Time To Cut The Ad Tech Tax

Seth Demsey is svp of global advertising products and strategy for AOL Networks. 

For every dollar a digital advertiser spends on a placement, a publisher reaps — on a good day — around 45 cents. The remainder gets sucked into the whirling maw of trading desks, DSPs, exchanges, networks, data suppliers, data aggregators, ad verification vendors, tag management vendors, retargeters, optimization vendors, SSPs and more.

Call it the “technology tax”: the more specialized solutions that enter the market, the higher the costs get involved in moving an ad dollar from Point A (the advertiser) to Point B (the publisher).

The problem isn’t just that the landscape is overcrowded, as recent headlines have argued. It’s that the process of using digital advertising technology is encumbered. More than simple consolidation (a la the inevitable vendor shakeout), the industry needs to unify and figure out how to make solutions work better together, so that the onus is not on buyers to figure out how to make it all work.

Here is what needs to happen:

Less Specialization, More Consolidation. Advertisers and publishers invest in technology to gain greater efficiencies, after all — through automation of previously manual activities, by leveraging data analytics and algorithms that drive better and faster decisions, or through systems that help them access greater reach.

But now that there are hundreds upon hundreds of ad tech providers — many touting highly technical “necessities” and trading on confusion — it simply requires too much time and too many resources to manage so many “relationships.”

When a typical media buy has to involve anywhere from a dozen to a hundred, yes, a hundred, or more specialized vendors (often with incompatible platforms), it’s a sure sign that tech is over-taxing advertising. And rightfully, advertisers and publishers are starting to ask, “What am I really getting for my money?”

Innovation at Scale. Ad tech needs to start directing innovation away from niche features and technology for the sake of technology. Instead, the objective should be the creation of an open ecosystem, which focuses innovation on smarter, more unified systems that add legitimate value for end users — at a magnitude that makes a significant impact on their business.

What, exactly, do we mean by “open ecosystem”? It’s an ad tech landscape where there’s more cooperation and less competition. Where solutions are designed to complement each other and work together seamlessly, with little effort required of the end user. Where the advertiser, publisher and not just everyone “in between” benefits. Optimizing a single aspect of an advertising buy has marginal value. Optimizing the entire process from end to end? That’s innovation at scale.

A market where $1 is really only worth $.45 cannot sustain itself. Consolidation will happen naturally, but unification will take an industry commitment to open standards, open cooperation and an open ecosystem. Instead of a morass of individual companies battling each other for a few pennies of the ad dollar, the ad tech industry should be known for delivering real advertising ROI, not tech return on equity. Only then will advertisers get the most value from the powerful cross-channel solutions they need more than ever, and a greater proportion of ad budgets will go to the consumer connection they’re meant for.

Image via Shutterstock

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