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Are we entering adtech's era of accountability?

Are we entering an era when it's no longer necessary to inspect the small print in adtech contracts? / Pixaby

When it emerged that the Guardian was suing Rubicon Project (an adtech outfit that professes to be the friend of publishers) for non-disclosure of fees, the potential problems posed by adtech were spelt out. The Drum consults various sources to gauge how relationships between adtech and publishers will likely pan out.

The more recent news of the breakdown of Rubicon Project's subsequent relationship with premium publisher alliance Pangaea has further underlined the extent of the adtech fallout, according to some. And the consensus among industry sources is that many outfits currently offering programmatic services will have to pivot their business models, or at least be more clear on how they earn revenue.

The ad industry's transparency trials

The Guardian's dispute with Rubicon is arguably the latest episode in an industry-wide move towards gaining increased transparency over just how ad dollars are channeled throughout the media supply chain, and who eventually pockets what?

The touchpaperof which was ignited by last year’s contentious K2 report for the Association of National Advertisers (ANA), which found “non-transparency business practices” to be widespread in the form of rebates between media agencies and, what sources claim, are other parties in the supply chain.

Although the claims in said report were widely contested, the extent of the misgivings it helped spark were laid bare at this year’s IAB Leadership Summit, where Procter & Gamble's brand chief Marc Pritchard, voiced his intentions to review all of his agencies’ contracts with third-party vendors.

This was later underlined by a World Federation of Advertisers (WFA) survey which found that 90% of its members would do likewise with regards to their agencies’ associated trading desks.

Add to this the pre-existing concerns around the viewability of ads served online, performance measurement issues around the industry’s ‘walled gardens’, as well as reports claiming that almost 25% of all digital ad spend is collected by fraudsters, and the need for further scrutiny is achingly apparent.

The spread of concern throughout the industry

The contagion of this distrust has not been contained within brand-side marketers (or their representative trade bodies), with agencies beating their chests when it comes to demands for Facebook and Google to providemore transparent advertising.

Even demand-side platforms (DSPs which have historically been seen as the black-box operators of the adtech sector) are beginning to apply pressure to supply-side platforms (SSPs) to ensure the quality of inventory they offer is of a required standard.

John Gentry, OpenX, president, says much more publishers are now asking questions around control of their inventory, and transparency around fees.

He adds that the trend towards publishers embracing header bidding technology is indicative of this trend (whereas previously they would have used programmatic technologies to trade remnant inventory).

“What we’re seeing more of an emphasis on quality,” he says. "A lot of the DSPs were also starting to look at quality of inventory, and many of them [if they were working with multiple SSPs]... a lot of them would see 10 different bid requests for the same impression," he explains.

Such a scenario could result in a scenario where those using the platforms could find themselves inadvertently driving up the cost of the media they were attempting to buy, as they’d often find themselves countering their own pre-existing bids with a higher offer, he adds.

'Blind is out'

Also addressing these concerns, Jason Kint, chief executive officer of Digital Content Next (a US-based trade body representing premium publishers) draws reference to how those on the buy-side of the industry have to be wary of where their ads appear. This is especially if the proposition contains user-generated content, a danger highlighted in the recent Times of London investigation into brand safety.

He adds: “Blind programmatic is out. The entire supply needs to get in line with the drive for transparency into where their ads and investments are flowing especially if it's on user-generated content like much of YouTube. Ultimately, if you're not acting in the marketer and publisher best interests, the only two brands that matter to the consumer, you're going to be quickly left behind.”

Jana Jakovljevic, IPONWEB, vice-president of business development, North America, says that it's only when all programmatic fees are fully disclosed can publishers truly assess if they are being fairly rewarded, or falling victim to the infamous ‘adtech tax’.

She adds: ”By and large, SSPs provide service, and create value for both the buy- and sell-side. It’s essential that both parties fully understand the business model of the partners they work with. In light of this case, publishers will (and should) start asking more questions and demanding greater transparency from their vendors. Questions like: ‘what is the publisher fee?'; 'Is there a buy side fee?'; 'Are these flat or variable fees?’”

'You can't blame it on the small print'

To some, the prevalence of opaque business models in the early days of the adtech industry was born out of the fact that it was initially spurred by venture capital eager to gain as quick and high an ROI as possible. This often forced company founders into unsustainable business models that were not always focused on long-term value.

“I think you’ll start to see a lot of people turn around and say: ‘I don’t want to read your contract’s small print’. One of the good things about what’s happening now is that you’re going to see everyone – brands, adtech companies, publishers and agencies – have to step up when it comes to transparency,” according to one supply-side source, speaking to The Drum upon condition of anonymity.

Jeff Hirsch, chief marketing officer at PubMatic, also believes that it stands to reason that publishers may choose to re-examine their existing contracts, or scrutinize new ones to a greater extent than previously.

He anticipates a return to more direct relationships between publishers and advertisers where they negotiate deals, and then execute them with adtech, thus bringing in the benefit of automation.

“Interestingly, we have also been in discussions around alternative pricing models more akin to how software companies might charge. This is in line with how we see our value proposition to publishers evolving as well,” he adds.

Evolve or die

Such an evolution will require adtech companies to evolve from the earlier business models which prevailed at the dawn of the adtech era.

Hirsch agrees with OpenX’s Gentry that the emergence of header bidding wrappers, and their growing popularity with premium publishers is indicative of a new era in adtech, one where transparency is key.

“As our industry continues to evolve, it’s becoming clear that the ad exchange is no longer a viable business model—as various companies’ recent financial results illustrate,” he says.

“This is at least in-part due to the growth of header bidding and wrappers, which allow publishers to run their own ‘mini exchanges’ and maintain control over ad decisioning. Companies whose businesses hinge solely on the old exchange models — arguably even SSP point players — are likely to continue to face challenges,” he explains.

“Adtech companies that can offer a broader range of solutions, including optimization tools and analytics, in addition to standard SSP functionality like open market RTB and PMPs [private marketplaces], will see the greatest success as the industry continues to evolve. Essentially, adtech companies need to focus on innovating and providing publishers with the technology they need to run their own exchanges successfully if they want to remain relevant in the years to come.”

A new chapter is about to open

Amir Malik, outgoing head of programmatic at Trinity Mirror (who is about to head-up Accenture’s first party data trading desk operations) offers his opinion on how the recent moves herald the closing of a significant chapter in the history of adtech.

“A new one is about to open, and what we’ve seen recently is the need for transparency,” he adds. “We’ll probably see some companies go by the way-side, but what’s clear is that new models will emerge.”

For Wayne Blodwell, chief executive of The Programmatic Advisory, and chairman of The Drum’s upcoming Digital Trading Awards judging panel, this doesn’t mean all doom and gloom.

“Inevitably different companies will feel the force of these consequences in different ways and it’s important to recognize that these challenges are not solvable overnight," he adds.

“We are fortunate to work in an amazing and dynamic industry, but for it to stay that way there are some wholesale corrections and changes we need to make to enable sustainability.”

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Ronan Shields

I cover digital media trading and martech for The Drum magazine, plus I write my own opinion pieces, I don't really commission them.

All by Ronan