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Big-spending marketers’ use of agency trading desks drops 15% year on year: WFA study

Where a client's money goes on programmatic: WFA

Where a client’s money goes on programmatic: WFA

The World Federation of Advertisers has released a report that reveals a strong level of distrust big-spending advertisers have in agency trading desks, the systems media agencies use to manage the automated buying of ad space.

Based on a survey of 43 global advertisers with a combined annual spend of US$35 billion, the report reveals that, while the programmatic trading market is growing overall, spending with agency trading desks has fallen by 15 per cent year on year. Use of independent trading desks has more than tripled, from eight to 30 per cent in a year, according to the study.

The report’s authors call on advertisers to ask their trading desk partners the “right questions” about how much money agencies are making on automatically traded deals with publishers.

According to the report, using the trading desk model still means that more than half of an advertiser’s spend goes to “middle man fees”.

Publishers tend to receive on average around 40 per cent from an advertiser’s programmatic spend. The rest goes to the media agency (five per cent), the trading desk (15 per cent), the DSP (demand-side platform, 10 per cent), and the exchange (five per cent). One quarter goes on “value adds”, services such as data enrichment, targeting, reporting and verification.

' Do you feel that Trading Desks are more or less transparent  than ‘traditional’ methods of trading?'

‘Trading desks: Are they more or less transparent
than ‘traditional methods’?

The report suggests that because of the lack of visibility into the “machinations” of programmatic trading, and because agencies show a reluctance to share information on their cost structure and business model, 76 per cent of big-spending brand owners regard trading desks as “less transparent” than “traditional” trading methods.

Advertisers should be asking their trading desks what the market rate is for each site, who are all the vendors they’re commissioning, where the ad is going to appear, how and where campaign data is collected and stored, and whether or not the ad will be visible to the consumer, the WFA suggests in its report.

Around one fifth of all online display and mobile ads are “invalid”, and in emerging marketers a much higher proportion, the report says, because ads are unseen, or because page impressions are generated by bots.

The report recommends that advertisers “take greater contractual control of the technology stack they chose to use”, and “consider direct contracts at every step of the chain in order to limit arbitrage and wasted commissions.”

Do you consider ‘arbitrage’,  where TDs can make significant mark-ups on inventory, to  be acceptable, as long as you are getting improved value  compared to ‘traditional’ trading?

Is ‘arbitrage’ acceptable if you are getting better ROI
compared to ‘traditional’ trading?

“While complete transparency may be a utopia, no fundamental mechanical barriers exist between the advertiser and a level of transparency far superior to what is currently available,” the report reads.

But advertisers are getting better at managing their programmatic trading operations, the paper suggests. Ownership of data generated programmatically has been secured by nearly 60 per cent of respondents, up from 33 per cent in 2013.

Trading desks remain the favoured way to trade with 69 per cent of respondents saying they use them (down from 81 per cent), and 29 per cent now dealing direct with an independent trading desk or DSP (up from eight per cent). Only two per cent of respondents have tried taking programmatic in-house, the same figure as in 2013, the report finds.

Advertisers should consider using “hybrid” trading desks, essentially the same as a trading desk but with the advertisers getting sway on data ownership, or “brand” trading desks, which give the advertisers a direct line to the publisher, the reports concludes.

In the report, the head of global media at pharmaceuticals giant Boehringer Ingelheim Mark Butterfield, is quoted as saying: “We have little or no clear understanding of what percentage (of digital spend) is being delivered to the media owner and what is being taken in fees from either the agency or middle men. There needs to be clarity in the value chain otherwise clients will continue to question the validity of the digital buy.”

The WFA’s ‘programmatic task force’ for the study, which can be read in full here, included the heads of media at Coke, GSK, MasterCard, Philips and Johnson & Johnson.

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