Industry Perspectives

3 Reasons Programmatic Needs More Transparency

Two weeks ago, we sponsored the IAB’s Annual Leadership Meeting (ALM), where leaders from across digital advertising gathered to discuss the pressing issues facing our industry. Unsurprisingly, the topic of transparency was front and center. The murky programmatic supply chain has long vexed advertisers and publishers alike by enabling both deceitful pricing practices and fraudulent activity.

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The AppNexus Team
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But there are reasons to be hopeful. Startups like Amino Payments promise the ability to audit the programmatic supply chain via blockchain technology to give publishers and advertisers the information they need to conduct business in an open, mutually-beneficial manner.

At the IAB ALM, our CEO and founder Brian O’Kelley headed up a panel with Amino Payments CEO Will Luttrell and AT&T VP of Media & Sponsorships Mark Wright, where the three discussed what a more transparent programmatic ecosystem would actually look like. Below is a recap of the conversation, focusing on three key benefits greater transparency can bring to our industry.

 

1. We can drastically reduce ad fraud

Year in and year out, digital advertising fraud is one of the biggest drains on programmatic budgets, costing advertisers an estimated $14.2 billion in 2017. In most cases, bad actors sell advertisers fake traffic either through domain spoofing – a practice by which fraudsters claim to have inventory they don’t – or by selling them impressions generated by bots rather than by humans.

The magnitude and severity of this problem is a direct result of the complexity of the programmatic supply chain. With so many degrees of separation between brand marketers and the publishers whose inventory they want to buy, it becomes easy for campaign budgets to be siphoned off by unscrupulous intermediaries.

On our panel, Will recounted the biggest question he and his team asked when dealing with fraudsters at his old company, ad effectiveness measurement provider Integral Ad Science: How do these guys get paid? Until we can know exactly which ad tech intermediaries are responsible for spending on fraudulent impressions, advertisers will continue to get fooled into buying them. But with a clear “dollar in, dollar out” view of where programmatic spend goes, we can trace the supply paths that lead to fraud, name and shame the offenders, and help advertisers avoid them.

 

2. Advertisers can effectively evaluate their ad tech partners

In most business relationships, the customer can easily evaluate what they’re getting, judge the value against the costs, and decide whether or not the purchase is worth it. But this often isn’t the case in programmatic advertising – and once again, the foggy supply chain is the culprit. In most cases, marketers pay agencies up front, who in turn use that money to pay media buyers, exchanges, and other ad tech providers. There’s no system of record itemizing where all the money goes, so brands don’t know how much of their budget is actually paying for ads and how much is going toward fees from intermediaries – or exactly what services those fees are paying for. 

As Mark pointed out in the panel discussion, it’s ridiculous that a brand like AT&T can’t fairly evaluate its programmatic partners. Digital advertising is one of the biggest investments a company like his will make, and right now, he has huge gaps in his understanding of the return on that investment.

In order to correct this issue, marketers like Mark need to see exactly how much of their ad spend is reaching publishers and how much is going to intermediaries. Only then can brands accurately assess their partners’ performance and make an informed decision on whether or not to keep working with them.

 

3. The best ad tech providers will get stronger

Believe it or not, the ad tech providers who provide real value to advertisers will benefit from greater transparency. That feels like a counterintuitive point at first. After all, the transparency conversation is often framed around forcing fees down and fighting the “ad tech tax.” On the surface, you may wonder why ad tech providers would want that to happen.

But as Will takes pains to emphasize, programmatic fee transparency isn’t about shaming providers for the fees they charge. It’s simply about making it possible for brands to evaluate the providers they work with. As he points out, it’s entirely possible that an ad tech provider could be taking as much as half an advertiser’s campaign budget but adding enough value to justify that cost. Brian agreed, adding that increased transparency is an opportunity for the best ad tech providers to showcase the ROI they provide. It makes sense – fairer competition tends to benefit the best players. And as Brian outlined in a recent blog post, providers charging fees out of whack with the value they provide and hoping this transparency push goes away will likely find themselves losing revenue when the chickens come home to roost.

 

This future is closer than you think

Many in the industry think that full programmatic transparency is a dream that won’t be realized for years. But in reality, we’re pretty close today. Six of the top ten programmatic spenders are already working with Amino Payments (or will be soon). Meanwhile here at AppNexus, we’re already offering a clear view of all fees to advertisers who use the Adobe Advertising Cloud on our marketplace. As these transparency mechanisms become an industry standard over the next couple of years, we expect to see brands drastically improve their ad performance.

 

If you’d like to learn more about how AppNexus provides transparency to advertisers, please contact us here.