Understanding the Complexities of the Programmatic Advertising Value-Chain
The IAB run a number of Trading Councils, covering a multitude of industry sectors, including ad ops, video, search, social, and display marketing. Council delegates are all senior executives who appreciate that the industry won’t mature without cohesion enabling progress to be made on projects. IAB Councils are seen as the voice of the industry. In this post, James Prudhomme, managing director EMEA for Index Exchange, (pictured left) offers his perspective on the Display Trading Council’s recent conversations about the complexities within the programmatic advertising value-chain.
“Let me tell you. Can I give you guys a friendly piece of advice? OK? Don’t ever go up to the drive-through OK? Always walk up to the counter. Do you know why? OK. OK. Do you know why?” – Leo Goetz, Lethal Weapon 2.
There is an implication inherent in the advice that Leo Goetz, played by Joe Pesci, gives to the characters played by Mel Gibson and Danny Glover in Lethal Weapon 2. You are better off transacting your fast-food purchase under the glaring fluorescent light of your local outlet than you are relying on the anonymous automation of the drive-through window.
Sometimes, it feels like digital advertising should come with the same warning.
The programmatic advertising value-chain is complex. In the milliseconds that exist between a real-time bid and a delivered ad impression there are multiple opportunities to deduct a fee, charge rent, impose a tax, pay a duty, and exact a levey.
I’m not cynical about this. In most cases, there is legitimate value being exchanged for those fees, taxes and levies. The only question is one of transparency. Should advertisers and publishers have complete transparency into the transaction fees deducted from their programmatic ad campaigns?
No matter if you are a buyer or a seller of digital advertisements, if your goal is to transact a larger share of those ads through efficient, programmatic channels, then there must be full transparency and visibility into the taxes, fees, rents, and levies. Further, both buyer and seller must be easily identifiable and willing to stand behind their transaction.
There are three main reasons: first, transparency inspires trust and trust must be at the foundation of our industry. Throughout the short history of the digital-ads business the desire for trust has driven the development of everything from ad-servers to viewability measurement systems.
Next, one bad apple can ruin the whole bushel. A single bad actor in our industry has the power to bring down the entire ecosystem. Email marketing has been regulated by governments throughout the world. The move towards government intervention was driven by a small number of email spammers who operated in the shadows and abused the trust of consumers.
Finally, publishers must be able to accurately measure the efficiency gains in moving to an automated transaction model. If the savings can’t be measured, the ecosystem will be starved for premium supply.
Trust, but verify
The next phase of growth for programmatic advertising will be driven by moving premium campaigns from traditional delivery systems, like ad-servers, to programmatic channels underpinned by exchanges and SSPs. These private marketplaces are based on the Deal ID standard and are established easily, instantly, and automatically, once business terms have been agreed by both buyer and seller. Agencies and publishers are now cautiously testing these channels with their highest value campaigns and programmes.
If these cautious steps result in arguments and finger pointing over who has been charged which fees, and there is no ability to transparently trace transaction taxes back to their point of origin, then trust will be lost. Trust will be lost in the partners conducting the transaction, or it will be lost in the platform that managed the deal. In any case, it won’t matter. Trust will be lost and it will be extremely difficult, if not impossible, to rebuild.
One bad apple
Remember Leo Goetz’s warning? It wasn’t directed at one specific restaurant or quick-service chain. It was all drive-through windows everywhere. None of them could be trusted. You always ended up in the same place.
“Sunlight is said to be the best of disinfectants”. The second half of that famous quote is: “Electric light, the most efficient policeman”. In an environment that is clean and transparent, bad actors have nowhere to hide – we all thrive and our businesses flourish. Leo Goetz gets all the chips he’s paid for. The fast-food chain continues to serve customers faster and more efficiently through the drive-through window. Nobody gets flanked.
A business case for growth
The holy grail of automated ad-delivery is the global television advertising market. PWC forecasts this to exceed USD$240bn by 2019. A number of forces are converging to make the opportunity addressable to the buyers, sellers, and platforms that make up the key constituents of our business.
This industry is not necessarily broken. As a percentage of total volume, the existing transaction fees are not completely unsustainable. TV does not need us, we need TV. We will not win that business unless we can entice it with an environment where fees are transparent.
If not unsustainable, then the transaction costs in TV advertising, as they exist today, are still very large. A business case can be developed to provide a USP, such that media companies and content producers will be compelled to change their current mode of operation in favour of one that is more efficient and delivers significant value to their enterprise. What are the inputs to this model? How do we compare the current fee structure to the new one? I don’t believe this is possible today.
I’m the sort that prefers to peddle a bike up to the drive-through and order a veggie burger (ok, with extra cheese and a milkshake to boot). Nonetheless, it’s a more efficient use of my time to do that than it is to lock my bike, walk into the store, and queue up with the other punters. That, and I want the small discount that comes with takeaway instead of eating in.
I’ll spend the extra money, and the extra time it takes to walk up to the counter and stand chest to shoulder with Joe Pesci, if that is the only way I can be completely sure that I’ll get what I paid for.
Newly appointed chairman
Each of the IAB Trading Councils is chaired by a leading visionary dedicated to improving online advertising. Amit Kotecha, head of marketing, EMEA at Quantcast, (pictured below) has recently been appointed Chairman of the IAB UK Display Trading Council.
Speaking exclusively to ExchangeWire, Kotecha said: “In my role as Chairman of the DTC, I see each one of our appointed members as the voice for digital trading in the UK, creating powerful and engaging thought leadership and sharing best practice. We plan to focus on innovative industry research, interviews with key advertisers, and share industry case studies to demonstrate how the industry is changing and how best we can keep up with it, whether you’re a publisher, advertiser, or agency.”
He continues: “The DTC is not only fundamental for education, but also in the development of best practice for digital trading. We must be assured that everyone plays by the rules so that digital trading is being done fairly. With collaboration and transparency, we aim to tackle several significant issues including viewability, fraud, brand safety, and trading standards.”
One of the issues that Kotecha is particularly passionate about is viewability.
According to the recent IAB Media Owners Sales Techniques (MOST) study, 45% of all UK display advertising was traded programmatically in 2014 – four years ago it was under 10%. At that time, I was at the IAB and we knew change was coming. Together, with 15 leading display companies, we formed the UK Display Trading Council (DTC). The DTC is responsible for aiding the growth of the display market by providing clarity to help the industry understand the benefits and strengths of display media trading.
In that four years, we have seen considerable technological changes that impact how digital media is traded – the rise of mobile and video, and the adoption of ‘Internet of Things’ technologies including wearables, to name a few. Yet, still one of the biggest changes to how digital media is traded has been programmatic advertising. There is no question about the benefits and efficiencies that programmatic automation brings; however, best practice, diligence, and education are paramount to ensuring its longevity and evolution as we continue to innovate.
Recent hot topics, such as viewability and attribution, illustrate this evolution. As we gain the ability to measure more, we step away from non-targeted reach and frequency towards an industry driven by granular data and real insight. Yet, viewability and attribution are good examples of the types of challenges that we uncover as we innovate. I see the preeminent role of the DTC as one of education. By bringing clarity around these challenges, the industry can build solutions that help build an altogether stronger marketplace.
The IAB video The Evolution of Online Display Advertising, is a great example of this educational capacity. Presented to, and viewed by, thousands – including Whitehouse policy makers (!) – this video indicates the appetite to understand this complex display ecosystem, which has evolved from a simple unilateral marketplace into a progressively intricate environment, with data being traded along with real-time bidding.
To find out more about the DTC, visit the website here.
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