Programmatic has long faced a transparency problem — not just in terms of fraud, but with the murkiness of agency and vendor pricing models as well.
At this morning’s AD-Vantage Programmatic Trading conference, transparency quickly emerged as a theme.
In his keynote, Ian Hewetson, vice-president of client services for Eyereturn, called transparency the “Achilles heel” of programmatic. The ideal scenario for online marketers is a high level of transparency in both media they buy and the price they pay, he said. Marketers want to know where their ads are landing, how much they’re paying and who’s getting the check.
But that can be next to impossible with so many layers in between the marketer and the media, and so many players taking a cut.
Marketers are starting to hear more about arbitrage, a practice where a media agency or network buys bulk inventory at low prices and resells it at a markup. Arbitrage remains commonplace across the industry.
“Arbitrage is not necessarily a bad thing. It’s how the world works — buy low and sell high,” Hewetson said. In the ad world, pre-buying large amounts of inventory at low prices ensures that advertisers can deliver a full campaign at reduced prices.
“But one of the big cons is that once you own the inventory, your prime consideration is to unload that inventory. So if you’re on the buyer side, you can end up buying the inventory because your [intermediary] has the inventory on their hands and wants to get rid of it.”
The problem isn’t exactly new to media. In fact, the discussion about publisher rebates for agencies is still very much ongoing. But in some ways, programmatic makes it easier to brush these kinds of practices under the rug.
The same problem arises when a technology vendor doubles as a media owner. Even if a media company claims its technology is neutral, there will always be a suspicion that it’s privileging its own impressions.
Hewetson compared the situation to Ontario’s controversial Beer Store chain. The Beer Store — which is co-owned by three multinational beer companies — posts a list of its Big Ten beers in each of its locations. “Are the Big Ten the most delicious, succulent beers in the store? Depending on your taste, they could very well be,” he said. “But what you can guarantee is that each and every one of those brands is owned by the store.”
In just the same way, media owners that “control the pipes” can shift the focus to their inventory, even if it’s surreptitious or unintentional. “By controlling the process, you can really manipulate the market,” he said.
Marketers should even be wary of non-media-owning tech vendors that try to “cross the aisle” between publisher supply and advertiser demand. A platform that operates both as a supply-side platform and a demand-side platform [glossary: DSP] has to juggle incompatible imperatives: minimizing the advertiser’s cost, and maximizing the publisher’s yield.
Hewetson warned that with such platforms, pricing also becomes an issue, since there’s often markups on both sides. The publisher markup, though often not disclosed to buyers, is still extracted from the media dollars the buyer spends.
He went on to outline even more nefarious — but not outright fraudulent — practices that players throughout the ecosystem can use to penny-pinch advertisers.
‘Soft’ floors
One method, called “soft floors” or “dynamic floors,” is used by exchanges and networks to pile fees on top of the buyer’s auction bid. Typically, when a programmatic buyer places the winning bid in a real-time auction, they pay the second-highest bidder’s bid, called the clearing price. With dynamic floors, the marketplace can wait until after bids are placed and then set the minimum clearing price higher than the second bidder’s bid, forcing the buyer to pay an extra few fractions of a cent.
Although on a small scale it’s but a tiny difference (and remarkably hard to detect), on the scale of 100,000 or a million impressions, those fractions add up.
Non-disclosed audience extension
Sellers and publishers often use audience extension to supply extra impressions to buyers when they run out of inventory to sell. It works by using data to target the publisher’s visitors on other sites on the web. Generally speaking, this is an accepted way of meeting the buyer’s scale requirements, but the problem arises when sellers decide to use audience extension without telling the buyer.
Where it breaks down, Hewetson said, is when the publisher promises a certain amount of inventory and delivers it on other sites without the advertiser’s consent or even awareness. They may be running on sites all over the web, even though the publisher is still paying a premium CPM to be on their site.
“We do see this happening,” he said. “As a buyer, you have to be aware of these types of things.”
The moral of Hewetson’s talk seemed to be that there are a thousand and one ways to get swindled in programmatic. But as the head of client services for a programmatic vendor himself, he does still think there’s a lot of value in it, as a means of reaching the right audience at the right time for the right price.
The problem is when advertisers don’t care about transparency. Hewetson said marketers and agencies have gotten used to not taking these kinds of issues seriously, since for a long time programmatic has been focused on low-cost remnant inventory. But with more premium inventory being sold through programmatic, the scale of the problem. and the dollars lost, is growing.
