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Marketing MathTM

Category Archives: Advertisers

Investigation Reveals That DSPs Are Charging “Hidden Fees”

10 Jan

fraudsterInteresting article from Adexchanger, which reveals that marketers are still subject to a range of hidden fees being charged by DSPs. This in conjunction with DSPs earning non-disclosed rebates from exchanges that certainly raises questions about DSP objectivity. Of note, these non-transparent charges and sources of revenue can be in excess of 20% of media spend.

While the subjects of “transparency” and “accountability” have been at the fore of industry discussion over the course of the last few years, it is quite surprising to see how little progress has been made across certain segments of the digital media supply chain. It is clear that marketers cannot rely on their media agency, trading desk or DSP partners to safeguard and optimize their programmatic investments.

Strong contract language establishing an advertiser’s expectations for “cost-disclosed” transactions, coupled with independent oversight and financial penalties for violations are required if marketers are truly interested in boosting their working media. DSP’s desire to offset rising costs or to recoup investments in ad technology and infrastructure are not valid reasons for the application of hidden fees. Marketers should continue to push for full disclosure of all transactional cost detail from each player in the digital supply chain. Read More

Nike Evaluates Digital Agency Partners Using a “Reverse Auction”

08 Jan

reverse auctionNot a believer in the reverse auction methodology for sourcing professional services firms. History has shown that this methodology is clearly not the most effective means of evaluating capabilities and or the distinctive nature of an agency’s work and or relevant performance. Additionally, this approach can limit an advertiser’s access to top tier agency talent as many firms will simply choose not to participate in this type of review process.

From a supplier perspective, advertisers using this approach risk being typecast as only being interested in driving agency fees lower, not in building collaborative partnerships or the caliber of the work or the depth of an agency’s resources. Will be interesting to see which agencies choose to participate versus those that opt out. Read More

2017 | A Year in Review: Marketing Math’s Most Read Stories

29 Dec

Top 5With 2017 now in our rearview mirror and all of our attention focused on the coming year, we thought that you might be interested in learning what our “Top 5” blog posts were over the past twelve months, according to our readers.

 

  1. Advertisers: Buying Guidelines Matter
  2. How Well is Your Agency Compensated?
  3. What if You Discovered That Your Digital Dollar Netted You a Dime’s Worth of Media?
  4. The Real Cost of Agency Employee Turnover
  5. Media Agency Estimated Billing Should Be Eliminated

While familiar issues such as; trust, transparency and brand safety continued to be at the fore of advertisers’ attention, new topics including people-to-people marketing, artificial intelligence (AI) and general data protection regulation crept into our field of view.

Thus 2018 certainly promises to be a challenging and exciting year and our Marketing Math team will be at the ready to cover these and other topics impacting the marketing and advertising industry.

The Transparency Premium

20 Dec

price riseIt was with great interest that I read an article on Digiday.com regarding the “media transparency fallout.” An underlying theme of the article was that advertisers should be prepared to pay more for transparency if they want to continue to work with the top tier media agency brands.

The notion that advertisers are not fully embracing transparency, because it “costs more” to reveal to clients how their media dollars are being invested is a laughable premise. If this is truly the position being taken by the agency holding companies, then it easy to understand why independent media agencies could carry the day in 2018.

From our perspective, advertisers are already paying a premium for the lack of transparency. This comes in several forms, including:

  • Non-transparent agency fees and mark-ups
  • Poor quality inventory driven by non-human and fraudulent traffic
  • Soaring non-disclosed ad tech and intermediary fees
  • Brand safety risks tied to questionable ad environments
  • Sub-par performance tied to untenable declines in working media

The fact that an agency would purport that it costs more to provide their clientele with a direct line of site into their media placements, the net cost paid and all of the related fees is a ludicrous proposition. Since when does honesty and transparency come at a premium? Isn’t that the cost of entry?

As we all know, there has been a recurring narrative that advertisers forced agencies to adopt non-transparent, unethical practices by squeezing agency compensation over the course of the last several years. This couldn’t be further from the truth.

Importantly, there are two parties involved in negotiating agency remuneration agreements, clients and the agencies themselves. In the end, no one forces an agency to accept a bad compensation deal. If that occurs, it is only because the agency has agreed to those terms, rather than pushing back or walking away from the negotiation. The notion that accepting remuneration deal terms that are less than an agency’s desired outcome makes it okay for them to pursue opaque practices to pad their bottom lines on a non-disclosed basis is simply wrong.

Thus the position that an agency would abandon such practices for a premium is disingenuous at best. There is never a wrong time to do the right thing.

When will the agency holding companies learn? Practices such as non-transparent revenue, media arbitrage, non-disclosed mark-ups, float income and volume based kick-backs are what led to the lack of trust among the advertiser community toward media agencies. This combined with the fact that the agency community repeatedly denied that they engaged in these practices when questioned repeatedly by advertisers and the trade press.

It wasn’t until the infamous Association of National Advertisers (ANA) media conference in 2015 when Jon Mandel, former CEO of Mediacom blew the lid off of those denials that the industry began to sharpen its scrutiny of these practices. Ultimately, this led to the seminalMedia Transparencystudy conducted by K2 Intelligence and Ebiquity for the ANA in 2016, where these behaviors were acknowledged and quantified.

Agencies that continue to ignore the cost of their non-transparent practices and the potential for irreparable harm that it may cause them do so at their own risk. Now more than ever, advertisers have bona fide options ranging from working directly with publishers and media sellers, moving their media planning and buying in-house to engaging independent agencies or management consultants that embrace full-disclosure.

If the agency community is ready to have an honest discourse on remuneration, we remain fully supportive and would encourage advertisers to openly embrace healthy discussions on this important aspect of client/ agency relationships. In our agency contract compliance and financial management practice, we have never encountered a client organization that begrudged their agency partners the opportunity to earn a fair and reasonable profit. All of these client organizations would welcome collaborative discussions on the development of mutually beneficial compensation systems.

So enough of the pretense that regaining the higher ground comes at a premium.  As the independent media agencies have already realized; “Take the high road, there is much less traffic there.”

 

Can Advertisers Justify Mobile Ad Price Escalation?

19 Dec

agency compensationMobile ad prices to increase at more than 12 times that of the growth in U.S. GDP. Really?

While one must always consider the “source,” one programmatic agency is estimating that mobile ad prices will increase 45% between now and 2019. This in a market where supply still exceeds demand on a broad basis.

Advertisers must be wondering; “What percentage of that increase in price is going to agencies and ad tech providers?”

Full transparency is required, moving from non-disclosed to cost-disclosed buys so that media inventory prices are broken out along with full detail on data, tech and agency fees Read More

Are Advertisers Ready, Willing and Able to Trust Their Agency Partners?

14 Dec

partnershipInteresting survey from Advertiser Perceptions, which queried marketers on topics ranging from favorite ad agency holding company to whether or not they would consider using a management consulting firm in lieu of a traditional ad agency.

Beyond marketers’ rankings of various agency brands, the most intriguing finding is one that is still centered on the “trust” crisis that has enveloped the industry for the last several years. Two-thirds of those surveyed “feel that their agencies are not open and transparent on cost” and “that they are not willing to share meaningful KPIs with their agencies.” This could certainly prove problematic for advertiser and agency alike moving forward Read More

Agencies vs. Consultants: What Does the Future Hold for Marketers?

24 Nov


pro vs con
Have you formed an opinion yet on the battle between traditional advertising agencies and management consulting firms for marketing and advertising supremacy?

Many have, citing profound differences between these two types of professional services providers. The basis for the beliefs are centered on a range of characteristics attributed to each type of firm, including; company culture, strategic focus, business processes, talent pools, breadth of capabilities and ability to provide integrated solutions.

The question to be asked, as management consultants continue to push into ad agency territory (largely through acquisition) is; “Are the differences between these entities meaningful?” Or will the blending of these two types of firms ultimately result in a level playing field among the large agency holding companies and international consultancies?

Most pundits suggest that the differences are very real, with consultants largely grounded in a strategic focus on how to boost a company’s performance, and agency services centered on building brands by leveraging traditional media channels and touchpoints. Clearly both perspectives are valuable in their own right. Along with these differences, other complicating factors are at play that will determine the ultimate outcome.

  1. Marketers seem to be increasingly focused on improving in-market performance, which is becoming the principal means of validating the efficacy of their advertising programs. Metrics such as awareness, consideration and brand purchase intent are all well-and-good, but at the end of the day organizations are more interested in topline growth, market share expansion and bottom-line profits.
  2. There have been profound shifts in consumer purchase behavior and questions raised about the validity of the traditional purchase funnel used by marketers to map a consumer’s progression from awareness to action. In today’s digital-centric world of transacting business the path to purchase is not as linear as it once was.
  3. Research among younger shoppers suggests that marketers can no longer pre-suppose that brands matter. Certainly not to the extent that they once did. In an industry where it is projected that companies will spend in excess of $1.0 trillion on marketing services in 2017 (source: GroupM, 2016 “Global Ad Expenditures Forecast”) this is quite alarming. According to Havas Worldwide’s 2015 annual index of “Meaningful Brands” it was determined that “only 5% of brands would truly be missed by consumers U.S. consumers.” Driving this trend has been the emergence of the 75 million plus U.S. millennial target segment, whose trust in brands has been eroded as have their perceptions of genuineness and brand authenticity.

These trends may point to a larger shift, where consumer purchase behavior is more readily shaped by relationships, peer input and social influences rather than by branding. Thus the ad industry’s model of pushing brand messaging through a variety of media channels as a way of creating awareness and consideration in the hope of driving purchase intent may not yield the results it once did. It is likely that this traditional approach will be supplanted by social engagement and social selling as consumers take control of the pre-purchase learning and competitive evaluation portion of the purchase decision making process.

This could allow management consultancies to curry favor among marketers under pressure to drive performance in the short-term. The consultancies ability to offer integrated end-to-end solutions including; organizational design, transformational strategy development, user experience design, data analytics, technology support and increasingly branding and marketing expertise is considered to be quite compelling to many Chief Marketing Officers.

With so much at stake, it is certain that the agency holding companies and global consulting organizations will continue to invest in transforming their businesses to better serve marketers seeking to evolve their approach to achieving in-market success. In the words of Jeff Bezos, Founder of Amazon:

“We expect all our businesses to have a positive impact on our top and bottom lines, Profitability is very important to us or we wouldn’t be in this business.”

Are Holding Company Cash Flow Pressures Slowing Supplier Payments?

17 Nov

estimated billing processIt has been reported by City AM in London that a research division of an agency holding company had received instructions to “slow down” payments to creditors in order to maximize its “cash position reported in the year-end accounts.”

All the more reason that advertisers should seriously consider moving from the industry’s antiquated “Estimated Billing” system to one predicated on final billing, based upon an agency’s actual costs. Remember, the money that the holding companies are clinging to when taking suppliers out on days payable outstanding belongs to advertisers.

Good treasury management practice would suggest that an advertiser would be better served by retaining their funds longer, maximizing interest income opportunities and eliminating risks to their reputation (and the associated pricing premiums) associated with being labeled as “slow pay” by the supplier community  … Read More

4 Questions That Can Impact Your Digital Buys

15 Nov

gour

According to eMarketer, in 2017 advertisers will spend 38.3% of their ad budgets on digital media – in excess of $223 billion on a worldwide basis. Yet, in spite of the significant share-of-wallet represented by digital media, there is generally little introspection on the part of the advertiser.

Looking beyond the “Big 3” [ad fraud, safe brand environment and viewability concerns], the lack of introspection begins much closer to home. Simply, in our experience, client-agency Agreements do not adequately address digital media planning and placement roles, responsibilities, accountability or remuneration details.

Standard media Agreement language does not adequately cover digital media needs. By this we mean specific rules and financial models need to be included in Agreement language that cover each potential intermediary involved in the buying process and to guarantee transparent reporting is provided to the advertiser. It is our experience that Agreement language gaps related to “controls” can be much costlier to advertisers than the aggregate negative impact of the Big 3.

And, regardless of Agreement language completeness, a compounding factor is that too few advertisers monitor their agencies compliance to these very important Agreement requirements. To assess whether or not your organization is at risk, consider the following four questions:

  1. Can you identify each related parties or affiliate that your ad agency has deployed on your business to manage your digital spend?
  2. Does your Agreement include comprehensive compensation terms pertaining to related parties, affiliates and third-party intermediaries, that handle your digital ad spend?
  3. Is your agency acting as a Principal when buying any of your digital media?
  4. What line of sight do you have into your ACTUAL media placements and costs?

If you answered “No” to any of the questions, then there is a high likelihood that your digital media budget is not being optimized. Why? Because the percentage of your digital media spend that pays for actual media inventory is likely much lower than it should be, which is detrimental to the goal of effectively using media to drive brand growth.

Dollars that marketers are investing to drive demand are simply not making their way to the marketplace. Often a high percentage of an advertiser’s digital media spend is stripped off by agencies, in-house trading desks and intermediaries who have been entrusted to manage those media buys. A recent study conducted by AD/FIN and Ebiquity on behalf of the Association of National Advertisers (ANA) estimated that fees claimed by digital agencies and ad tech intermediaries, which it dubbed the programmatic “technology tax” could exceed 60% of an advertiser’s media budget. This suggests that less than 40 cents of an advertiser’s investment is actually spent on media.

A good place to begin is to ask your agency to identify any and all related parties that play a role when it comes to the planning, placement and distribution of your digital media investment. This includes trading desk operations, affiliates specializing in certain types of digital media (i.e. social, mobile) and third-party intermediaries being utilized by the agency (i.e. DSPs, Exchanges, Ad Networks, etc.). The goal is to then assess whether or not the agency and or its holding company has a financial interest in these organizations or are earning financial incentives for media activity booked through those entities.

Why should an advertiser care whether or not their agency is tapping affiliates or focusing on select intermediaries to handle their digital media? Because each of those parties are charging fees, commissions or mark-ups for services provided, most of which are not readily detectable. This raises the question of whether or not the advertiser is even aware charges are being levied against data, technology, campaign management fees, bid management fees and other transactional activities. Are such fees appropriate? Duplicative? Competitive? All good questions to be addressed.

When it comes to how an agency may have structured an advertiser’s digital media buys, there is ample room for concern. Is the affiliate is engaged in Principal-based buying (media arbitrage)? Is digital media being placed on a non-disclosed basis, versus a “cost-disclosed” basis where the advertiser has knowledge of the actual media costs being charged by the digital media owner?

Evaluating your organization’s “risk” when it comes to digital media is important, particularly in light of the findings of the Association of National Advertiser’s (ANA) “Media Transparency” study released in 2016, which identified agency practices regarding non-transparent revenue generation that reduces an advertiser’s working media investment.

The best place to start is a review of your current client-agency Agreements, to ensure that the appropriate language safeguards are incorporated into the agreement in a clear, non-ambivalent manner. Once in place, monitoring your agency and its affiliates compliance to those contract terms and financial management standards is imperative if you want to assure compliance, while significantly boosting performance. 

“Today, knowledge has power. It controls access to opportunity and advancement.” ~ Peter Drucker     

Interested in learning more about safeguarding your digital media investment? Contact Cliff Campeau, Principal, AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this important topic.

 

Has the ads.txt Program Been Corrupted by Bad Actors?

13 Nov

fundingIs this a sad state of affairs or what? Ad tech firms, programmatic agencies, ad networks and resellers are actively trying to game the ads.txt system to further their own agendas. The sole reason that the industry got behind the implementation of ads.txt was to safeguard advertisers from domain spoofing and unauthorized inventory selling.

For these stakeholders to view this as an opportunity to manipulate the guidelines to drive their fees and or reseller revenue is inappropriate. Sadly, these actions shine a light on the number of “middlemen” firms operating between advertisers and publishers, and focused on their self interest are detrimental to reforming the digital media marketplace. Ad agencies, programmatic trading desks, DSPs, exchanges, ad networks, resellers, SSPs… what a mess. Can programmatic digital survive? Read More

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