Last month, the Association of National Advertisers released a groundbreaking report that shed light on a number of transparency issues in the commercial production pipeline. ANA found that major creative agencies have been using unfair competitive practices to secretly steer video, print, and other production projects to their in-house studios. Without insight into the process by which creative agencies allocate production work, advertisers have had no choice but to make “costly, inefficient and sub-optimal” business decisions.
As someone who works in digital media, the issues described in the ANA report felt all too familiar. In our industry, programmatic media buyers are often given free rein to purchase digital ads as they see fit, with little to no client oversight. In many cases, media agencies don’t even tell the advertiser which technology vendors they used to execute the campaign, or how much of the client’s money they paid them.
While the ANA production report is chock full of great advice for advertisers, the following insight stood out to me above all else: “Advertisers must understand that there is a direct correlation between the level of transparency and level of control taken by the advertiser — the more control, the more transparency.”
Indeed, as advertisers continue shifting budgets toward digital channels, they simply cannot afford to keep wasting money on a media-buying process they don’t understand. If brands want to learn where their budgets are actually being spent, they’ll need to take the control necessary to find out for themselves.
Why a lack of transparency creates a waste of money
In a way, the present online ad-buying model is a bit like what would happen if you hired a home contractor and they came back to you a month later with a bill bearing a single line item, “Home Repair: $30,000.”
Even if your contractor is working with your best interests in mind, the lack of transparency robs you of the ability to make smarter decisions about how your money is spent. For instance, if you knew that you spent $500 on a gallon of paint, you could choose to buy a cheaper or more appropriate alternative moving forward. Or if your labor costs seemed a little high, you could ask your contractor whether you really need everyone who’s working on your project.
In digital media, most brands don’t have access to this kind of line-item insight. Advertisers don’t know how much of a campaign’s budget goes to their demand-side platform, or to their anti-fraud vendor, or to the supply aggregators they work with. In fact, many brands don’t even see a breakdown of how much money is paid to technology vendors and how much is spent on media. As a result, I’ve heard some agencies have been able to profit by secretly keeping publisher rebates for themselves, as well as by purchasing bulk inventory to sell to their own clients at a steep markup.
When you know all this, it’s no wonder that just 29 percent of World Federation of Advertisers members say they’re satisfied with the transparency they receive from their agency trading desks.
Building a transparent media-buying model
Industry-wide change doesn’t happen overnight, but brand marketers can take concrete steps today to begin demanding more information about where their money is being spent.
As a start, advertisers should make sure that their media buyers are at least separating tech vendor commissions from media cost. This way, they can evaluate whether their vendors are providing enough value to justify their collective take rate, and whether their media mix is reasonably priced. Ideally, agencies would be required to re-invoice the technology and media costs to the advertiser before taking their commission, ensuring that a transparent cost breakdown is the only way they can get paid.
Moving forward, advertisers will need to take a proactive role in making the media buy itself. Certainly, this will require brand marketers to learn more about the programmatic buying process and invest budget in new hires who can help manage it. Nonetheless, these expenditures will more than pay for themselves in the long run, as advertisers will be able to use what they’ve learned to make smarter, more efficient business decisions.
Ultimately, the goal should be to get to a place where the advertiser is tracking every vendor on cost and quality, and making payments to those parties directly. Only then will they be able to know for sure that their money is being spent in a way that truly optimizes ROI.
The time is now to take control
On the surface, it may seem fairly simple to create a transparent media supply chain. You hire a few new people, take a few weeks to bone up on ad-tech, and save a few million dollars through your newfound efficiency.
But in my experience, marketing managers are often too intimidated by ad-tech’s complexity to get their hands dirty with new technology. To be sure, there are a lot of platforms and intermediaries to learn about. The truth, however, is that this isn’t rocket science, and you don’t need an expert to walk you through it. At this point, technology has become a commodity in digital marketing — everyone can understand how it works.
All that’s necessary is for marketing managers to roll up their sleeves and get to work. Once they’ve taken the time to comprehend the digital ecosystem, they can demand the control they need to gain real transparency into where their money is going. From there, it’s just a matter of time before the savings come rolling in.
George Levin holds a dual master’s degree in both mathematics and marketing. Attracted to accountability and predictability, his main areas of interest and expertise revolve around machine learning and programmatic. His professional passion for learning more about the advertising technology ecosystem led Levin, together with his fellow mathematics student Vladimir Klimontovich, to found the programmatic platform GetIntent.