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What advertisers want to know about programmatic

Tackling ad auctions, data leakage, what to measure and in-housing

Programmatic advertising is arguably the most important trend in advertising that is a necessitating a root and branch reformation of every tier of the media industry.

Research firm eMarketer asserts that $46 billion in ad dollars will be spent using such technologies in 2018 and that more than 82 percent of U.S. display ad spend will be purchased using programmatic technologies by 2020.

However, some of the biggest names in marketing are already calling out opaque practices of the ad-tech sector meaning serious questions must be answered. The IAB, in its role to educate, has attempted to shepherd advertisers with a program of conferences and advisory studies.

Adweek caught up with some on-stage presenters at its recent invitation only Programmatic Brand Summit to gauge what advice decision makers are heeding. Top among concerns were questions over in-housing, data and pricing transparency along with improved measurement capabilities as buyers prepare to reduce their number of trading partners.

How can I measure what matters, and should I go at it alone?

Javier Pérez Moiño, managing director, Europe and Latam, of Accenture Interactive’s programmatic services division, said marketers are paying more attention to programmatic as they want to understand the impact of their activity on real business outcomes.

This involves dispensing with outdated metrics such as average CPMs or clickthrough rates (CTR) in favor of more performance-based results, such as whether an ad led to a sale or qualified lead.

“For years marketers were relying on their media agencies to provide them with a report, whether they could understand it or not, but now they are starting to ask what technology they need to achieve their business goals,” he said.

Per Pérez Moiño, this involves developing entirely new skill sets, such as data science, etc., and that such an introspection would involve advertisers reconsidering their relationships with media agencies, aka in-housing.

He asserted that depends on the aims of the individual advertiser, adding that organizations—and not just their marketing departments—need to understand the implications of such a seismic move, including how they source staff with the necessary skills.

The skill sets of programmatic media traders and data scientists—such as analyzing bidding patterns and data modeling media outcomes—are not easy to come by but those brands that work with the right partners can markedly improve the performance of their media spend, he added.

Pérez Moiño also notes that remodeling a relationship between a media agency and an advertiser often involves the shift from a fee-based remuneration model—where agencies are rewarded as a percentage of media spend—to a more straightforward service model.

“Everyone knew what was going on beforehand with things like arbitrage,” he adds. “Now we see many people are moving from a fee to a service.”

What am I buying and why?

Increased transparency means the shady tactics that characterized the early days of programmatic are “less overt than it used to be,” according to Ari Paparo, CEO of Beeswax.

Industry veteran Paparo runs a demand-side platform (DSP) that lets advertisers customize their bid activity in ad auctions, and said that brand-side marketers ideally want to know how much of their media budgets are consumed by middle men.

The more erudite marketers are seeking “algorithmic transparency” by starting to probe beyond the well-established concerns over the relationships between buy- and sell-side players (especially ad-tech players that offer both types of services) and the potential conflict of interests this can raise.

This includes questioning the practices of some of the industry’s largest names with Paparo invoking the oft cited criticisms of Google’s ad stack, which is often labeled as a “black box”–albeit Google moved to address such concerns recently–but doubts remain.

For instance, Google algorithms uses pooled data—if Coke works with Google, part of its data is going to Pepsi, and vice versa. The data is pooled and somewhat anonymized, then fed back to clients.

Another a common complaint among those using the DSP within Google Ads Manager (formerly known as DoubleClick DBM) is that it allocates a disproportionate amount of their spend to the online giant’s ad exchange AdX.

“So is that transparency? If you don’t know what margin AdX is taking, you have a real open question about whether you know what you’re buying, and why you’re buying it,” added Paparo.

How can I improve my supply strategy?

Chris Kane, president of programmatic media consultancy Jounce Media, reports that advertisers are asking how to rationalize their supply strategy.

Historically, advertisers have relied on DSPs to fulfill this function but increasingly marketers are taking more ownership of such activity. Concerns over oblique practices such as second-price auctions and bid caching highlight the need for increased scrutiny.

The emergence of header bidding—a comparatively new way for publishers to collect ad auction bid requests to improve their revenues—and the supply-path complexity it creates means marketers now need to pay attention, added Kane.

Another question is more of a tactical nature, whereby media buyers ask suppliers for guarantees as they rationalize the number of supply-side platforms (SSP) or ad exchanges they work with.

The emergence of header bidding means that many publishers offer the same ad impression through a number of different ad exchanges. “And I’m not talking about like two, I’m talking about like 10,” said Kane.

He believes this presents buyers with an opportunity, claiming that many are slashing the number of ad exchanges they trade with. In some cases this cut can be as drastic as reducing the number of ad exchanges from upwards of 50 down to single digits, and many are using this as leverage for extra assurances from their suppliers.

Common assurances that ad exchanges are likely to offer include commitments around auction and data transparency as well as cost incentives.

“Principles-based” incentives could include agreements whereby an ad exchange provides detailed information on the mechanics it applies in an ad auction, such as how it chooses winners or the order in which it calls for bid requests, as well as notifying them on changes to said methodologies.

“Even further than that would be some kind of financial incentive … but I have not seen any evidence of that happening but it wouldn’t surprise me.”

Should I rein in my programmatic spend?

Lauren Fisher, principal analyst at eMarketer, said such concerns are leading sophisticated media buyers to seek “more private, one-to-one setups.”

This includes reducing their reliance on auction-based programmatic media trading through ad exchanges, aka real-time bidding (RTB), in favor of more direct deals with premium publishers, aka programmatic direct.

In 2020, U.S. advertisers will spend $42.6 billion on media via programmatic direct, representing 61.8 percent of all automated spend, while RTB spend, totaling $26.3 billion, represents the rest.

“By 2020, more than four of every five ad dollars U.S. advertisers allocate to digital display ads will be spent via private marketplaces or programmatic direct deals–not the open markets,” she said.

However, advertisers’ quest for more control could equally benefit larger platform players such as Facebook, Google and Twitter, according to Fisher, as their vast banks of first-party data and tech credentials can assure some marketers. Ultimately, it just depends on whose sales pitch they accept.

So just who will win out?

Opinion remains divided as to which parties will win out over such dilemmas. Will scaled advertisers’ patience with large platforms wear thin? Will they favor the more bespoke services of independent ad-tech providers?

EMarketer’s Fisher believes the larger platforms will remain resilient in the coming years as marketers seek security in established offerings.

“Put simply, advertisers want more control and direct contact with the publishers they are buying from and yes, that can include Facebook, Google and other walled gardens,” she said.  Although, eMarketer does expect to see Google and Facebook’s share of programmatic dollars holding relatively steady through 2020 she adds.

However, Accenture’s Pérez Moiño believes there is opportunity in the medium term for independent ad-tech companies particularly with the dual trend toward increased in-housing and governments beginning to impose more stringent privacy laws.

He said, “As advertisers better understand data, they want to own the technology, whereas you used to have agencies that would use the technology of several companies for all their clients, now the advertiser wants to own it and this opens a new phase of opportunity for these companies.”

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by Ronan Shields
source: ADWEEK