In June, the Association of National Advertisers (ANA) dropped a bombshell report that shined a light on the darker underbelly of media trading. The same report delivered some truths about sketchy ad tech deals, showing how some ad tech firms have contributed to the rebate issue, non-transparent practices in general and the “black-box” deals.
Ahead of Dmexco, ad tech’s global summit in Cologne, we granted a senior ad tech executive anonymity in exchange for honesty as part of our Confessions series. The executive believes the ANA report’s focus on rebates eclipsed the fact ad tech tax remains alive and well. In fact, it’s getting even worse, driven by publishers’ ongoing need to drive up yields and hype around header bidding.
Ad tech has become a commoditzed industry, in which many have said consolidation is inevitable, and could help reduce the number of middlemen take a cut of the media buy. But this executive believes that consolidation isn’t the necessarily the cure.
Excerpts lightly edited for clarity.
Remind us what ad tech tax is.
Ad tech tax is the term that refers to the long chain of tech companies that act as middlemen in digital ad transactions, taking an unnecessary cut of revenue that would otherwise go to publishers.
Why are we still talking about it?
It’s still massively rife, and it’s even more timely with the fallout from the ANA report, because its focus was on the agency rebates. But the agencies are just the last mile on this.
So the rebates focus overshadowed how bad the ad tech tax is?
Yes, and unfairly so. The transparency problem is not on the agency rebates. Should agencies be commercially rewarded for certain volumes of spend? Arguably they should be. But on the ad tech side, they’re creaming off all the money before it even gets to the agencies. It wouldn’t surprise me if half the value of the media spend was sucked up by ad tech players.
Shouldn’t the consolidation predicted in ad tech help?
If anything, the consolidation will bring new ways for ad tech suppliers to do this and new ways to launch products. Header bidding is just an extension of this — a way of justifying their place and the fees and making it even more opaque for the advertiser. Header bidding is just perpetuating ad tech tax. It’s another way for an ad tech company to cream funds off with new products, all in the name of chasing yield. The latest example is wrapper tags, where you put everyone’s header bidding solution into one single solution, and effectively a publisher manages one tag on their page as opposed to a load of tags.
But publishers need header bidding to boost their yield.
Yes, but header bidding won’t solve long-term problems. Today, publishers have become a product for ad tech people to solve, which is margin.
Will Facebook’s entry into header bidding make a difference?
Facebook exists to be an ad tech data tax. They’ve massively compounded the problem by sticking something else on the publisher’s page.
What’s the root of this?
Because ad tech companies are VC-backed, they’re incentivized to chase an exit strategy, not to solve this definitive problem for publishers. That’s partly because there have been some enormous exits in ad tech. I’ve benefited from at least one of them where the value was 10 times the revenue.
Are some ad tech vendors transparent about their fees, though?
Yes, those that are public and so have to declare their fees transparently. Rubicon and Tremor are ones that declare their fees transparently. There is no problem with ad tech tax, as long as everyone knows what it is.
Isn’t ad tech innovation good because it creates alternatives to Google and Facebook?
There is the illusion of choice. There are lots of companies with cool cross-device solutions that don’t scale as they’re denied the chance to play behind the walled gardens.
So what can be done?
People need to wake up, smell the coffee, audit their exchanges. They won’t let you audit them, but if enough publishers ask, they’ll have to bend. There’s work to be done inside the media auditors, also. Some can be as dumb as a bag of rocks. I put a massive pivot table in front of a major media auditor and they still missed the information and asked a load of daft questions about something else entirely. Also, push for transparency, or maybe even ask the exchanges for a cut.