Endlessly debating the transparency of programmatic won’t rebuild trust
Comparing programmatic with the supply chains of automotive manufacturers isn't going to get us where we need to be: back in the consumer's good books. PwC's Ben Shepherd explains.
There is no issue with more heat in the advertising industry right now than transparency. It’s hot locally. It’s hot globally. It’s being discussed daily in boardrooms and the media.
So, I was somewhat surprised to see an op-ed on Mumbrella questioning the motives behind “the programmatic witch hunt” the same week the World Federation of Advertisers released data that should have sent yet another shockwave through the industry.
Toby Hemming wrote a defence of what he called “mar-tech” companies and their margins and business model, arguing that “unless we expect Samsung, Apple or indeed any successful business to start providing a detailed breakdown of their profit margins on the price tags of their products, we might want to cut the programmatic industry a break.”
The logic of the article was that businesses, media or otherwise, shouldn’t be expected to provide supply chain transparency around costs and margin.
The problem with this assertion is never before has there been such discomfort and concern from advertisers around the broad area of programmatic and what value each layer of the supply chain adds beyond additional cost.
The challenge for the industry – of which both Toby and I are part of – is that we seem to be heading towards a situation where trust has eroded to such a level around digital generally that we can’t go one week without another headline that makes the situation worse.
When the WFA asked its members – the largest advertisers around the globe – their number one concern presently, 47% said transparency. It was far and away the largest concern across the board.
Transparency is not a new issue but it has magnified in recent years, with the WFA identifying the below triggers:
- A significant increase in the volumes of media being bought on an undisclosed basis and only limited numbers of contracts permitting this.
- A move towards free space and a decrease in cash rebates being returned.
- An increase in uncertainty surrounding audit rights and rights to media cost data access.
- The evolution of ad tech and programmatic has added much complexity. ‘Following the money’ becomes increasingly challenging.
Hemming argues that “working in media is about adding value” and that “each stage of creating, producing and planning a marketing campaign is part of a long chain of investments from advertisers, all designed to eventually make more money than they cost.”
No argument here. But looking at the below do we feel advertisers – the companies and individuals that pay our bills and sustain our industry – feel they are seeing added value and that these investments are generating more money than they cost?
According to the WFA, the below is where advertisers are sitting when it comes to their feelings around transparency and more broadly – the value we as an industry are creating for them.
- 53% have inserted specific financial audit rights into contracts in the last 12 months, with 29% intending to in the next 12 months.
- 29% have inserted clauses to clarify and clearly define agency or principle at law positions into contracts, with a further 29% planning to add in next 12 months.
- 50% plan to improve internal resources in the areas of media and programmatic in the next 12 months.
- 41% plan to conduct a programmatic review in the next 12 months.
- 47% have added specific clauses around return of incentives/rebates in last 12 months, with 26% planning to in next 12 months.
These are significantly concerning statistics and not at all demonstrative of a customer base who feel at ease with the current dynamic of digital advertising.
The premise of so much of today’s modern adtech, martech and programmatic is that it provides advertisers with never-before-seen speed and precision around how to read customer signals and turn these into actions.
However, when it comes to our customers and the clear signals they are sending, we seem totally oblivious. Comparing the current state of digital and programmatic with the supply chains of industries such as automotive and technology manufacturing is an example of this.
Finding a way forward out of this dilemma is incumbent on all of us. A good start would be to cease the straw man arguments around transparency of margin and commence meaningful, candid and honest discussions with clients around these areas of concern.
After all, we are in the business of connecting with customers – but right now it feels like we might be losing that connection with our own.
Ben Shepherd is a director at PwC’s CMO Advisory
As the industry likes to do we have over-complicated this issue. The issue is that you have agencies pretending to be martech, while martech are pretending to be agencies &/or media suppliers.
To start with let’s be clear on who we are.
I’m an Agency – Then you must disclose your fees versus your external hard media or martech/data costs, this disclosure is what makes you an “agency”
I’m in Martech – Be clear to clients that you are not an agency or a media supplier, and be transparent about your own tech and data costs versus the media costs
I’m a Media supplier – Value your audience and don’t disclose your margins
I’m a Trading Desk – You are not real, you’re just an agency that is pretending to be a mash-up of martech/media supplier so you don’t have to disclose your fees
User ID not verified.
The problem I have with this entire debate is that “transparency” has somehow become an outcome. Working in an agency, outcomes are tangible things like leads, sales, aided awareness, intent uplift, etc etc. Transparency, when viewed as a means to improve an outcome, is great, but when it is viewed as the outcome itself… then both sides have badly stuffed things up.
I think that is the frustration that Toby H was channeling. It’s the same frustration agencies who have built genuinely good products (even some non-disclosed ones) feel on a daily basis. But an opinion like that is kindling for a daft auditor looking to fan the flames of a debate like this that helps justify his obscene consultancy rates.
Of course the non-disclosed programmatic solutions that we at agencies have built (some very good, some very bad) and the full-service programmatic vendors flooding the market (all bad) are entirely to blame. Some bad acting and failure to set decent, independent, performance measurement frameworks that our clients can trust has led us here.
I just wish we could focus on real outcomes to lead us out…
User ID not verified.
@media agency cynic – I am not suggesting transparency is the outcome. That would be naive.
However it is an input into any outcome and there is clearly tension from the advertiser around the motivations of various elements of the supply chain.
Without that cleaning up you will never progress to discussions around outcomes. That requires trust. Something we don’t have much of at the moment.
It’s far from an auditor fanning the flames – just look around you and tell me otherwise.
User ID not verified.
Transparency is the only outcome that can lead to better trading.
Transparent and independent discussions lead to marketers understanding the market place, different tech offering benefits and how much programmatic media actually costs.
The conversation needs to start with transparent information and fact.Then we can move on to optimisation of tech, data, media buying.
Not allowing clients to audit media costs means there is a veil across the entire area of tech and media transactions.
Clients can currently only understand the space by taking the buying in house. Agency contracts don’t allow clients to see how the medium is transacted and the true tech fees that are associated.
User ID not verified.
Transparency is the only outcome that can lead to better trading.
Transparent and independent discussions lead to marketers understanding the market place, different tech offering benefits and how much programmatic media actually costs.
The conversation needs to start with transparent information and fact.Then we can move on to optimisation of tech, data, media buying.
Not allowing clients to audit media costs means there is a veil across the entire area of tech and media transactions.
Clients can currently only understand the space by taking the buying in house. Agency contracts don’t allow clients to see how the medium is transacted and the true tech fees that are associated.
User ID not verified.
Ben,
I have to agree that Toby’s article was a little misguided.
Transparency remains a major issue.
And it’s more than just the visibility of rates.
Another major issue is the forced separation that exists between marketers and those planning and buying programmatic activity.
Some Agency groups have deliberately kept the 2 arms length because of the ‘murky’ practices undertaken.
The rich understanding that marketers have of their customers and ways in which they can be influenced is lost in translation.
Campaigns are less efficient, performance hindered.
Some advertisers never see the people from the trading desk making selection decisions. They should be meeting weekly to discuss campaign performance and how to optimise future activity.
Ultimately non transparent and ‘murky’ behaviour is doing programmatic a huge disservice.
User ID not verified.