"Old George Orwell got it backward. Big Brother isn’t watching. He’s singing and dancing. He’s pulling rabbits out of a hat. Big Brother’s busy holding your attention every moment you’re awake"
— Chuck Palahniuk, Lullaby
How is it possible, in an age of digital surveillance, when all our keystrokes, clicks and posts are recorded and analysed by commercial companies funded by advertising, that we don’t know where millions of pounds of that advertising money is going?
It was not the place of brand trade body ISBA and auditing giant PwC to ask such a rhetorical question in the course of their extraordinary deep-dive into the workings of the programmatic media-buying supply chain. But it was a sentiment that burned through the landmark report, published last month, which is now causing many advertisers to ask fresh questions about their relationships with the adtech vendors and media agencies that handle their programmatic affairs.
According to the report, only 12% of 267 million ad impressions, paid for by brands to be served on publishers’ websites, could be accounted for or "matched". It was not possible to match the rest because of low-quality data.
Of the advertising pounds spent on these ads, from an accounting point of view, 15% has disappeared. Of the remainder, publishers receive 51% of spend, and the rest goes towards fees charged by demand-side platforms and supply-side platforms.
"We don’t think that programmatic is Machiavellian, we just think it’s a mess because of the way it has evolved," Sam Tomlinson, the PwC partner who oversaw the report, said.
Nevertheless, "messiness" on this scale is stunning, particularly when you consider the UK’s programmatic display ad market is worth about £6bn a year (based on eMarketer forecasts). This means hundreds of millions of pounds worth of advertising is being brought into question. Moreover, the true amount of unaccountable spend in the programmatic system is likely to be higher than the report shows, given that it focused only on premium advertisers.
PwC ended up spending more than £1m on this report, which was in no small part due to the sheer amount of time it took to complete: more than two years. The first nine months were spent trying to painstakingly agree terms with the 15 advertisers (out of 3,000 ISBA members), 12 publishers, five demand-side platforms and eight media agencies that agreed to take part (it ended up being a modest outlay for the 15 brands, each of which stumped up £20,000).
Who’s to blame?
Media owners are, understandably, unhappy that only half of the money in programmatic is going to publishers. Tracy De Groose, executive chair of the news brands’ marketing body Newsworks, says: "The current digital advertising model penalises those it is supposed to be working for, while significant amounts of cash are disappearing into murky corners. And we wonder why trust in advertising is at an all-time low."
Danny Spears, chief operating officer of The Ozone Project, the joint newspaper brand sales house, reacted to the findings by saying a pub fruit machine faces higher standards of accountability than the programmatic supply chain. He added: "Revenue is lost through these mechanics and commercials as a result of obfuscation, manipulation, unilateral adjustments and other means of value extraction, and in such a way that neither buyer nor seller knows what really has happened."
Kelly Williams, managing director, commercial, at ITV, describes PwC/ISBA’s analysis as "extraordinary, but sadly unsurprising", and warns that the findings did not even touch on concerns regarding viewability, ad fraud and brand safety. "ITV’s policy of remaining outside the open-market programmatic ecosystem is anchored in our concerns over supply-chain integrity; apprehensions which this report validates," he adds.
Programmatic insiders, however, insist the information is available for brands that take the trouble to find it. Ari Paparo, a former Google DoubleClick executive and founder of real-time bidding platform Beeswax, points out: "Buyers and brands have been pushing for transparency among their suppliers for a while. There’s no excuse for a brand to not know how much their DSP is charging and how much data is being charged for."
But how to explain this 15% "unknown delta", as it is referred to in the report? Many specialists point to discrepancies between the way DSPs and SSPs calculate the data and their fees. The report indicates that a DSP’s fee, on average about 10% of adspend, can vary wildly from the contracted rates, both above and below what the contract says the fee should be.
While there may be some reconciliation, or even rebates, when brands and agencies are sent invoices at the end of a month or quarter, these extreme discrepancies do not serve to inspire confidence in transparency.
How to fix it
Ultimately, it is up to regulators and governments to intervene if a market is not working properly, and digital advertising is already in the crosshairs.
Last July the Information Commissioner’s Office published a scathing report about the open real-time bidding supply chain and criticised companies involved for being poor at data compliance and protecting web users’ privacy. While that investigation has now been paused because of coronavirus, privacy campaigners are pressuring the ICO to do more, claiming that open real-time bidding (RTB) is in widespread breach of the European Union’s General Data Protection Regulation.
Then there is the Competition and Markets Authority’s investigation into whether advertisers are getting a fair deal in the digital ad market, given the strength of Google and Facebook in the search engine/display and social-media realms, respectively.
Some argue regulators need to step up now. Paparo believes that a governing body should require that all parties in a programmatic transaction must provide log-level data.
"There has been surprisingly little global regulation regarding digital advertising," he says. "There has been action on privacy but the governments of the world have done very, very little on digital advertising. In some cases, the digital advertising has just folded under legacy media law, like in France and other countries. I’m not sure why, but it just hasn’t been a focus."
So what can brands, advertisers and agencies do now to clean up the programmatic supply chain while they still have the freedom to act?
Among the key report recommendations from ISBA/PwC is that better contracts need to be agreed between brands, publishers and the adtech companies.
Imagining himself in the role of a brand marketer, Williams says he would insist on drawing up a "transparency contract" with his agency, adtech partners, and publishers, which would document a need to "follow the money".
"Where there were issues, I would vote with my wallet and remove the party from my vendor list," Williams says. "Secondly, publishers need to reassert themselves, collaborate where possible, and provide scaled, transparent, alternative solutions."
Wayne Blodwell, founder and chief executive of consultancy The Programmatic Advisory, agrees on the need for better contractual frameworks, which would put adtech companies’ accountability on a par with agencies, in ways it simply is not at present. For example, he explains: "At the moment there’s a lot of uncertainty around how companies are operating, even for very basic things. For example, sometimes people will show a gross price and others will show a net price."
But Paul Gubbins, a former global programmatic strategy lead at Unruly, insists that programmatic has improved in leaps and bounds in recent years, because industry bodies, such as the IAB, helped establish common standards through the open real-time-bidding protocol. Getting everyone to speak the same language on programmatic data now will provide a further leap forward, he insists.
"You had DSPs and SSPs and tech platforms all using a different language," Gubbins says. "[Open RTB] enabled buying and selling tech to all use the same terminology, the same rules, the same protocols to make sure programmatic could get adopted and could scale."
As open RTB has enabled programmatic to scale very quickly in recent years, Gubbins adds, a similar move now will enable similar progression in automated online media buying.
The world’s biggest advertisers had, in effect, already put the programmatic media industry on notice, albeit in different ways.
Procter & Gamble chose to rattle cages via the sabre of its chief marketing officer Marc Pritchard, who, in January 2017, made a landmark speech calling out "an antiquated media buying and selling system that was clearly not built for this technology revolution". That preceded a move to bring much of P&G’s US digital media buying in-house in the following years or, as a spokesman described it, enable its brands to "put their hands on the keyboard for search and programmatic".
Unilever, meanwhile, also chose to look inward and has been experimenting with using blockchain for digital ad buying. The FMCG company’s head of media, Luis di Como, told Campaign last September that early trials with IBM had resulted in "zero media" leakage.
It is among an array of global advertisers, which includes Nestlé, McDonald’s and Virgin Media, that have been using blockchain seriously as a way of keeping track of digital media buying.
In recent years, some advertisers have also turned to supply-path optimisation, which enables them to reach further into the supply chain and strike more efficient arrangements.
Gawain Owen, Jellyfish’s digital strategy director and former programmatic chief at Diageo and Nestlé, says that brands should simply treat the media supply chain in the same way that they approach the procurement of raw materials.
He adds: "They need to take ownership of their programmatic activity and manage the relationship with the publishers/intermediaries directly in order to gain 100% forensic transparency. If this means the brand needs to hire people in-house with these skills and stop working with vendors, then so be it. No brand can afford to have 15% of its budget vanish into thin air."
Media agencies must step up
One can begin to see why a growing number of brands in the UK, and even more so in the US, has started bringing digital media buying in-house rather than use a media agency. If they are having to spend time and resources hiring people and building teams to keep tabs on the supply chain, why not just go the whole way and buy the media too?
Blodwell, whose consultancy has run reviews to help brands select agencies for programmatic media, admits that agencies can look similar on the surface but there are key questions a brand can ask to determine their true value as a partner.
He says: "It’s how they think about optimising campaigns and structuring them. How proficient are they with the technologies? How good are they at reporting and providing insight? Are they innovating on top of the technologies? Are they building things themselves in conjunction with what’s available?"
For example, Essence, which runs the Google brand’s digital media buying and took part in the ISBA/PwC study, has a data strategy department that dives deep into data platforms and audiences, as well as programmatic experts that understand media buying and trading. Together, those teams of specialists are supposed to offer a solution that is more advanced than a programmatic generalist.
Essence’s vice-president, programmatic EMEA, Matthew McIntyre, advises marketers to ask prospective media agencies how they would help them make a decision. The report, McIntyre notes, shows there is a lot of deep knowledge required in different areas of programmatic in order to understand it.
"Our role is in providing expertise that in-house teams can’t do sustainably in the long term, as well as providing expertise across advertisers," McIntyre argues. "It’s important that you’re able to see the breadth of the market and the opportunities.
"We have a lot of different clients that are at different stages of their maturity in in-housing. Some clients have in-house teams where they do all of the execution, some own their own contract with DSPs, and, for some, we do all the buying but they’re heavily involved, like BT. It’s our role to bring as much rigour as possible to analyse and understand whether they’re making the smart choice."
"We see publishers becoming more selective with the partners that they work with and the terms that they do business with them on"
— Danny Spears, The Ozone Project
Adtech vendors cut back
Another key recommendation of the report is that advertisers and publishers need to work with fewer adtech companies and thereby simplify the programmatic supply chain. If it’s their responsibility to keep tabs on their suppliers, they need to make life easier and give themselves fewer beans to count.
Ultimately, the forces of supply and demand have created a situation where publishers are working with many SSPs simultaneously.
If you visit a news brand’s website for the first time on a new computer, you will notice it may take several seconds to load. This is because, over time, DSPs and agencies have tried to access inventory from as many SSPs as possible. Each SSP has some amount of exclusive supply, so adding these together would lead to a bigger audience and, in turn, lower prices for ads.
However, the practice of header bidding, where publishers offer inventory to multiple ad exchanges simultaneously before making calls to their ad servers, means that most SSPs mostly no longer have exclusive inventory. The result is that working with more than, say, three or four SSPs does not increase supply, it only increases the number of intermediaries you have to deal with and potentially pay fees to.
Spears says this culling of SSPs has already been happening. "We see publishers becoming more selective with the partners that they work with and the terms that they do business with them on. From an Ozone perspective, we are investing in deeper and more strategic relationships with a smaller group of vendors who are more closely aligned with our specific business requirements, and just as importantly, our operating principles."
PwC, which is advising publishers to monitor their impression volumes and the fees applied to SSPs at log level where possible, notes that most will have an audit right in their contract. However, the auditors also found that SSP contracts were not being updated regularly and could recall only one example in the past three years of a UK publisher exercising its right to audit its SSP contract.
Perhaps the renewed media attention on the programmatic market’s transparency will encourage more publishers to act.