As seen on AdNews

By Stephen Wright, Programmatic Media

The programmatic industry remains more insular than other areas of media. Few advertisers were in attendance and based on a quick ‘hands in the air’ survey most of these advertisers seemed to be managing programmatic themselves.

Less well informed advertisers seeking to broaden their knowledge base were in short supply and herein lies a problem that is holding back programmatic.

There is a poor understanding of programmatic amongst marketers and a lack of trust. This deters new advertisers from engaging and for those already engaged there is an unwillingness to ‘look under the bonnet’ for fear of what they might find.

These fears are compounded when they read about one of the worlds largest advertisers P&G experiencing major issues with ad fraud and overcharging by their agency partners.

The summit discussed verification at length and industry wide moves to standardise measurement and crackdown on fraud are afoot, but only Dylan McBride of AppNexus talked directly to the issue of overcharging and the massive price differential between the sum received by the publisher and the amount paid by the advertiser.

He maintains it is commonplace for publishers to receive around 40% of the price paid by an advertiser and that this could be as low as 30%.

From an advertiser perspective these numbers represent markups along the way of between 150% and 233% of the raw inventory cost.

Dylan points out that these practices can no longer continue but a solution to overcharging is far from simple.

The reasons for overcharging are many and vary case by case. Here are seven reasons why advertisers are overcharged for programmatic media.

  1. Because they can’. In many instances it’s nothing more than agencies preying on limited advertiser knowledge and a lack of any tangible pricing mechanism. It’s a short term grab for cash before Advertisers get wise.
  2. Programmatic propping up the relationship. The media agency and advertiser may have a broader arrangement that has been squeezed too hard by procurement. Programmatic becomes the area where balance is restored and an appropriate level of overall remuneration is achieved for the agency to remain profitable.
  3. The separation of the trading desk within multinationals. Many mainstream advertisers rarely see the programmatic people who are deliberately kept at arms length from the marketing team. The marketing team remain confused by the programmatic area, the difficult questions aren’t asked and things roll on as before.
  4. Contracts don’t cover programmatic. Very few advertisers have a contract that provides the capacity to audit programmatic activity and check on pricing. Contracts exist with the media agency alone. The trading desk is a separate entity and what the trading desk pays and oncharges is privy to them alone.
  5. Middlemen. The industry has evolved with a wide network of middlemen. These middlemen all take a cut and the price to the advertiser goes up accordingly. In some instances they take money from both the agency and publisher for their role. The value and benefit of many of them is questionable.
  6. Programmatic perceived as embedded. Advertisers use the trading desk of their agency partner and are unaware that they can appoint another partner in the programmatic space. They are told that the agency’s trading desk buys efficiently and uses the very best technology and never put these claims to the test in a competitive scenario.
  7. Poor reporting procedures. The industry relies too heavily on self assessment. Independent verification is far from commonplace. Advertisers are relying solely on their suppliers to confirm that things are looking good. Yet to hear of an agency calling itself out for poor campaign delivery and overcharging.

Overcharging impairs the efficiency of programmatic, undermines the trust of existing advertisers and scares away new advertisers…but it doesn’t have to be this way.

The summit was packed with examples of clients who have seen a tremendous return. The full benefits and value of programmatic need to be made available to every advertiser for the industry to realise it’s potential and transparency is a key step in this process.

Stephen Wright works for Programmatic Media, a new independent agency established on a platform of transparency and integrity.