Tag Archives: SSPs

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.”

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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 [email protected] for a complimentary consultation. After all, as Warren Buffett once said:

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

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Technology Companies Are the New Media Owners

1 Apr

technology firms as media ownersBy Oliver Orchard, Senior Client Director – EMM International 

This week I was fortunate to attend a debate in the British Parliament, The House of Commons.  The debate was hosted by the International Advertising Association (IAA) and organised by The Debating Group.   The IAA was formed in the 1930’s to help advertisers who were moving more and more towards export trade to understand the complexities of the different global ad markets. EMM’s staff are encouraged to take an interest in the work of the IAA, and we put many people through the residential training courses, with some of our senior staff holding committee positions.  The remit today is very much about helping to develop the client and agency heavyweights of the future, through networking, training and support.  The Debating Group has been holding debates in the House of Commons since 1975, and they regularly bring politicians, journalists and marketers together to discuss the political issues that surround marketing; and together they host a number of debates annually for the industry to participate in. 

The motion “Technology Companies are the new media owners” was supported by Rory Sutherland, Executive Creative Director and Vice Chairman of O&M and seconded by Anjali Ramachandran, Head of Innovation at PHD.  It was opposed by Hugo Rifkind of the Times and Chad Wollen, Group Head of Innovation and Commercial Futures at Vodafone. 

Rory and Anjali focused on the idea that ever since the Caxton Press printed the first secular work technology has always been the new media owner; whilst Hugo and Chad focused on the idea that media owners display some sort of moral conscience, or in some way better the world, through editorial.  Naturally, with Hugo’s work as a journalist this focused on print media and the role of Twitter and Google in events such as the Arab spring; though what sort of conscience media owners such CBS Outdoor, Exterion or Decaux demonstrate was conveniently overlooked.  Chad explored the idea that the message is separate to the medium; which as any junior planner will tell you is exactly why they have a job. 

The panel spoke eloquently for 40 minutes, and ultimately the motion was defeated. I voted against it myself, though with a different line of argument I feel the result would have been very different. 

The proposers missed a trick by ignoring media agency trading desks, DSPs, SSPs, RTB and inventory wholesaling.  Media agencies are the new technology companies, they are also the new media owners.  This situation is becoming more and more apparent to advertisers.  Many are scrambling to change their contracts in order to maximise their returns on the ‘good’ output of these technologies (the fantastic targeting and pricing), whilst seeking to limit the ‘negatives’  (unaccountable placements, lack of evidence of genuine exposures and the opaque margins anecdotally between 20% and 80% depending on quality of placement as one rather inebriated global head of a big five DSP network let slip to me recently). 

These technologies are increasingly supplanting the traditional agency/vendor relationship and are replacing transparency with opaqueness in an unprecedented way.  The share of digital on the schedule grows every year, the number of clients with a DSP clause in their contract grows weekly and every day traditional media channels become more and more digitalised.

Clients are often under-informed about these developments and contractually deficient when it comes to agency scopes. So what can you do? 

  1. Make sure that your contract with the agency is updated every year to cover all new technologies that might emerge – mobile advertising, RTB and interactive TV were all unthinkable until quite recently.
  2. Employ a specialist with a broad helicopter view of the market to ensure you are giving and receiving best practise in your process and relationships with the agencies for traditional and new media.
  3. Ensure you understand fully what the benefits and limitations are of new technologies.  With a recent study showing that just 8% to 15% of impressions online are actually “real” does that CPM deal really offer the best value?
  4. Understand which data is relevant and which is not.  Don Peppers, the social media guru, once said “trying to extract relevant data from digital is like putting a fire hose in your mouth when you’re thirsty” – it’s easy to be blinded by numbers, but in reality very few of them are important.
  5. Don’t go it alone, a market specialist can save you time and money by getting to the point, training your staff, and sitting on your shoulder during important future strategic discussion with the agency. Once you understand the game, ask the right questions, and make informed decisions, increased effectiveness will follow.

Some technology companies are the new media owners, they also happen to be your media agency.

To learn more about EMM International and how media accountability can drive advertiser value, contact guest blogger Oliver Orchard at [email protected].  Mr. Orchard is a Senior Client Director for EMM International and a key contributor to the company’s digital media accountability practice.  EMM is a provider of international media auditing and media optimization consulting services.  The company is based in London, England.   

 

 

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How Will Programmatic Media Buying Impact the Role of Agency Media Buyers?

7 Jan

One of the biggest trends in media buying is occurring within the online display advertising segment, the rapid expansion of programmatic buying.  Ironically, few advertisers have delved into the intricacies of this approach and its impact on the stewardship of their media buys.

In short, programmatic buying is the execution of online media buys utilizing quant technology, demand side software interfaces and algorithms to book, analyze and optimize display ad campaigns, often on a real-time basis.  The RTB exchanges, ad exchanges, demand side platforms (DSPs) and sell-side platforms (SSPs) were initially utilized by publishers to move remnant display space.  However, given the success of programmatic media buying, there is a growing push by agencies and ad exchanges to encourage publishers to expose more, if not all of their inventory, including premium inventory with guaranteed impression delivery which is currently sold on a direct basis. 

Why?  The use of programmatic buying yields a number of benefits ranging from enhanced targeting, the ability to select desired rather than bundled impressions, price clarity and enhanced agency control.  Programmatic buying is a more efficient means for agencies to place and manage media buys.  The processes and workflows affiliated with programmatic buying software solutions allow for improved analytics while yielding significant operational efficiencies for ad agencies, chiefly related to time savings.  Furthermore, they can also integrate with other financial and marketing automation platforms which work across paid, owned and earned media channels. 

The concept of selectively targeting users based upon behavior and projected responses to campaign inputs and to dynamically allocate resources based upon near real-time analysis of reams of data tied to a campaign’s objectives is appealing.  Demand side platforms make decisions for an advertiser based upon inventory availability, pricing, placement data, context and other decision making algorithms that align the advertiser’s media plan, budget and campaign KPIs.  Hence, the potential of programmatic buying to enhance the effectiveness of an advertiser’s media investment and to positively impact their return on marketing investment could be substantial.  Thus, it is no surprise that many stakeholders are already talking about the potential expansion of this concept to cover a higher percentage of online media activity and even extending its application to other media types such as television and print. 

The application of new technology that can effectively leverage “Big Data” to make better resource allocation decisions and evolving media marketplaces that dynamically match seller inventory with buyer demand has tremendous potential.  In fact, most would agree that this is a “game changer.”  Who wouldn’t be supportive?  The question to be addressed in the context of programmatic buying is, “What is the impact on the role of media buyers in the placement and stewardship of a client’s media buy?”  Further, how does an advertiser benefit from the realized “operational efficiencies” generated by programmatic buying that currently accrue to the advertising agencies and publishers?  Perhaps more importantly, “How will this automated approach to media buying and stewardship impact the role of agency media buyers?”

Today, marketers pay a premium in the form of agency fees and commissions for digital media buying relative to those paid for traditional media.  If technology is ushering in a more efficient, more automated form of buy management should advertisers be paying more, or less?  For some of the more progressive client organizations, the question may even be, “Should we utilize an agency at all or purchase media directly via electronic exchanges?”  The potential for disintermediation is very real in this context.  The challenge for media agencies will be to redefine the role of their media buying organizations in an evolving media marketplace to clearly identify how and where their buying staffs add value.  It is likely that their future role will be more strategic, giving way to technology to handle the basics of media execution such as the placement, monitoring, analyzing and adjustment of buys.  That being said, there are media buyer generational issues which will require training and development to school agency media buying professionals on emerging programmatic buying platforms and electronic exchanges.  All stakeholders can benefit from the perspective of Bill Gates when it comes to the promise of technological advancement:

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

Exciting times to be sure.  Will there be challenges for clients, agencies, publishers and media workflow and data management system providers?  Absolutely.  But in the end, all have the opportunity to benefit from a rapidly evolving and much needed evolution in the way media buys are executed and optimized. 

Interested in discussing the impact of programmatic buying on your client/agency letter of agreement, staffing plans and remuneration system?  Contact Cliff Campeau, Principal at AARM at [email protected] for a complimentary consultation. 

 

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