisers, suggesting in part that the agencies have not made their clients fully aware of the extent of the fraud and or audience validation issues inherent with digital media. Indicative of this conundrum was a story which he shared which involved a conversation with an agency representative regarding the performance of a recent campaign. For the campaign in question, it was determined that “90% of the impressions were fraudulent.” When this fact was shared with the agency, they replied that “the click-through rates were phenomenal.” In spite of the ad tech veteran re-emphasizing that the clicks were fraudulent and that humans weren’t viewing the ads, the agency stated that the client was happy and they were “renewing the contract.”

The article went on to point out that many organizations, including exchanges, had signed up for some of the trade association initiatives such as the Digital Trading Standards Group. However, the anonymous ad tech veteran’s perspective was interesting, suggesting that these were hollow actions. Why? Because in the end, the level of auditing, content-verification and fraud-prevention is spotty at best. In short, the belief is that these industry initiatives have no teeth.

As we all know, there are multiple industry initiatives under way to help combat the challenges associated with digital. Additionally, the key industry associations including the ANA, 4A’s and IAB have also taken proactive steps to educate, inform and protect their respective members through the establishment of third-party verification guidelines, the creation of viewability standards and the identification of processes to minimize fraud and improve transparency.

However, there is only one group of stakeholders that can truly drive accountability gains in this critical area … advertisers.

The Alliance for Audited Media stated it most succinctly; “Marketers must take the lead by demanding the accountability and transparency that come with a third-party certification audit.” Fortunately, the ANA concurs as evidenced by the sentiment echoed by Bill Duggan of the ANA who said that the association “will continue to urge marketers to demand greater accountability and transparency for their digital media investments.”

We sincerely hope that the sentiments expressed by respondents in the aforementioned ANA survey more accurately reflect the mindset of advertisers, as opposed to the potential level of indifference cited in the Digiday article. In the words of Benjamin Franklin;

“Well done is better than well said.”

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