What’s nice about this subject is that most players have come forward at one time or another claiming more transparency is better than less. What’s even nicer is having a fair way to understand transparency and judge it on a case by case basis. That's why the Transparency Acid Test is so useful.
Transparency has a lot of meanings. You can test this yourself by asking just a few people from different parts of the industry. You’ll probably find similarities between the buy-side and sell-side. You’ll also find much variation and confusion in how the many middlemen define it. The reason for this difference is because when a middleman is placed between buyer and seller, the probability of transparency can quickly diminishes to zero. In other words, less transparency means more opportunity for the middleman to exploit profits from the trade. This is perfectly normal market behavior.
What started as a cobbled ecosystem is now getting paved with demand for more clarity. When the exploitation is revealed and valued, markets tend to change. This is exactly what’s happening in the market today.
We are transparent about not being transparent
Some mad (middle) men are not ashamed to say how they see it. They take a position that protects their interests and stand by it until they figure out how to adapt to the new market need. When you hear things like “we are transparent about not being transparent,” you should think about smoke and mirrors – that companies are really saying, “don’t count on us to be totally accountable as your managed service partner at this particular time.”
While you might be inclined to extend more trust in exchange for such honesty, hopefully you’ll see through this trickiness, reduce your trust level to an arm’s length status and explore new ways to maximize your programmatic returns.
Quantifying middleman transparency with the ProgrammaticAcid Test Ratio
If you’re an advertiser (or publisher) and you want to cut through all the transparency disparity, you should try using the ProgrammaticAcid Test Ratio.
Step 1: get your team together or use outside help to list all the missing information you want to know from your middleman but don’t have today. Let’s say you’re able to generate 10 burning questions (there are actually more than 100 questions that are important on their own or when connected to related information).
What is the actual media cost for my campaign?
Can you please send me bid-level data from the last 90 days?
Step 2: Send the list to your managed service provider and set a firm timeline to get the answers.
Step 3: Run the following quantitative steps. This is very easy once you have the answers (or not).
Imagine five out of 10 questions were answered. After examining the answers, you find out only three answers actually answer the question. Now you can plug and play with a series simple acid test formulas.
Acid Test = answers / questions = 5 / 10 = 50%
Net Acid Test = satisfactory answers / questions = 3 / 10 = 30%
Satisfaction Ratio = satisfactory answers / total answers = 3 / 5 = 60%
Transparency Gap = 1 - Net Acid Test = 1 - 30% = 70%
You can do a bit more digging to break down the Transparency Gap into:
Vendor does not track
(therefore does not know)
Vendor knows the answer, but will not provide information
Out the seven missing answers, you need to ask if it is because the vendor does not know or track this information -- or is it because the vendor does not want to share it? In some cases you’ll have to make a judgment call between the two. Just keep in mind these are binary yes or no questions so you should be able to deduce Transparency Gap into one bucket or another.
After completing this exercise, you can index each middleman on relative transparency. You can also index other measures like the Transparency Gap as a gauge for the middleman’s programmatic competency vs. honesty.
Not only is there a lot of value in getting the answers (or not), but also in the exercise itself. The results will help drive better decision-making to get the most out of your programmatic activity and re-incentivize managed service providers to focus on mutual benefits instead of protecting an exposed position. The former typically has a future; the latter only has short-term gains.