About 90% advertisers reviewing programmatic contracts: WFA Report
While Agency Trading Desks continue to dominate programmatic ad buying, advertisers are now demanding a new kind of relationship that provides significantly improved control and transparency, with nearly 90 per cent reviewing and resetting contracts and business models to deliver on these objectives. This was highlighted in a new research by the World Federation of Advertisers (WFA).
Agency Trading Desks are used as the principal approach for nearly 40 per cent of the world’s biggest brands, the report found.
The results are based on a survey of 59 WFA member companies representing 18 industry sectors with a total global ad spend in excess of USD 70 billion.
Programmatic spend on the rise
The report found that the spend on programmatic is increasing globally with an average of 16 per cent of digital ad spend now programmatic, compared to 10 per cent in 2014.
North America led the spend on programamtic where it represents 23 per cent of respondents’ digital spend, followed by Europe at 17 per cent. Investment in China is lower, with programmatic responsible for just 12 per cent of digital spend, although this is expected to grow, principally via private exchanges, the report found.
Display ads take the largest share of programmatic budgets. Desktop display takes an average of 38 per cent of programmatic investment, although 45 per cent of respondents planned to decrease this area of spend in the next 12 months. By contrast mobile – both display and video – currently at 25 per cent was expected to increase for 98 per cent of respondents, with 61 per cent saying this will increase significantly.
The report also found that private market places are on the up. The market is evolving towards closed or private environments where inventory quality can be better guaranteed. A quarter of respondents are pulling money out of open auctions and exchanges, while 67 per cent said they were putting more money into private exchanges holding invite-only auctions and 52 per cent said they were boosting spend on private exchanges with fixed pricing options.
Premium inventory is in increasing demand, according to the report, but more than half of respondents said that currently 50 per cent or less of the inventory they bought could be defined as premium. Nine per cent of respondents said all inventory was premium.
Agency vs Independent Trading Desks
Combining shares of respondents who use Agency Trading Desks (ATDs) as their principal model with those who use them in select markets, makes a sizeable total of more than 70 per cent. But the report shows that these approaches are not mutually exclusive and Independent Trading Desks (ITDs) represent an equivalent total of almost half of respondents (46 per cent).
One of the most interesting finding of the research is that alternatives to Agency Trading Desks (ATDs) are growing rapidly. ITDs have seen usage increase by 12 percentage points compared to the previous wave of WFA’s programmatic research. In-house or ‘hybrid’ models, while less likely to the principal global model, are used by more than a fifth of respondents in total. These models were being conducted just at the fringes of WFA’s membership two years ago, the report highlights.
Advertisers demand transparency
Seeking additional transparency has led to the evolution of digital ad trading models. The second-generation of programmatic models has seen some improvement in transparency, with 29 per cent of respondents now satisfied with the level of transparency provided by their ATD, up from 21 per cent in 2014. Transparency at ITDs now satisfies nearly half of users, up from 36 per cent in 2014.
The report highlighted the trend that in the last two years the Agency Trading Desks were pushed down from Holding Company Level with 42 per cent of respondents now working with agency level trading desks, although 51 per cent still work with the legacy holding company operation such as Xaxis, Accuen and Cadreon. The shift has been driven by client demand to ensure closer working relationships between their day-to-day agency team and the programmatic buying team, to ensure consistency and simpler reporting.
WFA’s research also shows that advertisers broadly reject the idea that agencies and holding companies should act as principal in the media buy – able to mark up inventory they have acquired in direct deals with media owners before selling it on to brands. Sixty-two per cent of respondents disagree with the statement ‘we have ‘opted-in’ to principal trading and are comfortable with the potential conflicts of interest’, while nine per cent agreed.
However, this is not a simple area. The report finds that while 53 per cent claimed to have a ‘disclosed or transparent’ programmatic relationship, 33 per cent admitted their trading desk model was ‘non-disclosed/non-transparent’. A similar number – 34 per cent – also agreed that there was nothing in current contracts that precluded arbitrage or principal trading. Many are seeking to clarify their positions in these contracts.
“Programmatic has expanded rapidly and it’s no surprise that the market and mechanisms that big brands use to spend through this channel are evolving. The rise of in-house, hybrid models and independent trading desks demonstrates that the original trading model left much to be desired. The second generation of trading models is now being built and while agency trading desks still take the greatest share of digital spend there are now real alternatives being developed that give brands more control over data and technology alongside the wider push to ensure greater transparency. Ultimately, there are advantages and disadvantages for each approach and brands should identify the strategic principles which matter to their businesses, as these will govern partner choices,” said Matt Green, Global Media & Digital Marketing Lead at the WFA.
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