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Category Archives: Media

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

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

Can Facebook Build on It’s Advertising Success?

05 Nov

facebookSay goodby to the concept of the “long tail” of web advertising and potentially to the layers of middlemen ranging from ad tech vendors to exchanges to media agencies standing between advertisers and publishers (at least Facebook). Performance drives media investment decisions and Facebook appears to be doing very well on this front. At least with one sector Read More

 

 

Chief Media Officer Role: Growing in Importance

30 Oct

gearsGreat article from Digiday, with solid insights into a growing trend, the addition of Chief Media Officers on the client-side. Given the increasingly complex media marketplace, with its dizzying array of choices, the pluses of data driven strategies and the need to deftly navigate a multi-layered media ecosystem a chief media officer may soon be viewed as a necessity, rather than a luxury 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

Are We Missing the Real Issue with Ad Blockers?

26 Oct

blocker

 

The advertising industry is rightly concerned about the financial impact related to consumers growing use of ad blockers, which can filter out ads before users ever see them. A recent study by OnAudience.com highlights the reasons why:

  • 26% of U.S. consumers now use ad blockers, resulting in lost publisher revenues of $15.8 billion in 2016, up from $11.0 billion in 2015. The U.S. represents approximately $45 billion of the $100 billion global display market.
  • Internationally, the loss of publisher revenue from ad blocking is projected to rise to $42 billion, up from $28 billion in 2016.

In addition, Google has announced that the 2018 version of its Chrome web browser will allow consumers to automatically block “annoying, intrusive” ads, which will accelerate the financial impact of this trend given that Chrome represents approximately 60% of the desktop/mobile/tablet browser market (source: NETMARKETSHARE, September 2017). Google’s motivation, it claims, is that they are simply introducing the Coalition for Better Ads recently announced best practices standards to enhance the consumer’s web browsing experience.

It is no surprise how we got where we are. Advertisers wanted to improve consumer engagement and publishers wanted to drive revenues. This, in turn, led to publishers placing more ads on a web page, including higher paying video units, making ads larger or forcing visitors to somehow interact with these ads to get to the content. This involves video ads that automatically refresh or blast audio automatically or force consumers to wait for :05 to :10 seconds before they can access the content they seek.

In the end, advertisers and publishers have not realized greater levels of engagement, but rather helped to fuel greater levels of consumer irritation and therefore ad blocker usage.

Thus far, the industry has been focused on blocking the ad blockers. It is true that many publishers believe that being exposed to ads is a user’s obligation if they want their content to be free. Others, however, share the consumer’s disdain for obnoxious, intrusive ads, and would like to see them banned from their sites. The problem is that ad blockers tend to block all ads.

So what is the ad industry to do? Busting the use of ad blockers or implementing web browser workarounds would appear to be somewhat short-sighted. Consumers have clearly signaled that they find the level, number, positioning and type of online ads served to them on a regular basis to be discordant with their intended browsing habits. Pursuing a more measured approach on the part of the industry is warranted. As Supreme Court Justice Ruth Bader Ginsburg intoned:

“Reacting in anger or annoyance will not advance one’s ability to persuade.”

The challenge is clear, finding a mechanism for publishers to fund their content creation at least in part through the use of online advertising. The answer, however, is not so readily apparent.

Let’s face it, by in large, consumers do not want to view online advertising. This can be evidenced by plummeting open and click-through rates, reductions in conversion rates and declines in average viewing times. Advertisers and publishers want “engagement” and sadly, consumers want nothing to do with most of the advertising foisted on them.

Is the answer better creative that informs, educates and entertains in the hope that users will both notice the ads and choose to interact with them? Or is it fewer, less intrusive ads that can take away from a user’s web browsing experience? Or will publishers finally have to solve the “pay to view” content dilemma, which consumers have largely been resistant to thus far?

If consumer engagement is the goal, the answer is likely “Yes” to all of the above.

 

Media Agency Estimated Billing Should Be Eliminated

24 Oct

accounts payableLet me start by saying that Advertising Agencies are not banks and should never be asked to settle vendor obligations, made on behalf of clients, with their own funds. That said, the long-standing practice of “estimated billing” is a relic of a bygone era and one which should be abandoned.

In a day and age where the electronic transfer of funds is commonplace and where most media owners invoice agencies based upon “actual” activity, following the month of service, the notion of an advertiser being billed upfront on an estimated basis is no longer necessary for the vast majority of media being purchased. From an advertiser’s perspective, this antiquated system results in burdensome levels of paperwork, drives up accounts payable processing costs, needlessly extends the invoice reconciliation process, restricts client use of funds, results in lost interest income opportunities for the advertiser and perhaps one of the less apparent benefits, eliminating the apprehension/reliance on an agency to accurately track and timely reconcile such estimated billing.

Can anyone cite a single benefit that accrues to an advertiser from this approach? If an advertiser were to purchase inventory directly from the media seller they would pay based upon actual costs, so why should it be any different when purchasing media via a client-agent relationship?

The move to final billing has but one drawback, to one stakeholder… the loss of agency float income on pre-billed activity. While conceptually we don’t believe that it is appropriate for an agent to make money on the use of client funds, we do understand that eliminating this non-transparent source of revenue would have a negative impact on an agency’s bottom-line. This, however, should not be the concern of the advertiser community, as this was never the intent of the estimated billing process to begin with. After all, it is the advertiser’s money and as such, they should be the only stakeholder to benefit from access to and the use of those funds.

Transitioning to actual billing makes good sense from both a treasury management and a transparency accountability perspective. It is more efficient, can reduce payment processing costs and can potentially improve days payable outstanding performance for the media seller.

As it is, advertisers generally have little to no insight into the time gap between remittance of their funds to their agency and in turn the time it takes for the agency to reconcile media activity and remit payment to an advertiser’s third-party media vendors. If client-side CFO’s were aware, there would certainly be significant interest in reforming the estimated billing system and the stewardship of an advertiser’s media advertising investment.

When it comes to financial management within the advertising sector, we have always been cognizant of the words of Robert Sarnoff, past president of NBC and RCA in the mid-twentieth century:

“Finance is the art of passing currency from hand to hand until it finally disappears.”

Interested in learning more about improved financial management practices across your marketing agency network? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this topic.

Agency Head Cites Client Trust as a Concern

30 Sep

digital media viewabilityIn a panel presentation at Ad Week in New York, Martin Cass, CEO of MDC Media Partners stated that; “The way major holding companies have been treating clients’ media money without their knowledge is the key factor in the loss of trust by marketers in their agencies, a senior industry executive has claimed.” Are agencies in fact taking advantage of clients’ “lack of understanding: regarding the complexities of digital media … Read more

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