Ad tech comes under the microscope as marketers evolve their media mix

Although, as many are finding out, full transparency will be a hard-earned prize.

EMarketer predicts that 91% of the $270 billion digital ad market will be executed programmatically next year. Ahead of this, the Association of National Advertisers is auditing the “mind-numbingly complex” sector, the results of which are due later this year.

That audit, and characterization, could evoke memories of similar studies such as the 2016 K2 Intelligence report that noted a “pervasive” culture of undisclosed kickbacks (among other grievances) in the agency landscape.

This seemed to be reiterated more recently in a 2020 study commissioned by ISBA, the U.K. trade body promoting advertisers’ interests, which collaborated with the Association of Online Publishers. The report found an “unknown delta” whereby auditors could not account for 15% of programmatic buys.

Rising tide of ‘semi-in-housing’

Long before ISBA’s “unknown delta” study was published in 2020, marketers have been striving for greater transparency on how their media budgets are put to work. For 83% of professionals managing their marketing that meant either “mostly in-house” or “completely in-house,” according to Digiday Research in 2020.

Brands that have made such a move include a glossary of household names such as JP Morgan Chase, Marriott, and Nestlé not to mention big-spending CPG giant Procter & Gamble after execs cited the ability to better control cost and transparency.

Sources tend to avoid speaking on such decisions, citing sensitivities around contract negotiations. Although several industry insiders told Digiday how many marketers, particularly those promoting brands that were built on legacy media such as magazines or linear TV, opt for a hybrid model when it comes to digital.

One source from a CPG brand’s marketing team said, “Everyone thinks about in-housing as a binary decision… and that you have no relationship with media agencies and you hire dozens of people and everything is in-house but this is just one of the options.”

They went on to add, “I still think there will be situations where you need to outsource certain things to somebody else but the piece where advertisers can work is to make sure they have the right control on what other people are doing.”

A separate source from within one of the ad industry’s major holding companies told Digiday most marketers who want to in-house elements of their online media buying are taking rudimentary steps. “We’re still seeing in-housing as a big thing for pretty much every major advertiser in the industry… but in many cases, it’s ‘semi-in-housing’ like when they get their own contract set-up.”

Oftentimes, this process involves simply taking ownership of contracts with ad tech vendors then tasking their media agencies to activate campaigns. For instance, the CPG source recounted how their media buying team has direct relationships with two independent demand-side platforms. From here, the CPG’s media team can log in to the DSP at the time as the agencies it works with in order to keep abreast of ad campaign developments.

“I think there is a trend on taking ownership of technology choices which will go beyond just the DSP, it will touch every element of the supply chain,” added the source. “We decide the technology partners and then from that, we just recommend to market who the preferred partners are.”

Complexity imposes limitations

However, even with more direct relationships with the ad tech ecosystem, in-house marketing teams are also tasked with getting to grips with the complexity of the sector where inconsistent billing methodologies and undisclosed practices abound.

For instance, recently unredacted papers in the antitrust case led by Texas Attorney General Ken Paxton allege that Google conspired with Facebook to manipulate online ad auctions in a project nicknamed “Project Bernanke” demonstrate the complexity of the task. Google denies these charges.

Brands’ in-house marketing teams also have to toil with how independent ad tech companies — many of which position themselves as more transparent than their powerful Big Tech rivals — similarly employ complex billing structures. This was recently underlined, in a report by Adalytics Research which found that take rates among ad tech vendors can vary wildly and that, in some cases, only 2% of what an advertiser pays for an ad slot is actually pocketed by a publisher.

The holding company source, who spoke on the condition of anonymity, told Digiday that once the scale of the task ahead of them becomes clear, some advertisers that fully in-house their programmatic media-buying later reverse their decision. “I’ve seen one or two cases where clients in-house only to flip it right back out again because once they get down to the workload and cost, they quickly realize this is not where they want to be,” added the source.

As good as it gets?

In the wake of its 2020 report, ISBA formed a task force along with the AOP, IAB U.K., and IPA, a trade body representing media agencies, and published a series of recommendations to help members conduct their own financial audits of their programmatic buys in February 2022.

Among those recommendations was an “audit permission letter” detailing an agreed list of data points auditors can use to track ad impressions along the supply chain plus which parties are allowed to access them. Among the 21 data points recommended for audit are IDs for advertisers, their specific campaigns, publisher URLs, timestamps detailing when an impression was served plus disclosures of the fees from ad tech vendors and data providers.

Currently, the task force is working alongside PricewaterhouseCoopers — the auditors behind both the ANA and ISBA studies — to prepare a “test and learn study” of the guidelines’ efficacy. Although a source with knowledge of the developments, told Digiday key insights such as “common user and transaction IDs” were excluded from recommended data points by concerned parties that cited privacy as cause for their ommission.

“The types of information you want to see in the audit log were negotiated out of the contract,” said the source who requested anonymity. The source went on to claim the privacy argument ignores the distinctions regulators draw between personal data being linked to deterministic identity versus pseudonymized IDs.

“I said that if you really want third-party auditing then you need this data so that a neutral can compare buy-side and sell-side using these common keys,” added the source, “but the polite feedback I got was, ‘We tried, but Big Tech will never go for it, this is as good as we’re gonna get.'”

PwC is on course to publish the results of its ongoing transparency study, which will interrogate the intricacies of both Big Tech and independent ad tech, at the ANA’s Masters of Marketing conference in October 2022.