Advertisers’ attempts to secure more control over how they bid on programmatic ads are intensifying.
It’s dawning on programmatic spenders like BT and Deutsche Telekom that they have a limited view of what happens to their money once bids are made by demand-side platforms. The way to follow that money trail depends on the advertiser, but the overarching goal is the same.
“I want a view on supply-side platforms,” said BT’s head of media, Graeme Adams. “I want to see the bids we didn’t win and understand why, as well as know whether it’s better to do direct buys or open auction trades.”
Getting that view is easier said than done, as other advertisers have found. It starts with owning the contract to the DSP and therefore the commercial model behind it, said Adams. Since BT secured that deal earlier this year, it now has more control over how its DSP weeds out certain auction types and can scrutinize how the tech adapts bid strategies to shifting auction dynamics within SSPs and ad exchanges. There are huge cost savings to be made by advertisers that know how auctions are run and what price it takes to win them.
“We need to know as much as possible about what’s happening in the digital supply chain because the digital ads we’re buying cost five times more on average than their linear or analog counterparts,” said Adams.
Deutsche Telekom’s head of international media management, Gerhard Louw, alluded to this shift at the Digiday Brand Summit Europe last month.
“We’re fragmenting the scope of work to more vendors and agencies in a way that gives us more control over those partnerships,” said Louw. “More partners might seem like more costs, but we’re able to reduce wastage by being much more specific about what we want from each vendor and agency.”
Despite the challenges, it has gotten easier for advertisers to get a glimpse of auction mechanics used by the supply partners they buy from. The spread of Ads.txt over the last two years has created a systematic way to buy impressions from authorized sellers without resorting to costly private marketplaces, while the emergence of supply-path optimization and custom bidding tools from DSPs like Adform make it easier to win auctions at deep discounts.
“Five years ago, no one on the advertiser’s side was thinking about supply-chain mechanics, and now things like SPO are key issues we’re talking to our clients about,” said Ben Hovaness, executive director of digital activation for Hearts and Science.
But the more advertisers start to understand those auction mechanics, the more questions they have.
Some advertisers have started to query the value of buying certain inventory in private marketplaces at an agreed price locked in preferred deals when they could potentially get similar inventory in open auctions at a fraction of the price. According to Chris Kane, founder of programmatic consultancy Jounce Media, advertisers that are comfortable parsing auction data are looking at the latter option.
“Buyers are starting to question whether those types of private marketplaces are worthwhile for them,” said Kane. “It can lead to irrational premiums being paid to transact with a trusted publisher when you can buy quality inventory in an open exchange with significantly lower prices.”
This doesn’t mean advertisers will drift away from private marketplaces entirely. Those marketplaces represent around 40 percent of all inventory in established programmatic markets like the U.K., France, the U.S. and Australia, according to the World Federation of Advertisers. It’s more likely that advertisers will use the fact that they can secure similar but cheaper impressions to private marketplaces outside of them as a negotiating tactic to get publishers to lower rates.
Publishers are willing to have those conversations, according to Hovaness, who explained how Hearts and Science has started brokering fixed price agreements instead of floor price threshold over the last year to move away from preferred deals. The fixed price would sit between the average price paid to win impressions and the floor price set within a private marketplace, said Hovaness.
The agency is using the information gleaned from log files to figure out which exchanges are running first-price auctions where it pays exactly what it bids and those that run second-price auctions where the bid that wins ends up paying $0.01 above the second-highest bid in the auction.
While first-price auctions offer better transparency because advertisers know exactly what they pay for, they can end up overpaying for media. In response, Hearts and Science suggests advertisers invest in second-price auctions when possible and broker private marketplace deals with their top publishers.
Other advertisers question whether the ads bought from some exchanges are even legal under the General Data Protection Regulation. Consent strings are used by DSPs to determine whether a bid is being passed with someone’s consent to use their data for targeting. But they can be faked.
One senior marketer, who spoke to Digiday on condition of anonymity is concerned they have no way of knowing whether they’re paying inflated fees to target people they shouldn’t. Despite owning the contract to the DSP that buys ads on premium sites, the marketer still puts some spend through the DSP licensed by its agency to reach the long tail of sites, which means there’s a risk of buying from exchanges that fake the consent they get to share people’s data. The DSP has no way of knowing whether a buy was legal until after the ad has been served and the consent string is available to view.
“I’m concerned over how we detect consent-string fraud because you can only know whether it happened after the ad has been served and even then you need to sift through log-level reports,” said the marketer. It comes down to how well the agency is incentivized to sift through all that information.”
The comment speaks to the shifting dynamics between advertiser, agency and ad tech vendor as programmatic spend grows. Agencies like Hearts and Science and Essence are taking more time to build stronger relationships with exchanges so that they can steer ad budgets through the ones they trust.
“Agencies can start to add value to programmatic advertisers by using information from log files to negotiate better terms with SSPs and exchanges,” said Matt McIntyre, head of programmatic for Europe, Middle East and Africa for Essence. “You can start to identify the exchanges you may want to turn off because they don’t run fair auctions.”