At a time when advertiser and agency tensions are rising over the lack of transparency surrounding rebates, kickbacks, arbitrage and excessive margins on media buys, two experts on the media-buying marketplace are coming together to field a comprehensive study that will analyze actual programmatic media buys processed by agencies, trading desks and other ad technology middlemen for a cross-section of big advertisers.
The initiative, which is being organized by media auditing expert Ebiquity and programmatic media data aggregator AdFin, will kick off this month with results expected to be released publicly in the fourth quarter of 2015. The project, says Ebiquity Chairman-North American PJ Leary, a former agency media chief and long-time media auditor, and AdFin CEO Andrew Altersohn, a former top digital media executive at Havas, will expose explicit transactional data from beginning to end of programmatic buys made on behalf of a minimum of 10 big advertisers representing a variety of product and service categories.
The goal, they say, is to establish benchmarks and norms for margins of various players across the programmatic trading process to identify who gets what cut, when and for how much.
The problem, says AdFin’s Altersohn, is that the margins can be significant and not always transparent. Previous industry estimates -- most notably LUMA Partners analysis -- have indicated that as much as 60% of a programmatic media buy can be eaten up by middleman transactions, but Altersohn said the real factor could be as much as 80%. That would mean that for every dollar spent by an advertiser in a programmatic media buy, only 20 cents actually goes to the publisher delivering the audience impression the advertiser is buying. The rest is doled out in cuts -- some explicit, some not so explicit -- to technology and data providers, as well as to agencies.
Altersohn said the goal of the initial study is simply to understand when, where, why and for how much those cuts are taken in the conventional programmatic buying process, but that once some benchmarks and norms are established, the alliance hopes to uncover even more opaque practices, such as rebates and compensation made to agencies before or after the fact in the form of business agreements between the agency and programmatic suppliers in order for them to qualify as “preferred providers” used by the agency or trading desk in the first place.
The timing of the study couldn’t be better, following disclosures at the Association of National Advertisers recent media conference and going into next week’s ANA Advertising Financial Management Conference in Phoenix. While such trade practices have always exist in some form, Altersohn and Leary say they are reaching a new fever pitch, because programmatic technology has created so many new loopholes and processes where new margins can be extracted.
It is an issue of concern, they say, that is tantamount to other recent concerns among marketers such as fraud, malware, non-human traffic and non-viewable traffic.
“It is time to shed light on the programmatic advertising industry,” Leary said of the project’s goal, adding that it should lead to “greater transparency within programmatic buys by enabling our clients to see exactly where their dollars are going. This is important because marketers deserve to know more about the transactional value chain so that they can properly assess the value they’re getting in return.”
Among the study’s explicit outputs will be an analysis of the percentage of programmatic media buys that go to “working” and “non-working” media budgets, meaning how much goes toward actually procuring the audiences the advertiser is using programmatic exchanges to reach.“The programmatic markets are already a hundred times the size of the NASDAQ in terms of volume, and growing quickly,” says Altersohn, referring to the number of trades processed, not dollar volume. “Without real price transparency this market will hit a ceiling before its full potential is realized.”