What’s the future of the agency trading desk?
This is the first story in the “New Agency Model” series, which is sponsored by PulsePoint™, a next-gen ad technology platform that fuses the science of programmatic targeting, distribution and optimization with the art of content marketing.
In a world where agency compensation is continually squeezed, trading desks remain a bright spot. They have helped many a holding company claw back some of the margins they once enjoyed. But as more media is transacted programmatically, the long-term future of the centralized trading desk model could hang in the balance.
“In my opinion, the skills that trading desks are developing — data and technology expertise, and the ability to optimize in real time — are all really valuable skills as far as clients are concerned. They should be used by all media buyers,” said Jeremy Hlavacek, who managed ad technology partnerships for Varick Media Management before joining the Weather Channel as its vp of programmatic.
Increasingly, it appears to make sense for the expertise being honed with trading desk units to be distributed across a media buying operation, as opposed to living in a separate silo. That would bring client teams closer to where their ad dollars are actually being spent.
“What’s interesting today is how holding companies can take what’s working with their trading desks and apply it to their larger infrastructures,” added Jay Sears, who oversees trading desk relationships for ad automation company The Rubicon Project, which yesterday filed for its IPO.
From a client perspective, the decentralized model appears preferable. Why should they pay for an agency team to plan and buy media from a trading desk, only for the trading desk to charge them again to go out and buy it from exchanges? Why can’t their agency teams take care of everything?
Valid questions, but don’t hold your breath — just yet. According to Mac Delaney, who heads up brand relations for Publicis’ Audience on Demand trading desk, that type of decentralization is a long way off. It will be “years, not quarters” before agency teams are able to effectively use programmatic planning and forecasting tools to implement, optimize, analyze and report campaigns without error, he said.
For agencies, that’s probably a good thing. As long as they can avoid placing programmatic expertise at the agency team level, it affords them the opportunity to take a bigger bite of clients’ dollars by having their centralized trading desk units step into the equation, too. They don’t want that situation to change if they can help it.
“It’s about the business. People know trading desks are pretty profitable, and having them concentrated in one group maximizes that opportunity,” Hlavacek said.
Sears held similar views. “Trading desks have built a pretty robust business, and at the same time, a lot of the rest of the ad agency holding company business is under a lot of pressure,” he said.
So the trading desk model of today will live on for as long as holding companies can justify it. In the short term, there’s no advantage for them to dive into the complicated process of training and integrating traders on client teams, and enduring the headaches and costs associated with spreading technology expertise and access across their organizations.
In the end, it is the clients who will decide the fate of the trading desk. Some advertisers have already opted out and decided instead to build their own in-house capabilities, or asked their agencies to build dedicated trading teams for them alone.
Kimberly-Clark, for example, didn’t want its media agency, Mindshare, to buy through its sister company Xaxis. Instead, it had the agency staff a dedicated trading desk. “Transparency was a huge factor for us,” Jeffrey Holecko, Kimberly-Clark’s media manager for the North America region recently told Digiday. “We now have complete transparency on everything, on all the costs.”
But other clients are less concerned by what’s going on behind the curtain, as long as they see business results. Delaney thinks most clients see value in having a trading desk at their disposal, as opposed to seeing it as an added cost.
“I believe clients like the idea that there is an expert team navigating the Lumascape for them,” he said. “Clients will ultimately decide, of course.”
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