‘The whole supply chain is locked into a sense of omerta’: Why marketers, procurement, agencies, ad techs and publishers fear derailing programmatic ‘gravy chain’ – where 36 cents on the dollar is ‘optimistic’
What you need to know:
- US peak advertiser body the ANA’s latest report on transparency – this time within the programmatic open web – has been met with deafening silence from the ad supply chain, publishers and agencies.
- It mapped log-level analysis across $123 million in spending with 21 advertisers, including Dell, HP, Kimberly-Clark, Nissan, Mondelez and Shell, across 35 billion impressions.
- It found only 36 per cent, or 36 cents on the dollar, on average landed in front of audience eyeballs via the programmatic open web, i.e. digital programmatic dollars not spent via the big walled gardens.
- On average ad budgets – circa $88bn globally – are being sprayed across 44,000 websites and apps. Circa 25 per cent is going to made for advertising (MFA) sites on the open web. Private marketplaces, particularly those housing more than 500 publishers, fared little better in terms of quality, yet cost twice as much.
- Nick Manning co-authored the ANA’s scoping document. As a former ad agency co-founder – launching what is now MG OMG in London in the nineties, before a decade as strategy chief for media investment consulting firm Ebiquity – he knows where to look, and where the problems lie.
- Manning says the silence from agencies is deafening and the “gravy train” is “out of control”. But he says procurement departments must shoulder at least some share of blame. Demand peanuts on rock bottom CPMs, he says, and get “worthless” monkey impressions that nobody sees.
- Likewise he thinks the ad tech companies – many of whom would not open up their hoods to the ANA – and even verification firms are complicit.
- The ANA report maps out both the problem and step-by-step solutions. Which means marketers and their media supply chains can now do something about it. If they have the appetite to get more than 36 cents back from every dollar they pump in – Manning says even that figure is “optimistic”.
- He urges marketers to “get into the weeds” and at least start asking basic questions. Then cull their supply chains and re-write contracts to get access to data that allows audits. Hiring a chief media officer, or equivalent, “would pay back in multiples, if they do their job properly”.
- Agencies could – and should – take a stand, per Manning. “But none of the groups have come out and supported this report … They’ve said nothing.”
- Either way the money is starting to move. Walled gardens and retail media players will be the beneficiaries.
- There’s always a lot more in the podcast. Get the full download here.
The fact is that the media agencies often earn more money from their media owner incomes than they do from their client incomes. And then you know who your boss is.
Me, I’m counting
The ANA’s forensic probe mapped log-level analysis across $123 million in spending with 21 advertisers, including Dell, HP, Kimberly-Clark, Nissan, Mondelez and Shell, across 35 billion impressions.
Published in December, it found only 36 per cent, or 36 cents on the dollar, on average landed in front of audience eyeballs via the programmatic open web, i.e. digital programmatic dollars not spent via the big walled gardens. Money was being sprayed across 44,000 websites and apps on average, 25 per cent was going to made for advertising (MFA) sites and private marketplaces, particularly those housing more than 500 publishers, were not much better than the wilds of the open web in terms of quality, yet cost twice as much.
Unsurprisingly, it found supply chains between advertiser and intended audience are way too convoluted, driving up costs as everyone takes a clip, with contracts providing scant access to work out what’s going on under the hood.
Manning thinks even 36 cents on the dollar is optimistic. Meanwhile, the companies that wouldn’t play ball speaks volumes. While the ANA managed to get some of the major SSPs and DSPs to lift the bonnet, others, including The Trade Desk, Amazon, Yahoo, Google AdX and Pubmatic, either declined or ‘could not provide data in the required timeframe’.
“Everyone says they are supporters of transparency … until they’re the ones asked to be transparent,” notes the ANA report. Manning thinks it’s symptomatic of a problem that runs deeper than anyone will publicly admit, “but privately … anyone impartial … will recognise the truth of this report”.
If anyone could fix it, it would be the media agencies … by virtue of tolerating this, they are absolutely negligent in terms of their role.
Because the ANA report actually maps out both the problem and step by step solutions, marketers and their media supply chains can now do something about it. If they have the appetite to get more than 36 cents back from every dollar they pump in – and Manning says even that figure is “optimistic”.
“Even though it’s a shocking number, it’s probably on the high side,” says Manning, who co-founded the now Omnicom Media Group-owned indy media hot shop Manning Gottlieb before a ten-year stint as CSO for London-listed media investment consultancy Ebiquity. He’s now non-executive Chair at auditing firm Media Marketing Compliance – and co-authored the ANA’s scoping document for its latest report. Suffice to say, Manning knows better than most where to look.
“First off, the [ANA’s] cost waterfall doesn’t include any agency commission, which could be up to 5 per cent. The viewability metrics that have been set for it are the MRC standards, which are the ones everybody works to, but you know, 50 per cent of the ad for one second or two seconds, depending on whether it’s display or video… There’s also nothing in here about attention metrics and the fraud numbers [used] are, by most people’s estimation, probably a bit on the low side. So I would argue that while 36 cents on the dollar is pretty bad, the [true] situation could be even worse,” says Manning.
“I’m not trying to deliberately catastrophize this, the numbers are all terrible. But we’ve got to be realistic because the advertisers who took part in this study in the in the US were among the more sophisticated ones who have probably got more developed processes for working directly with DSPs, maybe even SSPs. So we’re talking about the pick of the crop here as opposed to the long tail of advertisers.
“But it doesn’t really matter whether it’s 15, 25 or 36 cents in the dollar. It’s terrible whichever way you look and it’s an enormous waste of resources. So something has to be done about it,” he adds.
“The machines are being set up to do the job, but they’re not doing the job and it’s out of control. That is one of the starkest findings … I can’t think of an equivalent in any other industry. We’re talking about a massive global marketplace which is out of control.”
At the risk of being struck off more Christmas card lists, procurement are part of the problem … because they equate low cost with being a good result … It’s no secret that if you pay peanuts, you get monkeys.
The “absolute truth”, per Manning, is that the billions of dollars pouring into open web programmatic has created “a massive gravy train for a lot of people … And the thing about gravy trains is that nobody wants to derail them, if they’re benefiting”.
It’s not a new problem, but over the last two decades the media supply chain onus has shifted from “making advertising work harder and be more effective, because then advertisers would spend more money and everyone would benefit,” to the focus shifting to the supply-side. “And the supply side now drives that gravy train to their advantage and to the disadvantage of advertisers,” suggests Manning.
“The media agencies have also been part of that. They have effectively crossed the floor to become part of the supply side in many respects, rather than being people who are entirely responsible for the good governance of the client budget. The fact is that the media agencies often earn more money from their media owner incomes than they do from their client incomes,” adds Manning. “And then you know who your boss is.”
Manning suggests while media agencies “pay lip service” to transparency, “most of it is complete bullshit,” and says it speaks volumes that few if any have commented on the ANA’s report.
“If anyone could fix it, it would be the media agencies … by virtue of tolerating this, they are absolutely negligent in terms of their role … They should be the ones manning the barricades and demonstrating in the streets about this, because they are the ones who act on behalf of the advertiser to maximise the return of their dollar.”
Without support from their suppliers and intermediaries, Manning thinks advertisers collectively will continue to struggle to get value from their investments – at least in the open programmatic marketplace.
“The reality is that advertisers are up against oligopolies. There’s an oligopoly in the media agency marketplace; there are only six substantial groups who represent 80 per cent of worldwide spend. There is also an oligopoly in the ad tech market. I’m sure Google and The Trade Desk would say ‘no, no, we’ve got lots of competition’. But in reality, that’s not quite how it works; they dominate the marketplace,” suggests Manning. “Then to a certain extent, you have publisher oligopolies – Meta, Google and now TikTok. Even in the periphery areas of content verification, with the strength of Double Verify, IAS and so on [the same applies]. So the advertiser really is like David and Goliath, except they haven’t got a sling,” says Manning.
“The truth is that this is such a gravy train that nobody on the supply side wants to do anything about it – and the media agency is a part of the supply chain. That’s really the only reason I can think of why, when reports like this come out, you get this roaring silence from all of them. They should be the ones who are saying this is unacceptable, and we’re going to do something about it. But none of the groups have come out and supported this report … They’ve said nothing.”
You almost have to say, ‘I don't care what happened in the past. We're going to have a Truth and Reconciliation Commission here.’ If I were a client, I would be sitting down with all the people I need to sit down with internally, including procurement, and agree what we're going to do. Then sit down with the independent supply chain providers and say, ‘these are the rules of the game… these are the audit rights we need, this is how we need you to behave in the marketplace – and you're going to be accountable.
Advertiser heal thyself
Advertisers are not entirely blameless. P&G CMO Marc Pritchard sent shockwaves through industry when in 2017 he told an IAB conference that the media supply chain was “murky at best, and fraudulent at worst”, and vowed to punt bad actors. That followed the ANA’s 2016 report on media agency contracts and remuneration. Eight years on, 36 cents on the open web dollar – at best – have a chance of being seen by actual human audiences. And the righteous swamp-draining P&G didn’t even take part in the latest ANA probe. Why?
Manning offers some marketer excuses.
“A lot of them would say ‘we’ve got this under control. We’ve got the best systems in the marketplace. Why would we want to share our industry leading thinking with anybody else? Why would we want to have our data mixed with other people’s data?’”
There is also the ‘FOFO factor’, or ‘fear of finding out’, as well as effectively being precluded when supply chain partners – in this case including The Trade Desk, Amazon, Yahoo, Google AdX and Pubmatic – don’t play ball.
“Also remember that 67 advertisers expressed an interest in participating in the study, but only 21 have them actually took part. The other 46 fell by the wayside because of the lack of data access, the confidentiality clauses,” says Manning.
“So it isn’t just about the P&Gs, the Diageos and others who weren’t able to take part or didn’t choose to take part. You’ve also got over 40, who said they did want to take part but couldn’t. So here again is another example of where we have a dysfunctional marketplace,” he adds.
“The whole supply chain is locked into a sense of omerta … we don’t want to talk about this, because if we do, it opens up a can of worms.”
Procurement chickens roost
“At the risk of being struck off more Christmas card lists, procurement are part of the problem,” says Manning. “In fact, they’re a big part of the problem in some client organisations because they equate low cost with being a good result. And one of the things that comes out of the ANA study in spades, and it’s again, no secret, is that if you pay peanuts, you get monkeys.”
Procurement departments may congratulate themselves for securing the lowest digital media costs. However, “what you then get is virtually nothing for your money”, says Manning. “But the way that procurement works in some client organisations is by always squeezing the agencies down to buy cheaper and cheaper and cheaper. And the agencies don’t fight that. Instead of saying ‘we’re going to resist it’. They say ‘let’s go along with this, if we want to win this pitch, we need to offer very low rates. So if they want to buy $1 CPMs, we can buy $1 CPMs’.”
Per the study, 50 per cent of impressions came in under US$3 per CPM. But those kind of – average – rates result in advertisers ending up with their ads being blasted across 44,000 websites, per the ANA’s report, “of which 41,000 are virtually useless with a long chain of invalid traffic/fraud, low viewability and brand safety issues,” says Manning. (The ANA reckons 5,000 websites is probably the upper limit.)
Taking back control
Manning says advertisers that want more than 36 cents on their working programmatic media dollar must take the initiative. Various reports globally and locally, including the ACCC, have been saying the same thing for years, effectively, ‘buyer beware’. He thinks the difference with this report is that it sets out “for the first time … a playbook for every stage of the journey between he dollar leaving you and arriving at the consumer.”
- Curate 75–100 high-quality, trusted publishers or sellers (versus individual domains).
- Work with a smaller number of ‘trusted sellers’, i.e. contract directly with the sell-side platforms with the shortest route to publishers to limit the number of mark-ups.
- Work with 5-7 SSPs and apply pressure to them to cut out bloat (fewer SSPs also means advertisers are less likely to be bidding against themselves).
- Contracting directly with ad tech partners such as DSPs, SSPs and ad verification firms also allows brands to specify access to log-level data within their contracts. Which means they can properly audit it: “Log-level data analysis is essential to drive additional media investment productivity,” per ANA. Yet only 41 per cent of companies involved in the study are definitely using log-level data to analyse programmatic activity.
- Overall, the report suggested brands – at least larger spending advertisers – could within just a few months end up paying significantly lower ‘true CPMs’ by doing the work in-house, or paying consultants, to map log level data, set up direct contracts, create inclusion lists and then recycle wasted spend to working spend.
The 120-page report houses a tonne of detail and recommendations, but at the very least, advises marketers to ask themselves and their partners the following to get the ball rolling:
- How many websites are used for an average campaign?
- Do you implement inclusion lists (or exclusion lists) for your programmatic advertising?
- Does your company own direct contracts with any supply chain intermediaries?
- If not, should you?
- Has your company done any work to optimise its SSP activity?
- How much of your programmatic media activity is running on Made for Advertising websites?
You have to set yourself some goals: how am I going to improve all of this so that when I spend $1, it doesn't turn into 36 cents, but turns into more than $1? That would be quite a turnaround in fortunes. But if you start from that point of view, then you're starting to do your job properly.
Truth and Reconciliation Commission
Manning hopes the report will “finally be the one that makes advertisers realise they cannot rely upon anybody else to represent them properly in the marketplace, so they have to take control for themselves”.
An aspirational ambition. Either way, appointing a chief media officer, one of the ANA’s recommendations, would “pay back in multiples, if they do their job properly,” reckons Manning.
But advertisers must have the will to genuinely question where there money is going and how to stop the rot. “Without that intent, you might as well not bother starting,” says Manning.
“You almost have to say, ‘I don’t care what happened in the past. We’re going to have a Truth and Reconciliation Commission here.’ So if I were a client, I would be sitting down with all the people I need to sit down with internally first, including procurement, and agree what we’re going to do. Then sit down with the independent supply chain providers and say, ‘these are the rules of the game, these are the contracts we need, these are the audit rights we need, this is how we need you to behave in the marketplace – and you’re going to be accountable and responsible for our spend in the way that you say that you want to be’,” advises Manning.
“All of that is doable if you’ve got the right people driving that supported by the right legal financial and contractual apparatus.”
But for all that to work, advertisers “have to accept that the unit price of what you are buying is going to go up. That is the bit they find so hard to accept because they have been paying unrealistically low prices for very poor quality inventory for a very long time”, says Manning.
“At a surface level, it looks as though it is effective. But it’s not even efficient, let alone effective. There is a long tail of websites that produce virtually no value whatsoever, but you’re still paying for them – and everyone’s earning off the back of that.”
There's not going to be an Armageddon. But what tends to happen in dysfunctional marketplaces where the end user, i.e. the advertiser, is getting poor value for money, is they start to take their money elsewhere. We're starting to see advertisers, particularly CPGs, saying ‘I'm going to go into digital commerce, I'm going to go into retail media networks, where I have a better chance of seeing where the money is going, and being able to measure the effectiveness of it.’
Dud PMPs, CMO weed-diving
Even where advertisers and agencies have tried to curb the worst of long tail junk inventory via private marketplaces (PMPs), the ANA’s report suggests the same games are being played: PMPs including more than 500 publishers were found to house circa 20 per cent made for advertising sites (versus just over a quarter for the open web), yet charging twice as much on a CPM basis. In other words, they are hiding almost as much budget-siphoning filler, but asking double the money.
“Our analysis suggests that not all categories of PMPs with matched DSP and ad verification live up to the promise of being ‘premium’ or ‘privileged’,” as the ANA drily observes.
“The point is, advertisers do have to get into those weeds, as [P&G CMO] Marc Pritchard put it. The trouble is, they are not. There are so many obstacle, so many people saying no, that it just gets very hard to do. So you have to use this [ANA] playbook, you have to be tough and you have to not take no for an answer,” says Manning.
“You have to set yourself some goals: how am I going to improve all of this so that when I spend $1, it doesn’t turn into 36 cents, but turns into more than $1? That would be quite a turnaround in fortunes. But if you start from that point of view, then you’re starting to do your job properly.”
Walled gardens, retail media
Manning reiterates a desire for “one of the big media agency groups to stand up and say ‘we are not going to accept this any more’.” But he acknowledges that aspiration is “probably one of the most naïve things you could imagine.” In the end, he says, systemic change can only be effected by big advertisers deciding to stop wasting money.
But he thinks shifts are actually underway – just more quiet budget reallocation than big programmatic bang.
“There’s not going to be an Armageddon. But what tends to happen in dysfunctional marketplaces where the end user, i.e. the advertiser, is getting poor value for money, is they start to take their money elsewhere. What we’re starting to see is advertisers, particularly in the consumer packaged goods marketplace, saying ‘I’m going to spend my money differently. I’m going to go into digital commerce, I’m going to go into retail media networks, where I have a better chance of seeing where the money is going, and being able to measure the effectiveness of it,’” says Manning.
“So the money is starting to move out of the open web. Unfortunately, in some respects, it’s going to go even more into the bigger walled gardens where the ability to judge effectiveness is limited … But the money will start to drift away – and the sad reality is some publishers will suffer even more as a result of this. But if they’re not adding value, then that’s just the way of the marketplace.”
There’s a lot more in the podcast. Get the full download here.