Blog

02/23
2018

What Is Your Programmatic Agency Not Telling You?

02/23/2018

What Is Your Programmatic Agency Not Telling You?

Marketers are becoming increasingly frustrated with ad agencies’ lack of transparency when it comes to programmatic marketing, and AI marketing tools like Albert™ offer a clear alternative.

A study conducted by the World Federation of Advertisers (WFA) revealed that 40% of the world’s biggest brands conduct programmatic ad buying through an agency trading desk (ATD). And that figure that is likely much higher among smaller companies that don’t have the resources to handle ad buying in-house.

The study found that an overwhelming 90% of the big brands that rely on ATDs for programmatic ad buying were dissatisfied with their agency partner and in the process of reviewing and resetting their contracts. This dissatisfaction seems to stem largely from the opaque, convoluted business practices that are common among programmatic agencies. When asked if they felt that ATDs are more or less transparent than traditional methods of media buying, 76% of companies responded “less.”

This would be problematic enough if companies generally had a sense of what was going on “behind the scenes” of their ad campaigns. But data from Circle Research indicates that 44% of companies currently buying ad space on mobile have either “little” or “no” understanding of how programmatic advertising on mobile devices works. In other words, many companies rely on agency partners to manage their programmatic ad buying without having the background knowledge necessary to keep their agencies honest.

Suspect Incentive Structures

For instance, even experienced marketers are often shocked to find that the organization that actually supplies the ad space for their campaigns only receives a typical 20 cents of the $5 CPM rate they pay to their agency. To be fair, this discrepancy is just as much a result of an overly complex ad network infrastructure as it is of programmatic agency greed, but regardless of who’s to blame, the end result is clear: companies are forking over sums far larger than the true value of the ad space they receive.

Unfortunately, this is actually a best-case scenario for many companies dealing with an ATD. As the ANA’s explosive 2016 Media Transparency Report highlighted, it is troublingly common for ad space providers to give cash rebates to programmatic agencies based on the amount of business the agencies funnel their way.

As a result, the ANA report explained, “[Companies] were sometimes pressured or incentivized by their agency to direct ad spend to [specific] media, regardless of whether such purchases were in the [company’s] best interests.” When ATDs are allowed to conduct programmatic ad buying according to this incentive structure, the likelihood of bad outcomes related to brand safety, ad viewability, and bot fraud skyrockets.

Moving Beyond ATDs

Fortunately, it appears as though ATDs and the media providers that abet them are finally starting to face a serious backlash for failing to increase the transparency of their operations.

According to a recent Metamarkets study, 41% of marketers claim that they won’t significantly increase their programmatic ad spend until transparency within the industry improves. This is not to suggest that programmatic ad buying itself is on its way out: 74% of marketers also claim that if programmatic buying becomes more transparent, they will expand their programmatic budgets by somewhere between 11% and 50%. That means that ATDs now have a very real incentive to clean up their act.

This pressure will only increase as more and more marketers begin to realize that artificial intelligence (AI) tools like Albert™, the world’s first fully autonomous marketing platform, enable them to bring ad buying and ad placement operations in-house.

Albert is an end-to-end “glassbox” tool, and his latest upgrade — Inside Albert — lets marketers take a peek behind the scenes of each and every campaign that he is running at any time. With Albert, marketers enjoy all of the benefits of working with an ATD without the all of the hassle and lack of transparency.

Unless programmatic agencies make a concerted effort to improve the transparency of how they go about their business, platforms like Albert will increasingly become the go-to option for small startups and multinational enterprises alike.

by Noa Segall
Head of Search & Display Data Research