Study Finds Only 40% Of Digital Buys Going To Working Media

Despite current concerns surrounding transparency issues such as fraud, non-human traffic and “viewability,” demand-side budgets for programmatic ad technology are expected to expand, according to an analysis released late Thursday by Technology Business Research (TBR).

The analysis, which is based on a TBR survey of 240 ad technology users in North America and Western Europe, estimates that only about 40% of digital advertising budgets are currently going toward “working media,” and that the second-biggest allocation -- 31% of budgets -- is going to pay for technology used to process those media buys. Only 29% of the budgets are going to pay for agency services.

While the so-called digital ad “technology tax” isn’t surprising -- sources as varied as LUMA Partners’ Lumascapes analyses have estimated that only 40% of budgets go to working media, and others have claimed it is as low as 20% in some situations -- the TBR analysis shows the proportion going to agencies services as well as technology.

TBR said 48% of ad technology users said they are allocating budgets to demand-side platforms, or DSPs, for “direct-to-publisher” ad buys, but it did not provide an estimate for how much of it was being spent on secondary channels, such as advertising networks or audience exchanges.

The conventional wisdom over the past several years is that big agencies, trading desks and big publishers have been gravitating toward so-called “private marketplaces” in which they use programmatic technology to automate and facilitate media buys directly with publishers -- but various other sources, including Interpublic Mediabrands’ Magna Global, continue to estimate a significant share of spending is being allocated to non-direct-to-publisher channels, such as open RTB.

Separately, TBR estimates that 45% of ad technology users currently are spending budgets on “marketing attribution tools."

“Although the ad tech market is still nascent and fragmented, marketing cloud vendors, social media heavyweights and enterprise pure plays are beginning to take dominant positions,” the TBR analysis notes, adding: “As digital advertising formats capture an increasingly larger proportion of global ad spend, the infrastructure, intelligence and ROI ad tech platforms deliver become strategic pillars for brands.”

For some perspective, TBR Senior Analyst Seth Ulinski noted that the study is based on estimated ad budgets for 2016 and covers companies sized from 500 to 1,000 employees, 1,000 to 5,000 employees and 5,000-plus employees.

12 comments about "Study Finds Only 40% Of Digital Buys Going To Working Media".
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  1. Cliff Campeau from AARM , March 4, 2016 at 9:42 a.m.

    The working/ non-working imbalance continues to be a challenge. With only 20% to 40% of their digital investment going to working media, advertisers will eventually step back and reassess alternate approaches to optimizing their digital media spend or will eventually reallocate those dollars.

  2. Henry Blaufox from Dragon360 replied, March 4, 2016 at 10:29 a.m.

    In response to Cliff Campeau - or the in house marketers will pressure agencies to reduce fees, take some of the work in house, and lean on the techroviders for lower rates (especially if they apply their staff smarts and corporate IT resources to measuring results from the providers, so they can negotiate wisely based on data about what is effective and what isn't.)

  3. Seth Ulinski from Independent Analyst and Consultant, March 4, 2016 at 10:59 a.m.

    Cliff -- While there is room for tech rationalization in some cases, I think it ultimately boils down to ROAS/ROI. In addition to marketing platforms and enterprise tech co.'s we are seeing publishers and agencies acquire ad tech because there is value and they are looking to capture more of the digital ad value chain. Many strategies are now data-driven and/or audience-based with the media viewed as 2ndary.

  4. Matthew Greitzer from Accordant Media, March 4, 2016 at 11:46 a.m.

    Joe, setting aside the Publisher’s perspective here, the concept of “working media” is really misleading in the programmatic marketplace.  It assumes all media are equal (which they aren’t), and that more “tonnage" is better (which is isn’t).  What’s more, the "working media" concept totally ignores the real, added value that technology plays in the programmatic landscape.  The whole point of audience-based buying is that, through data and technology, the buyer can better select the specific ad impressions most relevant to their efforts.  Technology is the means to this end.  Put another way, without technology you can probably get 80% of your dollars going to the end-publisher (after agency fees, ad serving, etc.). You also get 50%+  waste.  With technology you may only get 60% of your media going to the end publisher with 0% waste.  The second option is 50% more effective! 

  5. Ben Glaze from Nitorum Capital replied, March 4, 2016 at 1:34 p.m.

    How is waste defined?  If someone that wants to target an audience finds them on a site that they're totally unengaged in or is inconsistent with their brand message despite their target audience being there, is that waste or would that be considered not waste in your example?

  6. John Grono from GAP Research, March 4, 2016 at 7:07 p.m.

    To echo Ben's comment, and to paraphrase Prof. Byron Sharp's book "How Brands Grow" ... one marketers waste is another marketers new customer.

    Micro-targetting might be good for short-term sales objectives, but constantly replenishing the pool of customers is the long-term lifeblood of a brand.

  7. Adam Kleinberg from Traction, March 6, 2016 at 11:37 p.m.

    It is laughable to see people stuggling to justify this in the comments. I wrote an op-ed in Ad Age a few weeks ago saying that ad tech was the worst thing that every happend ro the ad biz ( and got similar pushback. The ROI and ROAS arguments belie the big picture. The digital ad industry made a promise to marketers — you're not going to have to accept the waste of traditional media any more. That promise has been broken. The value of that lost trust will have a huge cost for this industry than will be played out for years to come.

    Adam Kleinberg

  8. Seth Ulinski from Independent Analyst and Consultant replied, March 7, 2016 at 9:31 a.m.

    To an extent, I agree there is still "waste" (again, it's all relative) but keep in mind the industry is still nascent compared to traditional formats such as radio/TV/print. Growth of digital ad spend continues at 15%+ YTY and will accelerate with linear TV viewership transitioning to digital channels. Marketers will ultimately go where there are eyeballs. The advent of ad tech and advanced attribution tools is helping some organizations in N. America and W. Europe shift the marketing function from a cost center to a profit center.

  9. Andrew Eklund from Ciceron replied, March 7, 2016 at 10:12 a.m.

    In total agreement with the promise being broken. And, frankly, the digital industry did it to itself when the mathematicians went crazy on excess (waste!) inventory, raised billions in VC, and did the moonwalk all over the market. Think about that. The RTB space spawned much of the programmatic industry. RTB was based on mostly junk inventory. So that sector of the ad tech market only had one way to go to -- up towards quality. It didn't start with the good stuff. That stuff was sold by handshake. Now, it's interesting. People are grooving on the ease of the new platforms but still hatin' on the quality of inventory. Truth is, that's why I waited until only last year to even get into the space with our own method. I didn't want to muck around in the crap. The good from the bad is getting weeded out, and the inventory is moving towards the survivors. The question really is when and where enough of the good inventory (private marketplace?) is available. 

  10. Randall Tinfow from CLICK-VIDEO LLC, March 8, 2016 at 1:43 p.m.

    When numbers are reported for ad spend, such as $77B for digital ad spend on this page ( does that refer to the cost of the "working media" or does also that include the costs of the ad-tech intermediaries and agency creative fees?


  11. Seth Ulinski from Independent Analyst and Consultant replied, March 8, 2016 at 3:21 p.m.

    Randall, great question. I read this as general ad budget allocation, not working media (I'm sure the folks at emarketer would be happy to confirm).

  12. Ken Nicholas from VideoAmp, March 26, 2016 at 7:48 p.m.

    To Matthew Greitzer's point, some here are seemingly de-valuing the 'media' concept in two ways, with this analysis: [1] presuming that the 'working media' will in fact actually 'work' as well without the highly maligned adtech layer being apparently imposed upon it as I'm reading, and [2] by implying that the added services are a "tax" or are a "waste", sounds punitively like they have little or no value to them. Really? When you buy a new car, do you not think the new tires on that car [or the headlights, or the Drive train] were marked up by the OEM before they were put on? You'd rather have your new car towed to the Tire store on a flatbed, so you can buy them a different way, with no "waste"? [How much is that tow truck going to save you, even with AAA?] That's kind of the argument I read here, in one sense. 

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