OpenX chief executive officer Tim Cadogan has been working in digital media since the late 1990s, and is using his experience of transparency scares in years gone by to position the ad exchange and supply-side platform as a leading voice in a much-needed clean-up of the programmatic sector.
The adtech sector is undergoing a near unparalleled contraction, with the dominance of ‘the duopoly’ plus increased scrutiny from tier-one brands and media owners widely understood to have helped prompt this decline.
Now in its eleventh year, OpenX has just released figures detailing its fourth consecutive year of profitability, with digital media veteran Cadogan also speaking publicly of his plans to spend $25m on improving levels of transparency in the market before 2018 closes.
Commenting on the company’s decade of “straight line growth” Cadogan explains his opinion that investments in “advertising quality” are helping to differentiate the privately held adtech outfit during an era defined by distressed exits and winding up orders.
“I think you're seeing a dichotomy in the programmatic market … on the one hand, people express a lot of concerns about programmatic, and legitimately so, don’t have full trust in the system and not exactly sure how it works.”
Scrutiny as a sign of opportunity
However, Cadogan interprets increased scrutiny from the world’s largest advertisers as a positive sign for the sector, in fact, he points to the profile of the last two IAB Annual Leadership Meeting keynote speakers as indicative of this.
“If you've seen those concerns raised, it’s precisely because programmatic actually is pretty important [part of the media budget] and could become a lot more important,” he claims.
“It's getting much harder for advertisers to reach scale effectively because the audience is fragmented. We all know media [consumption] is much more fragmented, that makes the marketer's challenge a lot trickier, and I think audiences, consumers are a little bit more skeptical of advertising as well.”
For Cadogan, investments in the quality of media inventory available through online ad exchanges, etc, can help tier-one brands remedy these issues giving its targeting capabilities.
“Inherently it has the keys to solve that first problem … if you can do it right, it can enable you to deliver a message more relevant to audiences,” he says.
And an accelerant of consolidation
He further goes on to voice his belief that scrutiny from both the buy- and sell-side of the market is helping to buoy the number of mergers and acquisitions (M&A) in the sector, with his own outfit making two acquisitions in the last 15 months to bolster its credibility in the space during the last 15 months.
Why the world’s largest marketers now care about programmatic
The fact that Mark Pritchard, Procter & Gamble’s marketing chief, as well as his counterpart Keith Weed of Unilever, are publicly proclaiming “look, you guys need to improve this” demonstrates the overall market value that can be achieved through wider market investments.
“Choosing to talk about this topic and that's because it's important and I think sometimes people are focusing on the fact that they're beating the industry up,” Cadogan says. “So I'll take on that, we agree with those concerns, and with the underlying motivation that this stuff matters and could matter a lot more.
“This quality stuff, it works, it can drive growth,” he says, describing how the company had to turn money away over the last 12 months after partnerships with anti-fraud outfits such as White Ops unearthed suspect activity.
The commercial uplift of ads.txt
Of course, growing calls for transparency in the sector are indicative of its growing maturity – as embodied by last year’s ads.txt initiative to combat rampant levels of ad fraud – with the California-based adtech outfit investing $16m in ad quality efforts last year, according to the company’s latest market disclosure.
Discussing spending patterns over the last 12 months, Cadogan points to how increased take-up of ads.txt among publishers on its ad exchange has helped buoy the confidence of tier-one advertisers.
Third-party verification will be necessary for survival
Discussing other industry initiatives such as the Trustworthy Accountability Group (Tag), which recently hired industry stalwart Nick Stringer as its first UK representative, Cadogan speaks of his belief that brands should pay attention to external verification when it comes to ad quality.
Currently, only a minority of Tag-Compliant outfits have been listed as having passed an audit by third-parties (OpenX is among this number) with Tag’s first-tier members granted this status after having passed an audit by BPA Worldwide.
“I think it’s crucial if you want an independent standard to be truly credible and helpful … we had BPA, which is an independent auditor come in and they spend a week and they went through everything and they made sure we will do what we said,” explains Cadogan.
“If you are an advertiser and you only buy [via] Tag-certified [traffic sources] which is proven to be about 500% better in terms of invalid traffic rates compared to non-Tag-certified [sources] and you only buy ads.txt then you are reducing your risk of being defrauded probably by about 90%.”
Opportunity amid the great GDPR question?
Another tectonic shift facing the online advertising sector in the contemporary era is the upcoming General Data Protection Regulations (GDPR) set for enforcement by the EU on May 25, with OpenX keen to position itself as a leader in the space.
With leading voices in the publishing sector voicing doubt over the viability of the recently published IAB GDPR framework – whereby publishers are effectively asked to seek consumer consent for accessing their data on behalf of their supply chain – uncertainty still reigns.
In fact, fear over the implications of GDPR are said to be behind adtech players closing down (or at least suspending) European operations for fear of incurring a €20m fine, or 4% of global revenues, under the terms of the upcoming legislation.
Cadogan recounts an anecdote revealing ongoing levels of uncertainty around the implications of GDPR, explaining that a recent webinar hosted by jointly by Doug McPherson, OpenX’s chief administrative officer and general counsel at OpenX, and its outside counsel Venables LLP generated over 400 sign-ups. “That's pretty mind-boggling and know there were some very big companies on that list,” he says.
“This is why we're doing all this stuff. As we think that there's an opportunity to really get the category through this inflection points.”
How programmatic can learn lessons from search
True to his message of positivity among such headwinds, Cadogan draws on his experience of the search industry which dates back to the late 1990s, which encompasses his time as senior vice president of global advertising marketplace at Yahoo between 2003 and 2008 – a period when that sector of the industry experienced similar levels of scrutiny.
“I've actually lived this sort of thing before … about 2006 search was getting pretty mainstream and not yet fully mainstream and about that time we got absolutely hammered by a lot of reporting around click fraud. There was even a Business Week cover, it was black and red talking about ‘the dark side of advertising’ and it had the Google and Yahoo logos on there, and we were just getting hammered,” he recounts.
Cadogan concludes: “People kind of forget this now as search is now mainstream, and we got through this by doing the right things and stripping out the [fake] clicks, refunding money, building standards, and trust in that system, just as we are doing now.”
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