The World Federation of Advertisers has released a member survey on programmatic advertising, and one thing is very clear from the responses: advertisers are not happy with agency trading desks (ATD).
Of 41 multinational advertisers surveyed, not a single one said they were completely satisfied with the service they were getting from their ATD. Since last year’s survey, the number of WFA members that use ATDs has fallen 15% – from a dominant 81% of all programmatic advertisers in 2013 to about two thirds (69%) this year. Of those surveyed, 76% said they found ATDs less transparent than traditional media buying channels.
It’s a change of mindset of the media investor, to start to think with an investment theory that you might more commonly see in Wall Street
Rob Dreblow, WFA
“We have little or no clear understanding of what percentage [of digital spend] is being delivered to the media owner and what is being taken in fees from either the agency or middle men,” said Mark Butterfield, head of global media for Boehringer Ingelheim, in the report. “There needs to be clarity in the value chain, otherwise clients will continue to question the validity of the digital buy.”
Boehringer is part of the WFA’s programmatic “task force,” along with Coca-Cola, Mastercard, Johnson & Johnson, GlaxoSmithKline and Philips. The committee was formed last year to develop and review guidelines on smart programmatic buying strategy.
Those guidelines were released in a report alongside the survey data, authored by Mikko Kotila, an independent media consultant specializing in overhauling brands’ programmatic operations. The report focuses on how brands can get more transparency out of their agency trading desk partners, and why a more hands-on approach to digital media investment is key to succeeding in programmatic.
The report comes at a time when forecasts predict programmatic will take over most digital (and eventually television) spending in less than a decade. With the rise of automated ad buying, media investment strategy is becoming a growing focus for marketers. Many are re-examining their strategic options, which include moving their business to an independent, modifying their relationship with their agency, or sticking with the tried-and-true approach of letting the agency handle all the decisions.
From media buying to media investment
In his report, Kotila recommends that the key strategy for succeeding in programmatic is to think like an investor. Brands are used to buying media like they buy “utility goods,” products that serve a specific purpose such as a carton of milk or a new computer. Agencies, he says, are set up to facilitate buying large quantities of utility goods – the client sends them an order, and they negotiate its fulfillment with suppliers. The larger the purchase, the more power they have to negotiate.
But a digital impression doesn’t bear much resemblance to a utility good, Kotila cautions. In programmatic media, buyers’ dollars move through several layers of intermediaries, and may or may not end up with the desired product – they could be squandered on fraudulent ads, or they could end up in the wrong audience. And many of those intermediaries take a percentage along the way.
In that sense, it’s less like buying a computer and more like buying a stock in a computer company from an investment broker.
“It’s a change of mindset of the media investor, to start to think with an investment theory that you might more commonly see in Wall Street,” says Rob Dreblow, the WFA’s head of marketing. “Not just relying on buying clout, but having a better understanding of the asset you’re talking about and the market you’re competing with.”
Unlike traditional media buying, programmatic buying is inherently speculative, like trading stocks and securities. In a speculative media marketplace, where spending more doesn’t necessarily lead to a better campaign, success is less about how much you spend than how intelligently you spend it, according to Kotila. To get ahead of competitors, advertisers need to use better data and technology to get more value out of each media dollar. He writes:
“It is the uniqueness of the advertiser’s approach in regards to targeting the right segments, using the right bidding algorithms, and measuring the right things, that provides [an] edge [over competitors]. … Unfortunately the Agency Trading Desk is more or less stuck with running the same, or at the very least similar investment strategies across all of its clients. More or less the same people will operate more or less the same technology. In Wall Street terms that’s called the ‘dumb money’ approach.”
He argues that approaching the media marketplace like an investor means brands have to take a deeper interest in the technology that’s being used to manage their digital campaigns, and whether that technology is giving them an advantage over competitors. Without transparency and control over campaigns, brands can’t step in and ask for a customized media strategy. Brands need to know how their money is being spent before they can make sure it’s being spent smartly.
Save the agency trading desk, or go independent?
Kotila outlines two alternatives to the current ATD model that he says will deliver greater transparency.
The first approach is to switch to an independent trading desk (ITD), a specialized third-party company that manages programmatic buying and sometimes owns the technology used to do it. ITDs that own technology eliminate a layer between the brand and the media they’re buying. And because they tend to be much smaller than agency holding companies, they’re less likely to be working with competitors – meaning they can better customize a brand’s investment strategy.
The WFA’s survey shows this option has proven attractive to a significant number of global advertisers. Of those surveyed, 30% said they worked with ITDs rather than ATDs, up from just 8% 2013. Despite all the media coverage about big brands taking their programmatic “in-house”, they are more likely to be moving from ATDs to ITDs as only 2% of those surveyed actually set up a fully autonomous, in-house trading desk.
For those brands that prefer to work within an agency environment, there’s what Kotila calls a “hybrid” model, where trading is still handled by the ATD but the brand has direct supervision of partners it works with. That means brands have a say in what technology is used on their campaigns and who handles their data, so they can differentiate their investment strategy from other competitors using the same desk.
“Once you’ve got a better understanding, and you’re asking the right questions, there’s a few different routes you can take depending on how much you want to invest in the space,” says Dreblow at the WFA. “A lot of companies still want to work within the confines of their trusted agencies partners. [In that case] the advice is to have more control, of data ownership, and from a contractual perspective as well.”
One big brand that’s adopted the hybrid model is Mondelez, which recently set up a custom partnership with Starcom MediaVest for programmatic video. Although SMG continued to execute trades for Mondelez, the CPG had a direct contract with SMG’s technology provider, TubeMogul. The custom relationship was designed to give Mondelez more control over trading, and to separate its data from other brands under the Publicis umbrella.