Why Trading Desks are Conflicted

Two weeks ago I had the privilege of sitting on an industry panel tasked with discussing agency trading desks and the potential conflict of interest that their ownership by agency holding companies may cause. I was asked to provide my views since my company, Triggit, has chosen not to license our technology to trading desks. As a result, I am able to be more outspoken than our other demand-side platforms that depend on licensing fees from trading desks for their revenue.

That panel and the video of it — you can find here — has since become infamous in our industry. The reason for the notoriety is a series of quite harsh personal attacks pointed at me by the Vivaki representative on the panel, Mac Delaney. Subsequently, Vivaki’s director of EMEA Marco Bertozzi wrote this piece that reiterates the personal attacks and attempts to undermine my credibility. Clearly, what I had previously assumed an aberration must be Vivaki’s official position. Therefore, it appears that a more official response is in order.

The core question is how the industry — technology providers, agencies, publishers or customers – develops at a time of transformational change. Due to the critical role agencies play as client representatives, I can think of no more important discussion than how they should structure themselves and their decisionmaking structure internally to ensure that they retain the image of the utmost trust and fair dealing.

My chief concern about the current structure that agency-holding companies have chosen to adopt is that the agency hired by the client to be an impartial representative in the marketplace has a conflict of interest concerning where to allocate client-media dollars. Agencies quite openly admit that they get profit sharing when they send their clients dollars to their in-house trading desk as opposed to spending that money with an independent publisher, ad network or DSP. By routing those media dollars internally, the agency and holding company gets to take an additional margin from the client’s dollars and substantially increases the amount they keep. This is a conflict of interest, pure and simple.

There have been numerous instances where media planers and buyers have said that they could be fired for working with anyone other than their holding company’s trading desk. An agency hired to act as an impartial representative and tasked to choose the best places to spend the client’s dollars is highly incentivized and pressured to spend money with a vendor owned by their company.

This is a valid and important subject for debate. But instead of addressing the issue directly, Mac and Marco responded with substantially the same argument, namely, that I am a crybaby with a failed DSP that is flailing around out of desperation. I am not sure if they saw the recent announcement of our deal with Amazon or our post on last year’s results, where we announced that we grew revenues by 2000 percent. I would venture to say that we are doing just fine at Triggit. I am willing to speak up about this exactly because, unlike other DSPs, we are not dependent on trading desk business. We made a decision three years ago when the trading desks were initially begun to remain independent and to focus on serving clients directly. They also very correctly point out that I have an agenda in this question as an active participant in the market. This is both true and beside the point since all participants in this discussion have agendas. Either there is an issue around a conflict of interest or there isn’t. Finally, both Marco and Mac pointed out that since Triggit is a venture-funded company we somehow are different than the corporations they work for in that we seek to make a profit. I am not sure what they think ad agencies do, but the last time I checked it didn’t appear that they are in the charity business. Fundamentally though, their attacks on me are simply an attempt to evade the very real question about conflict of interest. Until they come up with a better explanation, I will question their model.

At the end of the day, the real question is where we go from here. The answer to that question appears to hinge around the fundamental change that technology is causing to the entire business of advertising. What was once a services business dominated by hiring people to manage the buying and selling of media is rapidly becoming a business where technology manages those same transactions. That transformation means that both the way that clients conduct their media buying and how the industry serves them must adapt. Technology will take a central role, and clients will increasingly evaluate the technology that their spend is managed by as closely as they currently evaluate the people they hire to spend their media budgets. As technology assumes a much more central role in the process, the way we structure media buying and our industry itself will have to evolve. That won’t happen if all parties aren’t committed to an open and vigorous conversation about important issues.

Zach Coelius is CEO of Triggit, a demand-side platform. Follow him on Twitter @zachcoelius.

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