• by Laurie Sullivan , Staff Writer @lauriesullivan, August 17, 2011

Sunil Sharma, an independent consultant who was formerly director of trading at Adnetik, the trading desk for Havas Digital before it was spun off, has published a white paper on the state of programmatic ad buying that explains how advertisers and publishers lose out on targeting opportunities, and what the industry can do to mitigate this problem.

Sharma says in the white paper that the "recent circus-like atmosphere around the question of agency mandates has masked one fact. Whether there are mandates or not, the advertisers' money is being wasted, and available remedies are not being implemented."

The paper highlights the problem of misattribution in campaign tactics, poorly aligned incentives, and suboptimal market structure dynamics, along with attribution models that don't make sense-all threats to the market.

In a massive waste of advertiser dollars, the process gets repeated continually until the DSP, trading desk or network games the system. Sharma explains the problems do not reside in the algorithms, nor programmatic buying, but rather in how these tools are used. He compares the misattribution to what happened in the bond market that led to the economic collapse, suggesting that the "house of cards crumbled, and so might this one if credit is not assigned to real value creation, rather than to faulty attribution tricks."

Placement of the ad matters, he writes. "This means changing the pricing models to allow more quality inventory into the supply chain," he said. "Rather than using a CPM model, use a stock broker model where fee pays for a service. This way the advertisers know what they paid for the impressions."

The agencies and media planners need to scrutinize the process and measure the effectiveness of media buying, not just by CPMs, but take into consideration where the inventory gets placed. It's not happening, he says, because the CMOs don't monitor campaigns closely enough.

Feel free to discuss the issues among yourselves.