Tag Archives: Ebiquity

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.

 

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.”

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