After working at my last ad tech company, the decision was made to go agency side much to the chagrin of my colleagues, all who warned of the pitfalls involved with agency life. Being placed on our agency’s highest value account and on one of the largest lines of business was a truly invigorating experience.
For the first time I was on the other side and was able to use my ad tech knowledge to drive real value for my clients. In my 2 years on the agency side I assisted in course correcting said line of business by creating efficiencies within our partner set and evolving our audience targeting strategies. Caught and got a very well-known media vendor blacklisted for unscrupulous practices. Squeezed in a promotion. And what I take the most pride in, I mentored the next generation of digital marketers on how to be intelligent and savvy media buyers.
Despite feeling like I was bringing real value to my clients for the first time in my advertising career, I still wasn’t satisfied. Having personally witnessed just how flawed the open exchange programmatic model of buying was, I sought to raise awareness internally and propose alternative and innovative buying strategies from a supply centred POV. You see, the promise of programmatic was that it prioritised the audience over the actual inventory.
But for that line of thinking to work, we must trust that all available supply is of equal quality. The dirty secret within our industry and one that everyone knows and always tries to tip toe around, is that actual quality inventory is very limited. So limited in fact, that we’d never be able to scale the ever-increasing YoY programmatic budgets that clients give us.
Enter RTB and open exchange and you suddenly have an infinite amount of supply against which infinite budgets can be scaled. And there in lies the problem. How can you expect an industry with no oversight and little accountability to do the right thing and use this tech to execute campaigns properly at the expense of their profit margins. As complicated as our industry is, the way all the players involved make money for the most part is not. The industry has become one giant game of arbitrage. This is how it works.
Agency/brand approaches media vendor for programmatic campaign execution. Media vendor sends back a media plan with a cpm of $5. Deal is signed and campaign launched. The media buyer rightfully assumes that the majority of their cpm will go towards working media paid to the publishers. In reality, something completely different occurs. A battle ensues. No not a bidding battle on the open exchange between advertisers for premium quality inventory. A tug of war between the media vendor’s sales team and operations team with the campaign manager stuck in the middle.
The campaign manager’s actual job is not to make the client happy. It’s to make these 2 perpetually feuding sides happy. The sales team is happy when the campaign hits client KPIs to guarantee repeat business. The operations team is happy when the campaign’s profit margins are as high as possible. How do you maximise profit margins? By ensuring that the majority of winning bids fall far below the cpm that was quoted to the client. How is that done? By buying the near limitless supply of cheap and fraudulent inventory on the internet to offset costs of higher value premium inventory. Even then you’re still left with the fact that there is only so much quality inventory that real humans go to. The difference between the winning bid and client facing bid goes directly into the vendor’s pockets.
You might be saying well that’s fair, vendor needs to make money too. But ask yourself, do you trust that vendor to draw the line at a certain profit margin percentage. And what is that percentage? Is it 10 per cent, 20 per cent, 30 per cent? How about 70 per cent – 80 per cent? Because I may or may have not gotten performance bonuses for driving such high profit margins in a past life. Campaign managers are actively incentivised to not deliver high performing campaigns from the client’s perspective.
But high performing campaigns from their employer’s perspective. This misalignment in incentive structures within the media partner & advertiser relationship is one of the foundational reasons for why our industry is the way it is.
Of course direct response campaigns had lower profit margins because there was a degree of accountability. But what we lost out on there was made up through branding and awareness campaigns. How was that done? Very easily in fact! Clients only cared about clicks and other arbitrary metrics which do not correlate to true performance and are easily faked. All we had to do was to buy all impressions from highly questionable sites that sold cheap and viewable impressions.
These high budget campaigns were for brands all of us have heard of. And they all had the name brand safety/ad fraud measurement companies on as well. Now you’re probably saying I pay good money for these same measurement companies to tell me that my media is fraud free and viewable as well. I’ll just leave that there.
If there’s one thing you do after reading this, it should be to ask your media partners for a full site list of all domains on which your ads were served. If you have a measurement vendor or trafficked out your own ad tags. You’re able to pull your own domain reporting. To learn how to do so. Please reference this how to I put together with highly respected ad fraud researcher Augustine Fou. If you do ask for a site list from your partner, you will most likely be met with resistance.
They’ll offer you a top 10 or top 20 of your most delivered to or top performing domains. Do not accept this. Chances are it will be doctored. They might tell you their publisher contracts forbid them from sharing such a granular level of information. Do not believe that either. It takes 10 minutes for most reporting dashboards to produce a site list. If your request is an urgent one, and they take a while to get you what you want. Start asking questions.