Moving beyond radical transparency to trust
By Rajeev Goel, co-founder and CEO, PubMatic
Ad tech vendors are vying to be crowned as the leader in transparency by any means necessary, regardless of the consequences for their clients or the industry. In truth, the transparency debate itself has become radicalized, with attention-grabbing headlines occasionally eclipsing appropriate change. It’s time to move past rhetoric. What the market needs is trust between publishers, advertisers, and technology providers–trust that can be achieved by reimagining programmatic business models.
At the IAB Annual Leadership Meeting last year, Marc Pritchard, P&G’s chief brand officer, called for cleaning up the supply chain, vowing to only pay digital media and ad tech suppliers that complied with the company’s strict quality and transparency requirements. It was the first time a brand advertiser committed to leveraging significant ad spend to improve the programmatic landscape, setting off a wave of efforts and initiatives aimed at achieving this goal. While a year has passed without full resolution, many technology providers have revised business practices to align with changing market demands. Some have even co-opted the concept of “radical transparency” to promote mass disclosure of customer fee rates.
This approach sounds good in theory, but will do little to increase trust between all parties. Comparing fee rates doesn’t work in a B2B environment. The business arrangements are too complex, and companies’ product capabilities are too varied. Ad tech is not a commoditized market. A variety of parameters–feature set, payment terms, quality controls, and volume discounts, to name a few–could be factored into each agreement. Simply put, if your offering is not differentiated, rate wars won’t solve your problem.
More importantly, mass disclosures could result in each side of the digital ecosystem having unwarranted influence over the other. Advertisers, justifiably, want to maximize how much of their ad spend flows to the publisher. But this disclosure could put advertisers in a position to dictate which SSP a publisher should select based solely on fee rate. Likewise, a publisher could tell an advertiser they prefer a specific DSP that charges lower fees. This is a slippery slope. Should advertisers only buy ads from publishers that pay their journalists the lowest wages? Or that pay the lowest rent for office space?
Mass fee disclosure could unfortunately result in a single, isolated commercial term becoming the dominant driver of technology decisions. Premium publishers have told us they could risk significant monetization if buyers seek to route ad spend to competitors with lower revenue shares. And it’s not just publishers that would suffer; this practice could ultimately remove choice and stifle innovation across the industry.
Realistically, programmatic take rates–the share of ad spend that goes to a technology provider–should decrease over time, particularly as volume scales and brand spend overtakes direct response in the programmatic market. Ultimately, publishers should have control over what is best for their business; we need to welcome a vibrant and competitive ecosystem that encourages negotiation on both price and functionality.
The status quo, revenue share-based approach has created an opaque ecosystem. As a publisher-first company, we believe SSPs should remove all fees from the buy-side so the total rate is fully transparent to publishers. But this is only one piece of the puzzle.
A viable path forward requires a mentality shift for decision makers. The way to achieve trust is to move the industry towards a mature software procurement approach that is transparent, lowers costs for everyone, and creates healthy relationships. We have introduced new pricing models that are based on usage, not revenue. By licensing technology to support more sophisticated transaction methods– including private marketplaces and header bidding – publishers will have more predictability and liquidity to take advantage of the evolving market and innovate for consumers and advertisers alike.
As technology providers, we need to stop talking exclusively about revenue targets and instead broaden our conversation to a client’s entire P&L. By thinking about both revenue and cost, one can make more informed decisions that will drive long-term business success. This requires a move towards partnerships between principal (publisher or advertiser) and technology provider, as opposed to campaign- or day-trading-based relationships.
Trust between publishers, advertisers, and technology vendors can be achieved. The real path forward is the application of clear, mature licensing models, not radicalized headlines masquerading as transparency.