Rob Dreblow, head of marketing capabilities at the World Federation of Advertisers (WFA), explains why advertiser concerns about transparency in the digital media marketplace could mean not all benefits of programmatic trading are realised.
Transparency isn’t a new demand and has been an advertiser concern for many decades. Ever since the World Federation of Advertisers (WFA) was founded in 1953, it’s been on our list of priority issues.
We work closely with our local associations – such as ISBA in the UK – and our member companies to provide guidance designed to help them ensure their relationship with agencies is as transparent as possible.
That much is not new. What is new is that transparency has become the biggest challenge facing many advertisers, mostly thanks to changes in the way media and particularly digital media is bought and sold.
In 2012 our members told the WFA it should be our number one issue. That same year, a survey of member companies found that 88 per cent of respondents agreed the following statement: “Agency fees are falling, yet profits continue to rise. This demonstrates that advertisers feel that agencies and media owners are being less transparent than ever.”
They didn’t say this because advertisers object to agencies being rewarded for their time, effort and insights but because of their ongoing and increased concerns about how their money was being spent.
Transparency is back to the top of our agenda mainly because of the new trading landscape that’s being created, notably around agency trading desks. With the development (and investment) being driven by the big agency groups and ad tech companies, it appears that not everything being created is always in the best interests of advertisers.
Advertisers recognise that programmatic trading and real-time bidding offer real advantages and can enable them to reach target audiences more effectively and efficiently. That’s why more and more of our members are using trading desks (both those run by agencies and independents).
Although principally used to buy online display, they are also increasingly adopting this route for video, mobile, social media and search.
A recent WFA survey gathered results from brands who spend a combined $30bn each year on marketing globally and identified that 81 per cent of respondents were using agency trading desks and 11 per cent were using independent suppliers.
Although budget levels channelled through this means of trading are currently relatively low, the consensus is that budgets will increase in the next 12 months.
One reason is that the advantages of trading desks are pretty clear for some members. Two-thirds of survey respondents identified reduced CPMs as a result of using trading desks. Improvements in targeting and return on investment were cited by 44 per cent and 31 per cent of respondents respectively, and 26 per cent said they experienced richer insights.
However, while there is evidence of performance benefits, there is also serious concern. The same survey discovered that just 13 per cent of WFA members who responded are happy with the current levels of transparency in this area. In fact 83 per cent of respondents thought that trading desks are less transparent that traditional trading.
Agency behaviour in this area simply adds to such concerns. Fifty-four percent of respondents said they had been asked to sign separate and additional contracts for trading desks, often with additional limitations applied to data access and audit rights.
The central concern is that agency trading desks offer a new way to charge more for the same product, that the price that is paid for an impression can bear no relation to the price the media owner charged for it.
Advertisers also fear that the ability of agency trading desks to provide a new profit centre makes them vulnerable to making choices that are determined by the agency’s business interests rather than their client’s marketing goals.
Our survey found that 57 per cent of respondents are aware that “arbitrage” is happening and 82 per cent suspect it influences the impartiality of recommendations.
At the same time, clients have a genuine fear that their data – or the data gathered via the spending of their ad budget – is not always treated with the respect and exclusivity that it deserves.
Such views and responses demonstrate the obstacles to the goal that advertisers and agencies share, the ability to build a solid and ideally long-term partnership that benefits both parties in the new digital landscape.
Our research shows that the development of new trading technology is broadly welcomed and there is evidence from many of our members that it delivers substantial benefits.
Widespread acceptance, however, is likely to require something more than just great results. Advertisers need transparency as well as great technology.
There will always be a degree of friction between advertisers and their agency partners; it is the nature of the beast to a certain extent. We should acknowledge that advertisers too contribute when they constantly look for cheaper deals from agencies.
The current level of transparency in traditional media is not perfect – we can have a discussion on rebates another time – but it is generally accepted to be better than what’s being created for digital.
The hard lessons that have been learnt in delivering greater transparency in traditional media need to be incorporated into the new digital trading mechanisms. We can’t ignore the past as we build the future of advertising.
The Drum is launching the Digital Trading Awards to reward clarity, transparency and client service when it comes to digital advertising. Find out more at digitaltradingawards.com