When I met my wife years ago, she was my sales rep. I won’t say that totally endeared me to the sell-side but it certainly helped. However, most of my training was in finding ways to buy media cheaper or more effectively. I’ve spent countless days and weeks with procurement, shredding vendor contracts with redlines and bringing them to the breaking point of their Service Level Agreements (SLAs). Since then, I’ve found that understanding the ecosystem around you, finding ways to add value, and allowing others to do so, as well, is more beneficial than beating people up over price.
In service of a client, there are typically three active participants in the trading of impressions: Agency, Technology, Publisher. Here are a few examples of how we’re pinching each other, as well as client responsibilities (they’re not off the hook!)
Agency: Demands on the agency to be more transparent and provide more expertise– while also lowering fees–put the business at risk.
As per the Business Insider report, P&G and Unilever have made deep cuts in their ad spends and have both aggressively pushed for more transparency in the murky digital media landscape in recent years, even threatening to pull back on digital spending unless the system is cleaned up.
As advertising budgets swiftly move from TV to digital-where advertisers are now spending USD 72 billion a year according to eMarketer– the noose can be expected to tighten further.
Clients have been putting pressure on advertising companies as procurement officers exert more influence over marketing budgets. Procurement departments review everything from agency fees to production costs, looking to cut expenses where they can. Many big companies are also stretching out payment to agencies from 30 days after a piece of work to 60 days or even more than 120 days.
A recent study from the Association of National Advertisers, a trade group, found that only 40 per cent of agencies believe they are fairly compensated, even though 72 per cent of clients think their payments are appropriate. Agencies are expected to do the same work they did last year for less than they did it last year. If cuts are too deep, an agency can be forced to shed staff.
• As a Client- You should determine what value your agency is providing. And, you should work to remunerate them fairly when they successfully provide that value. Now increasingly advertisers want commission for simplicity over outcome-based payment. The number of ad agencies using media commission-based compensation systems is on the up, according to findings from the Association of National Advertisers’ (ANA)
• As a Publisher- You should arm your agencies with knowledge of your offering. And, you should collaborate to help deliver that articulation of value.
• As for Technology- Listen to your agency partners to learn about features that help automate the workflow. This ensures they spend more time adding value versus configuring a platform.
Technology: Challenged by commoditisation and a closing window for exit, these companies are also in a market that doesn’t seem to get them.
• As a Client- Educate themselves, get very comfortable with how your ad tech works: what it does, what it doesn’t do, how often it breaks (because it does, all the time), and how your agency is accessing it for maximum performance and transparency. Clients have to start putting more pressure on media agencies and understand exactly what they are doing. They need to recognise that there’s some value leaking in the system, and figure out what is acceptable and not acceptable practice. With programmatic expanding into new sectors such as TV and outdoor, understanding it will only become more important.
• As a Publisher- We understand you need to improve your yield and you are taking different approaches to your waterfall and ad stack, but understand what potential ramifications that has to the Demand Side Platforms (DSPs). Growing infrastructure costs and competition will kill off the smaller DSPs and SSPs. Competition will remove players with fraud, bad tech and high fees. Companies will consolidate as economies of scale kick in. Infrastructure costs create economies of scale, and the barrier to entry in ad tech will be that much higher.
• As an Agency- Be prepared to be the referee between Publisher and Technology. Be solutions-oriented and consider how these other entities make their money. Undue pressure on Publisher yield or Technology overhead is bad for all of us.
Publisher: Fighting frequent cost battles with clients and agencies can prevent you from seeing the forest for the trees.
• As a Client- Focus on fewer, bigger, better. Publishers can provide huge value if they are communicating more directly about strategy and what is actually working.
• As an Agency- If the business terms aren’t quite working for a Publisher that is a strategic fit, get creative about revenue opportunities. Pay for the data, pay for the custom creative. Think about the full package.
• As Technology- Work with your publisher partners to simplify the mechanics for transaction. Can a unified auction solve waterfall and header problems? Is it time for 2nd price auction?
• As Publisher- Number of nimble and savvy publishers are starting to think about building their own mediation layers either on the server side or client side. Publishers could work with their demand providers to allow for all bid information to be passed. That would enable publishers to mediate and conduct a true unified auction. It’s more likely that publishers will be able to accomplish complete auction unification as the competitive issues go away, transparency is not an issue and the pricing is “free” – excluding all of those software developers. Many companies will be striking their own path or going in the directions laid out above, but it’s clear that this is a next phase of progress within the programmatic space. A unified auction will solve for the scattering of demand brought about by header bidding and provide even greater value to publishers and advertisers
Agencies should provide strategic value; they should be held to account. Technology allows us to be precise and perform well in media; we should understand it better. Finally, without publishers, we’d have nowhere to advertise; they should get their due.