Time to tear back the layers of the programmatic onion!

Wayne Blodwell, chief executive of The Programmatic Advisory, reflects on recent reports on marketers' levels of dissatisfaction with levels of transparency in programmatic media tradings, and suggests some likely outcomes.

'Non-disclosed models are in decline,' says Wayne Blodwell

If you’re reading this article you don’t need me to tell you that pricing in programmatic has been a hot discussion over the past three years. Transparency has been top of the agenda: the WFA first reported in 2014 that 79% of advertisers were dissatisfied with the level of transparency in their programmatic buys, and this dropped slowly to 71% in 2016 – a long way to go to get full satisfaction.

A recent report from the ANA stated that 35% of brands have in-housed their programmatic activity in some form. This hasn’t been driven entirely by transparency, but it certainly has been a major catalyst.

So transparency in programmatic is on the rise and non-disclosed models are in decline. That ‘can of coke’ or ‘you pay for results’ argument is slowly starting to fall flat on its face for the largest advertisers (some of the longer tail will continue to operate on a non-disclosed model for quite some time).

Transparency has many layers – the programmatic onion

Previously in programmatic, all of the above layers of cost would be bundled into a CPM, CPA or CPC – for example, an advertiser would book a campaign with a programmatic provider at £2 CPM with a minimum spend of £10k per month and all of the operating costs are covered. Now, slowly, the costs are being unbundled from top to bottom of the programmatic onion. During this unbundling process, some of the people, contracts and relationships are shifting from 3rd parties and into advertisers themselves.

The first step we at The Programmatic Advisory have seen from advertisers taking more control is definitely in the platform technology fees layer. An example of two clients who are doing that is Betsson Group as well as Deutsche Telekom who we have worked with in 2017. Advertisers are going through processes to understand what technology is required and suitable for their specific needs and negotiating costs and contracts directly with the selected providers. These processes can be cumbersome and lengthy but ultimately holding 1:1 relationships with data collectors and transaction platforms is incredibly beneficial in a post-GDPR world for discerning advertisers as well as a great way to create competitive advantage.

The second step we have seen advertisers taking more control of is resource. There has been a huge rise in the need for Head Of Programmatic roles at major advertisers – typically these have been global advertisers who operate centrally. There have certainly been some local hires across EMEA and more so in the US, but generally centrally operated global brands are those who have taken greater ownership of programmatic and are disseminating the knowledge and approach out globally.

Where does programmatic pricing end up?

Ownership is shifting and I would not be surprised to see more brands have contracts with targeting providers (especially brand safety!), data providers, sellers and even publishers. Understandably this is difficult to navigate and advertisers should lean on their third parties to help them secure the right deals and relationships. Side note – third parties must be open to these types of conversations with their clients.

Beyond ownership, I fully expect the relationships with third parties to no longer be based on spend volumes as that automatically misincentivises third parties to stretch the rules of the game and instead will be transparent fixed cost models. Realistically we’ll see this happen with resource fees, but longer term we’ll see tech companies move to a true SaaS model and tiered based on use (like Beeswax currently offer) and away from a percentage of spend model. We can also expect publishers to demand this on the sell side with their sellers.

I’m not naïve enough to think this will happen overnight. In fact, the current model is so beneficial for the middle men it’s difficult for it to change at scale, but as industries mature cost versus value gets better realised.

Once there is contractual transparency, operational transparency and supply chain transparency through better buying practices which aren’t predicated on spend volumes then that ‘murky supply chain’ is all of a sudden much better for the smarter advertisers. Better being the key word as this shouldn’t be cheaper per se, but certainly more efficient.

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