At the Digiday Programmatic Marketing Summit earlier this June in New Orleans, we surveyed 46 client-side and agency marketers about their plans to reduce arbitrage in digital advertising. Check out our earlier research on how important it is to European marketers to address arbitrage here. Learn more about our upcoming events here.

Quick takeaways:

  • Forty-three percent of advertisers surveyed said they would only buy ad inventory from ads.txt-verified sellers.
  • Roughly two-thirds of advertisers expect ads.txt to do more to reduce arbitrage than the General Data Protection Regulation.

Arbitrage in digital advertising, whether in the media or data form, is one of the industry’s great ills. It stifles transparency while enabling middlemen to erode advertisers’ budgets by selling marked-up data and profit on a publisher’s inventory. Video advertising, which advertisers will spend $15.42 billion on in 2018, is particularly susceptible to arbitrage. Part of the issue is marketers don’t collectively back one way of combating arbitrage, according to Digiday’s research. The most common tactics marketers employ are reducing their use of third-party data and buying inventory from ads.txt-verified sellers in programmatic exchanges, both at 43 percent adoption, while only 10 percent of marketers are doing nothing.

Open exchanges are the perfect environment for media arbitrage because publisher inventory can be easily mislabeled. That’s encouraged at least 26 percent of respondents to Digiday’s survey to foster direct relationships with publishers. But given that the Interactive Advertising Bureau Tech Lab created ads.txt last year as a way to verify authorized media sellers and resellers, it’s somewhat surprising that few marketers are using it. That’s because while ads.txt adoption is increasing, 40 percent of the top 1,000 publishers have not implemented it, making marketers hesitant to limit themselves to only ads.txt-approved publishers.

Ads.txt will become more valuable to marketers as more publishers adopt it, but ads.txt has its shortcomings. Some third parties are trying to game the system, and 16 percent of publishers have errors such as spelling mistakes in their ads.txt files. Regardless, publishers are nearly twice as likely to believe that ads.txt will do more to reduce arbitrage than the recently enacted GDPR.

There is hope that GDPR will limit arbitrage for several reasons. GDPR will limit the data publishers collect and their ability to sell it to vendors, who would then resell that data at a higher price. Marketers will also be reluctant to use third-party data without knowing where it came from and without assurances that it is GDPR-compliant because of concerns about being fined under the law. GDPR will also create a market for second-party data where marketers could turn to companies with large amounts of first-party consumer data like Walmart and Target to access data they can no longer get elsewhere and to purchase ad inventory on those sites.

Like ads.txt, GDPR has its flaws. GDPR’s ability to reduce arbitrage is limited to data arbitrage and not media arbitrage. Additionally, GDPR is meant to protect European consumers, and while the law will affect U.S. companies, U.S. businesses are still free to practice arbitrage. Many companies also believe GDPR is about complying with the spirit of the law rather than a strict interpretation of it.

Since marketers are unsure of what GDPR enforcement entails, reductions in arbitrage might not happen until regulators first make examples of offenders. Comparatively, ads.txt already provides a public record that marketers can use to avoid arbitrage. Google has also pressured demand-side platforms to make media buying easier for marketers by creating filters that marketers can use to select ads.txt inventory.

If GDPR were implemented in the U.S. and more supply-side platforms and publishers were pushed to adopt ads.txt, then together the two would be a potent force against arbitrage. But don’t expect arbitrage issues to disappear anytime soon.

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