Information asymmetry, restricted vision contracts and a supplier-dominated programmatic chain are all hindering advertisers. PJ Leary picks out three highlights from the ANA’s Programmatic Media report.
Like any good story the ANA’s Programmatic Media Supply Chain Study revolves around some key themes. The authors take special care to emphasize and illuminate findings that are deemed particularly important to their narrative.
For example, they don’t miss the opportunity to hammer home the concept of information asymmetry, an imbalance in the nature and quality of information possessed by different parties in a transaction.
It’s a key observation with massive implications for the challenges that exist within the programmatic supply chain today.
As the study points out, “there are strong characteristics of information asymmetry in cases where sellers typically have more or better information than buyers about the quality of media inventory being sold in auctions. If buyers are unable to properly access the price of the goods in question (i.e., programmatic inventory and audiences), they tend to overpay. If buyers are unable to know enough about the underlying quality of the goods being sold, particularly in auctions, they cannot know how to price it with any precision or certainty.”
When A Stranger Calls
However, as global risk advisory and intelligence firm Kroll notes from their work on the study, the imbalance in the nature and quality of information possessed by different parties is both an external and internal issue for advertisers.
In other words, it’s not just present as advertisers engage with outside suppliers but also internally, within the marketing, media, procurement and legal teams.
Like the memorable scene in the horror movie ‘When A Stranger Calls’ (the original from 1979), the call is coming from inside the house!
This is fueled, the report goes on to say, by a “complicated, decentralized, highly technical system comprised of many disparate players that has and is subject to minimal oversight or regulation."
As any subject matter becomes more technical in nature it divides the room. Those that know, appreciate and truly understand the technicalities grow tired of explaining it to those that can’t be bothered (perhaps) or gain career or financial incentives to keep their knowledge to themselves (probably). And those that have a vested interest in knowing more are too busy (excuse) or too fatigued (more likely) to spend the time asking better questions.
As Kroll notes: “it would not require a herculean effort for advertisers to simply be able to ask better questions and give better direction to their agencies. Clearly, advertisers do not always have the time or resources to become experts in the space. However, this is not an excuse for advertisers to avoid acquiring even a minimum level of strategic knowledge."
The Contract Carousel – One Revolution Only
Lack of insight into downstream partner contracts contributes to an inherent information asymmetry.
In a simplified landscape, the Advertiser has a contract with the Agency and gets full visibility into those terms and conditions. But that’s just one revolution, then they have to get off the carousel. This is because they lack the contractual right to go further, if they haven’t attempted to forge direct contractual relationships with downstream partners or they don’t want them.
The next carousel is the Agency + DSP; this contract is often negotiated by the Agency acting as a principal and governs all agency-client engagements. This approach may severely restrict individual advertiser rights but it may also be a “one-revolution” ride on the carousel for the Agency.
The DSP has a contract with the SSP and the SSP has a contract with the Publisher, each a one-revolution carousel.
If the advertiser is unable to ride all the contract carousels as they travel downstream, then they will always face an uphill battle in the transparency game.
Where Does One Draw The Line?
There is one really significant observation in the First Look report that stands out even more, however, not because it has never been uttered before but because it was stated so plainly and seemingly not for effect.
It appears in an illustration that supports the information asymmetry point on page 20 of the report.
The illustration is intended as a simplification of the supply chain, detailing the Advertiser on the left side (followed by Agency, DSP, SSP) and the Publisher on the far right hand side (with Ad Verification to the right of Publisher, a further complication but that’s a quibble).
The illustration draws a line to delineate the Buyer and Seller. That line is drawn between the Advertiser and the Agency. That’s right. And worth restating….The ANA puts the Agency on the side of the Seller rather than the Buyer. The accompanying note states, “Some brands don’t fully understand when their agency is acting as their agent or as a principal, and the implications of that.”
Which is a fair point and one also made in the 2016 ANA Media Transparency report on rebates.
We are certain that many agency leaders would take issue with this demarcation and would be offended by the implication that the client's interests are not at the forefront of their negotiation strategy.
Tom Triscari, a Programmatic Economist with Lemonade Projects and a key architect of the ANA study, has an eloquent way of defending it that goes right back to the balance sheet: The only party that declares the Advertising investment as an expense is the Advertiser.
Every single other party, including the agency, books it as revenue. Therefore, when you follow the money and how it’s accounted for in financial terms, it becomes clear that the only true ‘buyer’ is the Advertiser.
In effect, this a shift from a demand side-led advertising industry to a supply-side dominated one. As that shift has solidified, it has also redrawn the line. A line that now appears to have irrevocably separated the Advertiser and the Agency.