The World Federation of Advertisers (WFA) has released a set of guidelines to help brands better tackle programmatic ad trading and combat transparency and arbitrage issues, while unveiling Coca-Cola, Mastercard and Philips as members of its programmatic ‘taskforce’.
Other members revealed to be part of the taskforce, which began unofficially last year, are Boehringer Ingelheim, Deutsche Telekom, GlaxoSmithKline and Johnson & Johnson (see details of individuals below).
Their remit will include driving understanding, education and “interrogation” in the programmatic environment to ensure the channel can be used “without reservation” and with “full visibility and understanding” of the whole value chain, according to the WFA.
The guide outlines key steps brands can take to bolster their return on investment in programmatic ad trading market, ranging from advice on what kinds of questions to ask suppliers, to the more complex process of negotiating individual contract terms and choosing the right technology stacks.
The WFA has issued the guidelines (detailed below) off the back of research it conducted across 43 of the biggest spending marketers, across a broad spectrum of verticals, which account for a combined, global annual spend of $35bn (£21.3bn).
All brands surveyed showed that they have doubled their investment in programmatic ad trading year on year, with 10 per cent of their total digital media investment now going through programmatic channels – 44 per cent of which is targeted at online display advertising.
Meanwhile respondents also specified they expect programmatic to account for a “significant” chunk of their digital budgets in the next year, with 83 per cent citing video as a major growth area in this space and 77 per cent predicting rises in mobile activity.
However, the report revealed that there is work to do to cut out the money flow issues in the programmatic supply chain, with more than half of advertiser fees going to middle men rather than direct to the publisher (see graph below).
“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. There needs to be clarity in the value chain otherwise clients will continue to question the validity of the digital buy.” Mark Butterfield, head of global media, Boehringer Ingelheim.
As a result of the lack of visibility provided to advertisers by agency trading desks into the details of the area, and due to the “reluctance to divulge information” around cost structure and business model, 76 per cent of advertisers regard trading desks as less transparent than traditional direct-sale trading, according to the report (see image below).
“One of the immediate opportunities programmatic offers advertisers is the potential to cultivate a culture where commissions are focused around rewarding carefully selected best-of-breed value-add partners. Better management of the suppliers involved in the value chain can immediately yield improved visibility and ROI for the advertiser”, said author of the report Mikko Kotila.
The report has listed the core transparency issues encountered as:
“These three aspects are inherent to the current agency trading desk model for reasons within and beyond their control.
“Exchanges are not making the pricing information available; the demand-side platforms (DSPs) are not disclosing the way their bidders work and many publishers don’t want their inventory to be disclosed. Conceptual solutions to these problems do exist, but agency trading desks are mostly not equipped to tackle these issues with the systematic rigour demanded,” said Kotila.
Meanwhile another major cause for advertiser concern highlighted in the report is where an agency trading desk buys impressions upfront and then sells those same impressions to the advertiser via programmatic channels, raising questions over the neutrality of the recommendations made by the trading desk.
Advertiser uncertainty over whether those impressions are then sold on at marked-up prices – a practice known as arbitrage – has caused further concern, according to the report.
“While it might be argued that ‘arbitrage’ is acceptable if clients are getting improved results and value from their media compared with the ‘traditional’ way of trading, in reality, very few advertisers see it this way,” said Kotila.
The majority (85 per cent) of advertiser respondents have stated that ad misplacement remains a major concern in the programmatic trading landscape.
Meanwhile an average 20 per cent of all online display and mobile ad impressions have been deemed "invalid" as a result of not being visibile to consumers or generated by non-human bot traffic,according to the report.
The industry must therefore hunt for new ways to reduce the number of invalid impressions to a "feasible minimum", according to the report.
“I personally believe that the 50:1 guideline (50 per cent visibility for one second) is the absolute minimum and only a starting point for our industry. Advertisers need to gauge what the right viewability baseline is for their individual marketing requirements” Gerhard Louw, media management, Deutsche Telekom.
More than two thirds (69 per cent) of respondents have already engaged with programmatic trading via open exchanges and real-time bidding, while 42 per cent have also used private exchanges with fixed prices. A total 31 per cent have participated in invite-only auctions on private exchanges, according to the report.
Although agency trading desks (ATDs) remain the most dominant players in terms of usage with 69 per cent of respondents opting to use them to run programmatic campaigns, they saw a 15 per cent drop in usage from 81 per cent year on year.
Independent trading desks (ITDs) and demand-side platforms increased in popularity, rising from 8 per cent of brands using them to 30 per cent year on year. Just 2 per cent of respondents have tried or tested an in-house equivalent – the same figure as last year, according to the report.
However, respondents who were totally satisfied with their ITD fell from 20 per cent to 4 per cent year on year.
Independent trading desks have overtaken agency trading desks (ATDs) in terms of usage, tripling year on year to 30 per cent, while use of ATDs fell 15 per cent, according to the report.
Issues over data ownership was also revealed as a major issue, with half of respondents unhappy with the way data is captured, stored and used.
However, it also highlighted that more brands had taken back control of their data, with nearly 60 per cent of respondents saying they have taken ownership of data generated programmatically – up from 33 per cent in 2013.
The survey also found that 36 per cent of respondents are now using a data management platform compared to 20 per cent in 2013.
The WFA has outlined that even small changes to an existing system can deliver major improvements in terms of data ownership and marketing performance.
See below for the WFA’s core takeaways for brands looking to capitalise on their programmatic activities:
The full report can be downloaded here.
Gavin Mehrotra, director of global media for Coca-Cola; Sital Banjeree, global head of media for Philips, Mark Butterfield, head of global media for Boehringer Ingelheim, Ben Jankowski, group head of global media for Mastercard, Gerhard Louw, International Media Management, for Deutsche Telekom, Sameer Signh, VP and fglobal media head for GlaxoSmithKline, and nick Sparey, VP of procurement, Global Integrated Marketing for Johnson & Johnson are the members of the WFA Progammatic Taskforce.