Let’s look at some of the differences between the two industries. One major difference is that Madison Avenue is an unregulated market, while Wall Street is regulated. While we certainly aren’t suggesting that the government get more involved in the ad tech space, Wall Street regulation creates a base set of standardized rules for exchanges and promotes transparency. Madison Avenue’s digital marketplaces (exchanges) fundamentally lack transparency.
Also, financial exchanges are wholly accountable and liable, while recent contracts suggest ad marketplaces seek to avoid both responsibilities. Until recent exchange consolidation, the competitive nature of Wall Street markets has driven down electronic transaction and other costs (spreads) incurred bridging buyers and sellers. On Madison Avenue, spreads are growing, with transaction and other costs thousands of basis points higher than what is charged on Wall Street for matching buyers and sellers.
Another aspect of this lack of transparency in the ad business is the confusion between precision and accuracy when it comes to reporting and invoicing. Financial companies are required to be 100% auditable, which means being completely accurate on price. Financial investors are risking capital -- as are media investors -- but demand to be informed exactly how their trades are managed. This is too often not the case in ad tech, where imprecise and/or inaccurate cost, placement and performance estimates -- or no campaign reporting at all, for marketers or publishers -- is the standard. Too often Madison Avenue’s digital media invoices are a miracle of simplicity, unbound by the need to depict how they were derived, or any sense of auditable accountability.
Independent media traders (IMTs) could be part of the solution to these problems. IMTs are typically more transparent than agency trading desks, offering greater accountability for their trades. Similar to Wall Street banks, which are required to be fully auditable and offer transparent reporting and invoicing, IMTs typically outline exactly what trades and services they are doing on behalf of clients and are willing to explain every charge on an invoice. For example, their bills may include an itemized list of every action surrounding a buy or sell, the costs of media, technology, data, labor and other such fees. IMTs are also flexible in terms of how they bill and are willing to work with a client to determine a pricing structure. As specialists, IMTs often provide clients with a more insightful picture of what is actually occurring in the market.
Transparency is important in programmatic advertising in particular because it offers stakeholders the promise of more control derived from receiving a more complete, faster picture of how trades are actually being filled. Without it, marketers, agencies and publishers will miss maximizing programmatic’s twin key benefits: greater efficiency and incremental effectiveness..
Programmatic trading may still be young on Madison Avenue as compared to Wall Street, but it offers a world of potential to improve the way the industry does business. We have a long way to go. Our industry can learn a lot by exploring the practices already established on Wall Street.