The good, the bad and the ugly of real-time bidding

This post is by Michael Smith. Michael is one of the UK’s digital veterans and is Managing Partner and Digital Director of Media and Communications consultancy, ID Comms – a Marketing First Forum partner.

Real time bidding

Image source: The Economist

It’s fair to say that few people are neutral when it comes to programmatic buying and real-time bidding (RTB). From the agency enthusiast to the client skeptic everyone has an opinion about what it means.

Some of these views are wholly negative but some of them are utterly positive. They appear to be so contradictory that they might be talking about two completely different developments in the way digital is traded.

On the one hand, the agency might say that this is a fantastic way of reaching a target audience, at scale and cost effectively. It’s the future of digital advertising and you’d be a fool not to take advantage

On the other, the more cautious would claim that while the targeting might be more precise, the true cost of reaching that larger audience is unclear.

Actually my take is that both are partly right. There are some fantastic opportunities from programmatic buying and agency trading desks but there are also some problems that need to be ironed out to reassure clients and give them the confidence that their media investments are being traded to ensure maximum value.

In order to get a more measured perspective I’ve outlined my perspective on the good, the bad and the ugly of the new trading eco-system.

The fundamental issue is that too much of the good is being overshadowed by the bad and the ugly. I strongly believe this is discouraging brands from taking advantage of what could be a fantastic opportunity.

To take one favourable statistic from a recent World Federation of Advertisers survey, two-thirds of respondents reported that they were paying reduced CPMs as a result of using trading desks

Based on respondents at companies that combined spend around $30bn a year on marketing it also found improvements in targeting and return on investment at 44 per cent and 31 per cent of respondents respectively, while 26 per cent said they experienced richer insights thanks to their use of trading desks at both agencies and independent suppliers.

The good side of programmatic buying

Trading desks are a great opportunity to deliver data-led trading and allowing brands to buy audiences rather than media placements.

They bring together the reality of placing the right ad, at the right time, with the right message, in the right context for the right price.

Key to delivering this opportunity is robust data and the use of multiple data sets to build an anonymous but comprehensive picture of the type of profile behind the impression.

Assuming such ads are seen, this allows us to reduce wastage and enhances the value of media investments. Being able to target at such data-driven granular levels means that media buying and delivery can be optimised to impressions with greater confidence that they will deliver a result – what client wouldn’t want that?

Brands can buy the eyeballs of the most exact types of individuals rather than buckets of impressions or worse multiply audiences across sites.

In addition, where agency trading desks have access to private exchanges with publishers or deals to secure first look/refusal on premium impressions, there is the opportunity to deliver ads in environments that can be hard to secure or expensive via other routes.

Too often technology is allowed to overshadow the opportunity but fundamentally, in the RTB space the ‘good’ comes from the layering of technology to allow for a more efficient and targeted buy.

The bad side of programmatic buying

It’s early days but there are a number of challenges in ensuring the good outweighs some of the bad.

One of the biggest “bads” is the complexity of the ad tech ecosystem. There is still a lack of knowledge and education at both the client and agency ends and clients in particular have limited understanding of the options available to them, or quite specifically how to execute them.

Not only is it complex, but it’s also constantly changing. Both agency account directors and clients are struggling to keep up. All too often, the experts, who have no direct client contact, are making budgetary decisions on behalf of advertisers.

Agencies have failed to communicate clearly the benefits of programmatic buying and RTB, while clients – even the largest ones – have not taken steps to acquire the knowledge they need.

The ad:tech agenda has been driven by agencies (and often a small group within agencies). They have developed the contracts, mandates, partnerships and made the investments required.

The time has come for knowledge to be shared much more widely to ensure that more people are comfortable with the new eco-system.

All these issues are solvable, if everyone gets around the table. But the ugly issues below are making it harder for everyone to reach an amicable framework that allows the benefits to shine through.

The ugly side of programmatic buying

No comment on agency trading desks would be replete without reference to hidden margins, rebates and kickbacks. With many agency contracts precluding clients from auditing within the programmatic space, the truth of the situation is more hearsay than hard fact. The current level of opacity does not invite confidence among advertisers.

Because many contracts preclude auditing of programmatic buying, it is impossible for clients to see whether they are being charged media at cost. There is a need for full transparency about the agency business model in the digital age.

There is deep concern too about data. Client data storage is a big issue and one where clients need confidence that their data is not being used to the benefit of clients within the same vertical (particularly data based on the impact of media investments).

Data ownership, or in fact lack of, could make moving a media account a very difficult challenge for clients in the not too distant future, although this can be resolved by updating contracts to ensure they are clear about how data will be transferred to clients as and when they request it.

Four key steps for clients to take now:

1. Celebrate the benefits that programmatic buying can bring to your business. But keep up the pressure for more knowledge and greater transparency. Work with your suppliers to eliminate the ugly so that you can sit down and deal through the bad issues sensibly and calmly.

2. If you are using an agency trading desk (or indeed an independent supplier) be clear about where they are adding value and where they should be rewarded for their knowledge and the value they add.

3. Work with your industry bodies to create clear industry standards that allow for open terms of engagement between agency and advertiser. This will help reassure your procurement team and build confidence across the business.

4. Ensure knowledge of trading desks and how they work extends beyond the trading desk you use. Make sure your agency account director is au fait with the details and can provide guidance to you and the trading team. Create an in-house programme to ensure your media team understands the implications of this kind of trading on your brand budgets and your reputation.

This article was originally posted on The Drum on 20-Nov-13

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About Michael Smith

With an unparalleled digital knowledge and experience across both the public and private sectors, Michael is one of the UK’s digital veterans. Michael is Managing Partner and Digital Director of Media and Communications consultancy, ID Comms
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