Opinion

Seven practical ways to reduce the bloat and inefficiency of programmatic

In response to his own piece from earlier this week, PwC's Ben Shepherd reflects on better ways to manage programmatic, in a world where execution is inefficient and bloated.

Earlier this week, I wrote a piece that put forward the idea that programmatic, in its current form, is bloated and fat when it comes to resource and service required to deploy it.

Platform fees are more often than not relatively reasonable. Between 4% and 10% for demand side platforms and around the 8% mark for supply side platforms.

Programmatic execution is inefficient and bloated, but there are better ways to manage it

In most cases, the largest proportion of the fee goes towards the manual servicing of programmatic, which generally sits between 20-30% of media spend, and sometimes more.

The tools meant to automate optimisation, reporting, logistics, financials and untangle advertisers from the inefficiencies of manual admin, have created significantly more manual admin than what came before.

Put simply, the execution of programmatic is inefficient and bloated. It leaves little resource for the creative and strategic side of addressable media and advertising, to the detriment of advertisers.

So, I asked: “Is there a better way?”

My belief is that there absolutely is. The way we manage programmatic needs to be blown up and rebuilt if we are to provide advertisers (the source of the investment and the ultimate beneficiary) with their share of the upside.

Programmatic is helping a lot of companies report significantly improved financial performance, but I am unsure whether the advertisers are amongst these.

The starting point for improvement is a much more mindful appreciation of finite resource, both human and financial. Programmatic activity and its management needs to take an approach akin to zero based budgeting, that is, adding costs that provide proven benefit and value.

If you’re an advertiser investing in programmatic and wanting improvement, these aren’t bad places to start. Note that these suggestions focus primarily on simplifying the execution, in turn, freeing up resource to spend time on strategy and creativity.

If you’re an advertiser and you feel your programmatic setup and operations are too complex – either you are incompetent or your partner is

We simply cannot accept complexity or in many instances continue to hide behind it. Demand simplicity and if it’s not being presented – look at why. Complexity can no longer be the business model – it erodes resource, creates inefficiency, and ensures advertisers never see their fair share of the value created. Hiding behind complexity makes some feel good and empowered, but it focuses attention and energy away from an advertiser selling more products.

Understand where the money is going and what value it provides

This is a reasonable ask, but in the majority of the cases I have seen, it’s much more difficult than it should be.

How much are platform costs? What do the platforms do? What would happen if they weren’t used? What are the supply sources? What is the servicing fee from the execution partner and what is the process? Is the service fee on the cost of media, or is it on the total budget? Would the fee, and resulting service, be considered reasonable to execute any other media channel?

Understanding these questions allows the activity to be unpacked, and value to be assigned to each link in the chain. If value isn’t commensurate with cost, make changes.

Simplify and reduce: platform and ancillary costs

Some advertisers are using three or more DSPs, which means three machines to operate, three machines to train staff on, three machines to check. Often, DSPs are being used for extremely niche purposes, for example, purchasing one small source of inventory across one device. This often results in zero incremental reach/impact, but significant incremental resource.

Ancillary costs, including verification, additional bidding technology, and data layers, are also becoming a significant cost. In many instances, these are being used as a result of how complex the processes needlessly are.

Consolidate supply

Some advertisers are buying over tens of thousands of supply sources, and there is absolutely no rationale to cast the net this wide.

More supply creates more work, more risk, and more protection required. Embrace the ‘vital few’ and dispose of the ‘trivial many’. If 10-20 key sites can give you 95% of your audience, in a context you want, then why add another 2,000 sites to possibly gain an incremental 1-2%? To consolidate supply, move to a single page whitelist to complement your 50,000 site blacklist.

Advertisers need a direct relationship with their platforms and key supply source(s)

These players are the key conduits to your consumer through programmatic means, so it’s important that you speak with them directly. Given data and customer understanding is central to the marketers’ remit, ensure those who have the most to offer in this area are direct partners. Who are the ‘vital few’, and what they can do for your business?

Review and analyse the current process: understand what the platform does, what the humans do, and where efficiencies can be gained

Who or what does which tasks? Where is there duplication? Is there manual optimisation and automated optimisation? In many instances, there is both manual and automated tasks, which is acceptable if the value created is reasonable. If not, remove the duplication.

Using business process management is a good way to redesign these processes. Draft the ‘as-is’, and work through ‘to-be’ scenarios – where the process is as efficient and effective as reasonably possible. This should be done regularly, as the speed of technology improvement and the speed of consumer change is at pace.

Stop paying a fee based on % of cost of media

Charging a percentage of media investment is ludicrous, and does not align anyone in the process. When you pay a real estate agent a percentage commission to sell your house for more, you both benefit. When you pay a supplier a percentage of media, you are rewarding them simply for spending money. Worse still, some suppliers are charging their service fee on total budget, which means that ad serving, platforms, verification, and all other ancillary costs incur the fee.

Programmatic cannot become more efficient with continued remuneration based on commission, as it will only drive programmatic spend upwards, and efficiency will never be the primary motivator.

A better way to remunerate your partner is to base it on resource required – hours or FTE – or better still, via a value based compensation method, with upside based on shared aligned goals.

Ben Shepherd is a director at PwC.

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