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Mike Solomon

Mike SolomonBy Michael Solomon

EVP, Chief Media Operations Officer

 

Last week, I attended the Interactive Advertising Bureau’s Programmatic Symposium in New York.  Programmatic advertising is the application of data and software to automate digital advertising (including tasks such as audience targeting, bidding, transacting and tracking).  Programmatic has been beleaguered by criticism lately as revelations continue to surface about fraudulent activity, ad tech “taxes”, and lapses in transparency and brand safety.  Procter & Gamble’s Marc Pritchard has made a series of speeches to the Association of National Advertisers, IAB, and others calling on the digital ad industry to clean itself up.  Also last week, the ANA, Ad/Fin and others released a report “Seeing Through the Financial Fog” which lends credence to the transparency concerns.

The attendees gathered for the Programmatic Symposium were painfully aware of these issues and of the need for the industry to address them.  “Transparency” and “Brand Safety” appeared all over the agenda.  There were “Town Halls” to facilitate discussion around key problem areas.  Indeed, keynote speaker Michael Barrett (president and CEO of ad tech firm Rubicon Project) observed that the ad tech industry is in an “existential crisis” and that if the industry does not address key issues, it risks others stepping in to do it for them.  Speakers throughout the day likened the proceedings to “group therapy”.

There can be little doubt that the industry understands the issues facing it, and that many are coming together to address them.  Can they be successful?

“Never send a human to do a machine’s job.” – Agent Smith, The Matrix

The promise of programmatic advertising appeared clear a few years ago.  Advances in big data, processing speed and cloud computing have created an environment where advertising functions such as precise audience targeting, negotiation, execution and reporting can be executed by computers in milliseconds.  The precision and efficiency touted by such processes was understandably compelling to many in the industry.

© Ivan Kmit | Dreamstime

 

The problem with computers, of course, is that they’re fast but they’re dumb.  They do exactly what they’re programmed to do.  It became increasingly clear that programmatic “open exchanges” (where any seller can list inventory) were littered with land mines such as outright fraud, low quality inventory, poor viewability, brand safety concerns and opaque pricing.  Many within the industry began to “walk back” this pure-play programmatic in favor of Programmatic Direct and Private Marketplace paradigms, where there is more control over participating buyers and sellers and thus less fraud and higher quality inventory.

Evidence also began to mount that, although efficient in theory, the cost to run the process itself (the programmatic infrastructure) is rarely clear to advertisers and represents a significant portion of every ad dollar spent.  Some advertisers work with agency “trading desks” which generally execute buys on a non-disclosure basis, pocketing some unseen portion of the expenditure.  Data Management Platforms (targeting), Demand Side Platforms (buy side decisioning), Exchanges (marketplaces), Ad Servers (serving and tracking the ads), Supply Side Platforms (sell side decisioning) and 3rd Party Verification Services (measuring viewability, brand safety, etc.) are all employed to make the programmatic process work effectively, and they all cost money.

How much money isn’t always clear, although a World Federation of Advertisers study put the cost at 60 cents of every dollar spent.  A more recent ANA study (to be discussed further) was slightly lower at 42 cents per dollar, although the ANA points out that its study was for fully-disclosed activity only, and included very little agency trading desk transactions, likely bringing the overall “tech tax” in its sample down.

Is the bloom off the programmatic rose?  The same day as the symposium, the IAB published a document suggesting that the term “Programmatic” be replaced with “Automation”.  This was also discussed at the symposium, with the IAB arguing that “Programmatic” suggests an all or nothing characterization, whereas in reality specific components of the advertising process have simply been “Automated”.  This seems not unlike a brand that has endured a spate of bad PR changing its name.  “You don’t like ‘Programmatic’?  We’re not ‘Programmatic’.  We’re ‘Automation’.”  It’s ironic in a way that “Programmatic” has become a liability, because initially it was quite the opposite.  Advertisers practically tripped over one another in their rush to get in on the “Programmatic” action.

Well, no more, apparently.  That’s not to say that programmatic is going away.  That train has left the station.  Some estimates indicate that 80% of display advertising is already being placed programmatically.  However, advertisers are becoming increasingly wise to what they are getting themselves in to, and they are increasingly asking for answers.

“You may think you know what you’re dealing with, but, believe me, you don’t.” – Noah Cross, Chinatown

In addition to finding that some 42 cents on each programmatic dollar in the study went to the ad tech “tax”, the study released last week by the ANA concluded that clients often don’t know what they are paying for or even whether they have the right to ask.  Many of their agencies seem in no particular hurry to help them figure it out, either.  Of 58 advertisers initially expressing interest in study participation, only seven actually ended up taking part.

The remainder (88% of those who initially expressed interest) fell away for a variety of reasons.  Many discovered that they did not have the requisite data ownership rights necessary to conduct a financial analysis of their programmatic media spend, particularly true of those working with agency trading desks.  Agencies also successfully discouraged participation in some cases regardless of data ownership issues, citing “resource drain” or doubt of the “tangible value” to the advertiser.  This is shorthand for “Trust us.  We have it under control.  There’s nothing to worry your pretty little heads about.”

It was also clear that many advertisers did not understand their data access, or the various fee models being employed on their programmatic media throughout the supply chain.  “Advertisers that did not explicitly plan for and address programmatic disclosure issues were much more likely to find themselves faced with a myriad of challenges to transparency,” the study observes.  Even in cases where the advertiser may have had legal access to the data, the ANA cites unclear escalation paths, non-standardized practices, incomplete data sets and varied technical ability across various tech providers (DSPs, trading desks, etc.) as additional barriers to transparency.  It should be pointed out – these issues are not specific to programmatic or even to digital.  We see similar issues in other media channels on a daily basis.

“What we’ve got here is failure to communicate.” – Warden, Cool Hand Luke

Much of this boils down to expectations.  And by expectations I mean documented, legally binding expectations.  Advertisers need to understand the implications of agency contract language in this area and assure that it aligns with their expectations.  Is the agency operating on a fully-disclosed basis?  Does it have any conflicts of interest (ownership stakes in tech providers, etc.) and have these been disclosed in writing?

By extension, how does an advertiser’s agency relationship extend to the various tech partners who work on that advertiser’s business?  What does each contribute, and what is its fee structure?  Does the client have full access to all of its log level financial transaction data, and for how long?  Per the ANA study, many advertisers – large, sophisticated ones – do not have the best handle on this.

Another “communication” question frankly comes down to potentially conflicting priorities by various stakeholders in the ecosystem.  The motivation for the perpetrators of various kinds of fraud is pretty straightforward.  However, even the “legitimate” players in the ad tech ecosystem may be subject to conflicting priorities.  It was openly questioned at the IAB symposium whether marketers would continue to pay for all the various elements of the tech “tax” if they fully understood each of them and how they were priced.

There is also some question as to whether pricing models themselves create conflicts.  Will a tech provider charging on CPM really be all that interested in seeing billions of “low quality” impressions marginalized out of existence?  How can auctions be structured (first price, second price, CPM floors, etc.) so that pricing and process are transparent and fair to buyers, sellers, and exchanges?  In other words, are all participants in the supply chain appropriately incented to see its problems fixed?  Maybe even some of the legitimate participants in the ecosystem like it just great the way it is.

 

To be sure, there are many smart people and organizations working to fix programmatic.  In April, the IAB announced that it would require all of its general members to obtain registration with the Trustworthy Accountability Group (TAG) – a cross-industry accountability program created to combat fraud and promote brand safety through greater transparency.  Last week, the IAB announced an “ads.txt” protocol which, when adopted, will help to prevent domain “spoofing” in programmatic media (making it harder for fraudulent sellers to pretend to be legitimate publishers in programmatic exchanges).  The ANA’s programmatic study – also released last week – provides insight and guidance for advertisers to help assure that they understand their business relationships and have access to their data.  The IAB released a free programmatic fee transparency calculator tool last year (also showcased to attendees at the symposium).  Just today, holding company Havas announced a fee tracking portal for its clients, which it touts will track “literally every penny” of programmatic ad buys.  There is much more to be done if programmatic is truly to be “fixed,” but beginning to limit marketplace access to bad actors, giving marketers tools to better understand costs and raising awareness about the inner workings of the supply chain are good first steps.

 

If you liked this post, you might also enjoy “Transparency and 3rd Party Reporting:  Why Stop at Digital Media?”

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Media Watchdog