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Category Archives: Media Transparency

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

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.”

 

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.

 

Exchanges and DSPs Engaged in a Price War. Who Knew?

10 Nov

scam adsInteresting question for advertisers; “Were you aware that your agency was paying its ad tech partners (Exchanges, DSPs) fees equivalent to 20% to 24% of your digital media investment?” Further, did you know that an exchange operating as both a DSP and an SSP can lower its fees on its SSP platform to incent its DSP to route demand to their exchange.

Ironically, while this is totally self-serving, it is being merchandised to  advertisers as “Supply Path Optimization.” What it really is, is a method for building ad tech revenues at the expense of working media.

Not occurring on your watch? For grins, ask your digital media agency to arrange a visit with you to review the vendor billing detail from their ad tech partners. Of note, if they agree to share this information, which they may not, that invoicing won’t likely identify the fees being charged. So why all the secrecy? Read More

Advertisers Can’t Afford to Accept Digital’s Current State of Affairs

02 Nov

time for actionRecently, Mike Baker, CEO of DataXu, a programmatic ad tech firm, wrote an article for AdExchanger in which he rhetorically asks a question regarding Marc Pritchard, CMO at P&G and his leadership position on cleaning up the digital media marketplace; “Is this the battle we should be fighting?”  

Mr. Baker suggests that “Instead of working toward a slow, incremental uphill battle against the tech giants’ entrenched digital positions, brands have an unprecedented opportunity to shape and accelerate the future of TV.”

Of note, we agree with Mr. Baker’s premise regarding the need to proactively work on TV to prevent the same mishaps negatively impacting advertisers within the digital media space as TV expands their use of programmatic buying. That said, we don’t believe that anyone within the ad industry can afford to wave the white flag when it comes to reforming the programmatic digital media space. Ad expenditures in this area are too significant to give up the fight.

We take our hats off to Marc Pritchard and other marketing leaders who are fearlessly confronting the issues of brand safety, fraud, viewability, self-reporting and a lack of transparency when it comes to digital media, and all other channels Read More

Misstated Audience Data From Yet Another Social Media Platform

27 Oct

Should we be surprised? The practice of unaudited, self-reported audience measurement can’t end soon enough. Ironically, for advertisers desiring restitution, this high tech company seemingly can’t reconcile activity prior to 4Q16 due to “data retention policies.” This in spite of the fact that they have been overstating audience levels for three years. Really? Read More

Scathing Review of Programmatic & Media Agency Standing

03 Oct

cautionIn the recent edition of Marketing Week, writer Mark Ritson profiled a recent Advertising Week panel discussion featuring Martin Cass, CEO of MDC Media Partners and his stated view that clients simply do not have a “grasp of ad tech.”

He believes that: “They don’t understand it. We have become experts on the top of a pinhead and there are probably 1,000 people operating on the top of that pinhead. It’s so utterly bewildering and confusing. If you sat down with a CMO and asked him what most ad tech does he would not have a clue.” Read More

Lawsuits Expose the Seemly Underbelly of Programmatic Digital

25 Sep

fraudsterAt the rate things are progressing in digital media and programmatic trading, the tenuous relationships between advertisers, agencies, ad tech providers, exchanges and publishers are about to come unglued.

While many in the ad industry have had their doubts about programmatic digital, this sector has grown unabated for the last several years. According to eMarketer in 2014 advertisers invested 28.3% of their ad budget in digital media. Their projection is that this will grow to 44.9% in 2020, likely topping $100 billion in total spend. eMarketer estimates that 80% of U.S. digital display activity in 2017 will be transacted programmatically. 

Interestingly, since 2014 the industry has become much more attuned to the risks encountered by advertisers when it comes to optimizing (or should we say safeguarding) their digital media investment. Yet in spite of the findings regarding unsavory practices emanating from the ANA’s seminal 2016 study on “Media Transparency” advertisers continue to pour an increasing share of their advertising spend into this media channel.

However, not all advertisers are continuing to embrace digital media quite as readily as they once did. A handful of progressives, namely Procter & Gamble, have begun to rethink the share of wallet being allocated to digital media and programmatic trading. Marc Pritchard, P&G’s Chief Marketing Officer, has been very outspoken in summing up his company’s position quite succinctly; “The reality is that in 2017 the bloom came off the rose for digital media. We had substantial waste in a fraudulent media supply chain. As little as 25% of the money spent in digital media actually made it to consumers.”

Given Mr. Pritchard’s comments it has been quite intriguing to monitor the legal developments in two high profile lawsuits that have recently been filed.

In the first case, Uber is suing Fetch Media, its digital agency suggesting that it had “squandered” tens of millions of dollars to “purchase non-existent, non-viewable and/ or fraudulent advertising” on its behalf. Uber has further alleged that the agency “nurtured an environment of obfuscation and fraud for its own personal benefit” and that of its parent company, Dentsu Aegis Network. To be fair, Fetch Media has denied what it says are “unsubstantiated” claims by Uber which it claims is designed to draw attention away from their “failure to pay suppliers.”  Allegations include that the agency acted as agent for Uber in some markets and executed principal-based buys in others and that they earned and retained undisclosed rebates tied to Uber’s media spend.

The second case involves RhythmOne, a technology enabled media company and its partner dataxu, a programmatic buy-side platform/ applications provider. RhythmOne originally filed suit regarding $1.9 million worth of unpaid invoices. Dataxu filed a counterclaim alleging that RhythmOne “used a fake auction to consistently overcharge” them and suggested that RhythmOne also “procured inventory from other exchanges, and then marked it up,” both violations of their partnership agreement. As an aside, for the $1.9 million in payments that dataxu admittedly and intentionally withheld from RhythmOne, going back to January, 2017, it is likely that dataxu’s clients had been billed and remitted payment to them. Which raises questions as to how and when their clients will be made whole.

Of note, both of these lawsuits delve into a range of topical issues that pose risks to most programmatic digital advertisers:

  • Agencies executing principal-based buys, rather than acting as agent for the advertiser.
  • The retention of undisclosed rebates tied to an agency’s use of advertiser funds.
  • Non-transparent fees and mark-ups being tacked on to the actual cost of media inventory by multiple middlemen (i.e. agencies, DSPs, exchanges).

These are issues that advertisers should familiarize themselves with and address through the development of a comprehensive client/ agency contract. In addition, advertisers must vigilantly monitor supplier compliance with the terms of those agreements to insure full transparency and, importantly, accountability when it comes to the stewardship of their digital media investment.

As these two cases highlight it is dam difficult for an advertiser to accurately assess the value of digital inventory that is being proffered on their behalf by their agency and adtech partners. Beyond establishing what percentage of an advertiser’s digital dollar actually goes toward media inventory, these separate, but related legal actions demonstrate that it is not just a lack of transparency that advertisers must worry about, but a lack of ethics. When it comes to programmatic digital media the American artist, John Knoll, may have said it best;

“Any tool can be used for good or bad. It’s really the ethics of the artist using it.”

There are steps that advertisers can take to both safeguard and optimize their digital media investment. If you are interested in learning more, contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Will AI Render Media Agencies Obsolete?

11 Sep

artificial_intelligence

Artificial intelligence (AI) is already reshaping how advertising is developed, planned and placed. The marketing applications being envisioned and adopted by agencies, consultancies, publishers and advertisers are nothing short of remarkable.

From the onset of “Big Data” it stood to reason that the concept of predictive analysis, the act of mining diverse sets of data to generate recommendations wouldn’t be far behind. Layer on natural language processing, which converts text into structured data, and it is clear to see that “deep learning” is on the verge of revolutionizing the ad industry. As it stands, algorithms are currently optimizing bids for media buying, utilizing custom and syndicated data to match audience desires (or at least experiences) with available inventory.

Effective, efficient, automated methodologies for sorting through vast volumes of data to evaluate and establish patterns that reflect customer behavior for use in segmenting audiences and customizing message construction and delivery holds obvious promise.

So, what does this mean for media agencies? Will they be at the forefront of automation technology? Or will they be swept away by the consultancies and ad tech providers that are already investing here?

If media agencies desire to remain in control as the industry evolves, there are real challenges that they will have to address to remain viable:

  • Re-establish role as “trusted advisor” with the advertiser community. Recent concerns over transparency, unsavory revenue generation practices and a failure to pro-actively safeguard advertisers’ media investments from fraud and from running in inappropriate environments have created serious client/ agency relationship concerns.
  • Attract, train and retain top-level talent to re-staff media planning and buying departments. The focus will need to be on bridging the gap between developing, and applying automation technology and providing high-level consulting support focused on brand growth to their clients. Presently, media agencies are not effectively competing for talent, whether in the context of compensation and or personal and career development options being offered by their non-traditional competitors.
  • Provide a framework for addressing the compensation conundrum. Whether this is in the form of cost-based or performance-based fees tied to project outcomes, commissions or hybrid remuneration systems, tomorrow’s successful media agencies will need to establish clear, compelling compensation systems. These systems will need to reflect value propositions that will differentiate them from an expanded base of competitors, while offsetting (to some extent) non-transparent sources of revenue that many media shops have come to rely on in recent years.

This will not be an easy path for media agencies, particularly for those that are hampered by legacy systems, processes and management perspectives that may limit their ability to more broadly envision and ultimately, assist client organizations addressing their needs and expectations.

Either way, the race is on, as management consulting firms are acquiring various marketing and digital media specialist firms and as media agencies raid the consultancies for personnel to build out their strategic consulting capabilities. The key question will likely be, “Which business model holds the greatest promise, in the eyes of the Chief Marketing Officer, for improving brand performance?

 

 

 

 

 

Auction Price Models: Buyer Be Aware

06 Sep

transparencyInteresting article in MediaPost dealing with the vagaries of programmatic digital media auction methodologies.

Rogue players, operating with little or no transparency, without the agency buyers even knowing what auction methodology is being utilized to establish inventory pricing/ select winning bids… Is it any wonder why advertisers such as P&G, Unilever, L’Oreal and others are rethinking their digital media investments? Read More

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