Commentary
When Did We Become A Rev-Share-First, Not Client-First, Industry?
- by Dave Morgan , Featured Contributor, March 7, 2024
Last week, I wrote, “The past decade has seen the rise of ‘strategic’ partner deals with opaque revenue shares, push-button 'black box' trading with murky inventory pools, and a tendency for many in the business not to ask too many questions, since willful ignorance tends to be the favored state of many.”
That sentence got quite a bit of response, both in comments and on the several social media platforms where I shared it. For media purists that want to always make clients and their needs the center of the universe, a noble and worthy goal for all of us, the idea of “strategic partner deals" as a key driver in media selection is anathema. The issue surfaced significantly a decade ago and has only grown in industry impact with the growth of programmatic media.
Four words define the current world of digital advertising revenue-sharing: ubiquitous, promiscuous, obfuscating and debasing.
Ubiquitous. The vast majority of programmatic media, data, technology, and verification transacted today is subject to defined revenue sharing between sellers, buyers, suppliers, and platforms -- generally on undisclosed terms. It’s a fact.
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Promiscuous. It’s not like each company only has one strategic partner that they rev-share with. If anything, most rev-share with as many as they possibly can -- certainly, any that are willing not only to provide a significant percentage, but guarantee it as well.
Obfuscating. Virtually all the “strategic partner deals” are done under non-disclosure agreements. For some reason, folks doing the deals don’t want the funders of the campaigns to know how the money is moving. But then again, as we know, in mystery there is margin.
Debasing. For many of the campaign elements and participants, the revenue-share drives more profit than base client fees. Yep, “the tail wags the dog.” All too often the media chosen, data used for targeting and verification vendor are selected to optimize platform profits and deliver just enough client value -- but notclient results.
It doesn’t have to be this way. Shouldn’t deals be done for the benefit of the client, done selectively, disclosed transparently and aligned first and foremost for client results, not platform profits?
What do you think?
Dave
Great observations! So knowing this, how does it change?
I have been focused on changing this for four years and will continue to focus on it
Dave, of course I agree.
The obvious answer is that "advertisers" are best equipped to fight this battle and demand transparancy.After all, it's their money that's at stake.
But being realistic, the advertiser "community" is even more fragmented than the media and there is no commonality of purpose---or interest. Many of the advertisers are small local or regional spenders---operating without savvy media agencies to support their interests. Others---such as the large national TV branding advertisers---- use digital mainly as a sales promotion tool and these duties are handled by specialists, not their regular TV planners or buyers. Add to that, a huge part of digital ad spend is for search and/or direct response and often, it doesn't matter ---the advertisers pay based on clickthroughs.
Is there an entity--aside from hope and some honest players like Gabe----that might address this situation? I hate to say it, but the only one I see looming ponderously on the horizon is the Feds. Based on what we are seeing of the political chaos these folks and the warring politicians are inflicting on us, if they get their hands on the digital transparacy issue who knows what will happen?
Gabe,
I think that step one is more awareness. Step 2 is more client involvemetn. Step 3, which might happen naturally, is more scarcity in key areas of supply, which is very likely to happen in CTV.
Dave
Ed,
My hope is that a major DSP/SSP, seeking differentiation, will become a "fully transparent" platform wtih all "co-marketing" "rev-sharing" "bonus pool", etc. fully disclosed.
Dave
Dave-Unfortunately, if history is a guide, the agencies will not do business with someone who is transparent about the rev share because then the clients will KNOW and might ask for a piece of the rev share. Plus, the agencies would have to admit that they are not doing their jobs properly in recommending media that is actually right for the client. As Phil Geier told me when I was running a company who had a system like yours (in the early days for both of us) "It won't work because you are forcing them to do their jobs and you are taking away the way they make pure profit." He then went on to go over the nuts and bolts of every individual CEO/ Holdco and how they did what you talk about in this column. He also pointed out that every public company that did these blind rev shares and recommended based on their take rather than proper media stuff was making advertising not work and thus was in violation of SEC regulations on maintaining an ongoing concern etc because it would kill the ad business long term. Some of his teachings ended up in some transparency conversations a few years ago in the industry. ;-)
Dave, Jon makes an important point. While I'm not suggesting that everyone does it, there is no doubt that the agencies---at least some of them---- feel that they have been pressured so much by client bean counters whose only aim is to reduce their fees---aka incomes---that as businesses, they must sometimes get involved in "non-transparent" dealings with the media.
Is there a solution to this? Sure. Fire the agency media buyers----but not the account handlers or "creatives"---- and do media yourself. Then the advertiser can make its own deals with the media sellers. The problem is that such a move would be a disaster for the advertisers not only as they would be taken to the cleaners by the sellers, but also the problems of recruiting and staffing a real media planning and buying team and supporting it with Nielsen and other research are such that the resulting ROI would be awful. When they consider the ramifications of getting into the media business few advertisers will find this an attractive option.
Which means that there probbaly is no solution---I'm sorry to say.
Jon,
Yep. so true. Unfortunately, so true.
It doesn't mean that some of us won't keep fighting for change though :-)
Dave
Ed,
As you and Jon both point out, odds are stacked against solutions that we can imagine, which means that we need to keep pressing and find new ways to change it. I do think that the clients (and their finance processes) have created this situation, so it may take a new kind of agency model to solve it.
Dave
Not for nothing but some media buyers are just as bad on the client side