Untangling The Many Definitions of Ad 'Transparency'

"Transparency” is often touted in the digital advertising industry as a means of differentiation, designed to attract business in a very competitive market. The word has entered the ad-tech lexicon to assuage any fears advertisers have when considering adding RTB to their media plans, but what does “transparency” really mean to advertisers? 

It likely implies something different to advertisers compared to the vendors that include the word in their value propositions. There’s no current consensus on what transparency should entail, which means there’s still tension between the demand and supply sides and their respective interpretations -- tension that will remain until we actually figure out what’s important for all the involved parties. Let’s look at how transparency, the word, is used today -- and what needs to change.

Transparency Today

Perhaps the most common use of “transparency” from a vendor perspective refers to visibility into the sites where an advertiser’s ad ran. A recent MediaPost piece encouraged marketers to ask seven questions of their programmatic vendors to address transparency into where their ads appear, whom they’re reaching, and the intermediaries involved in the buying process.

This opinion is a bit out of touch, largely because programmatic, data-driven buying is designed to provide the type of transparency described. Therefore, advertisers shouldn’t have to ask. This kind of reporting should be a foregone conclusion. What’s currently not provided to advertisers is insight into all of the costs associated with purchased media. 

The Shift to Pricing Transparency

Contrary to the popular perception, trading desks and DSPs have moved away from the black-box model historically popularized by ad networks. However, it’s been difficult for these desks and platforms to adopt comprehensive pricing transparency by showing a breakdown of the markup on media.  One reason is that auctions exist between the supply and demand sides, so the DSP may not know the wholesale cost of media from the publisher due to an auction between two supply partners, such as Rubicon and AppNexus. Vendors also want to make enough margin to cover their overhead and technology costs, so many aren't willing to show all the costs that go into the markup. 

Full pricing transparency requires visibility into all fees associated with the purchase price for media. The markup on media usually covers ad-serving fees, labor costs, the margins taken by SSPs and DSPs, and technology innovation. We may begin to see a shift in the direction of this type of reporting as more advertisers request pricing transparency.

Trading Desk Needs

Trading desks are in the unique position of being able to leverage multiple sources of inventory via different DSPs. RTB has afforded efficiencies previously unsupported by ad network or direct buying models, allowing buyers to weigh the value of an impression to bid on it accordingly. Trading desks need full transparency into pre-bid data, including the URL and IP address of the bid request. Today, the market does not allow buyers to see the winning bid prices for impressions not won, a valuable piece of information for shaping future bid strategies. The goal to gain transparency into costs across buying platforms and data sharing between platforms would facilitate a more efficient marketplace for buyers and sellers.  

Transparency & Finger Pointing

With an industry as crowded as digital media, it’s tempting for competing vendors to call each other out for obscuring elements of the media buying process. Statistics such as “24 percent of an advertiser’s budget is spent on ads matching the consumer target” only serve as a scare tactic and detract from the nature of programmatic buying, implying that the practice generates huge amounts of waste. In reality, the fees associated with programmatic media benefit advertisers by covering the expertise and investment in future technological capabilities. It always benefits vendors to chase the best returns for their clients. Whether or not vendors decide to show those costs to their clients is still up for debate.

As companies in our industry continue to proliferate, we may begin to see an ecosystem that more closely mimics the stock market, in which economics dictate pricing in conjunction with full transparency. It will take a few vendors to blaze the trail for widespread adoption of all-encompassing transparency.

Tags: programmatic, rtb
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1 comment about "Untangling The Many Definitions of Ad 'Transparency'".
  1. Ken Nicholas from MindOnMedia[Sales] , July 6, 2014 at 3:24 p.m.
    I am actually going to defend the writings of Mr Peralta here in part, and their being 'out of touch', which is an alarming statement in my view, against a fellow MediaPost colleague. In fact, when I read that assertion, along with this statement in this article, "Contrary to the popular perception, trading desks and DSPs have moved away from the black-box model historically popularized by ad networks," I can only be surprised. They have? Really? A 'popular perception'...where, exactly? The reason why those '7 Questions' from Mr Peralta need to be asked...yes, even in 2014...is the same for questions on the black-box model that exists in very many places, including DSPs & exchanges, to be sure. I hear the exact opposite views on transparency every day among agencies & clients from the ones stated here. And so what appears as a blanket statement being made, seems more 'aspirational' at the moment, than 'actual.' - - - As for the focus shift to pricing near the end of the article, the above points are reinforced: "Today, the market does not allow buyers to see the winning bid prices for impressions not won, a valuable piece of information for shaping future bid strategies." It seems hard to say that there has been a 'move away' from the black-box model...when you outline exactly one place where there still IS black-box visibility [i.e. none], still in place? Ad networks have gotten that rap for years, so there's no change from that. Hope the dialogue continues from here...