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Digital advertising chain so broken it needs regulation

Self-regulation in the digital advertising supply chain has failed and the only way to fix it is for somebody to step in and take control, the audience at Mumbrella360 Asia has heard.

The digital advertising landscape is too complex, argued the panel

“I think our industry is absolutely broken and there are still some players with their heads in the sand,” CtrlShift’s Dominic Powers argued. “The problem is clear from the numbers that it’s been leveraged for far too long in favour of the intermediaries, whoever they may be, at the expense of the brands and the publishers. So something has to be done.”

That something, according to Kevin Huang, Hong Kong-based CEO of Pixels, and APAC MD of Gravity4, is a simplified chain and a clear set of regulations.

“I’m going to take the extreme and say regulation [will fix the problem]. It seems that our industry can’t self-regulate and it’s costing the likes of SAP, P&G, I can’t remember the exact number, I think it was US$6bn last year with ad fraud. Roughly that. And that’s a lot of money. And the industry is about 20-odd years old and you know, as a 20-odd-year-old, if we can’t behave ourselves then someone needs to step in and make us behave ourselves. Granted, there are a lot of good players in this space with integrity…. but unfortunately there are also a bunch of bad actors that really spoil the game.”

In order for the industry to become more transparent, trustworthy and truthful, various layers need to be stripped back and the supply chain simplified, he argued.

James Dutton, Kevin Huang, Olivier Burlot, John Matthews, Deepika Nikhilender and Travis Teo on stage at Mumbrella360 Asia

“The industry is just way too complex. There are way too many players out there. There is way too many layers of everything and in every single layer there is an issue. And so we add in more solutions to those layers… so for example with ad verification. That is a result of click fraud and bots and all that sort of stuff. And if that never existed in the world, then the ad verification services wouldn’t be needed. So I think the truth is that the transparency debate on the supply side and the sell side, that is a result of a complexity and I think at some point in time that complexity needs to be broken down and needs to be made simpler,” he said.

“If you compare that to a television buy, if you compare that to a print buy, that [complexity] doesn’t exist. The 20 layers that you need to go through to buy an ad, that doesn’t happen in print. It only happens in our [digital] world. Granted it’s a new industry. It’s 20, 25 years old. It’s starting to mature. But it needs to be, my advice, I think it just needs to be simpler, because at every stage there’s just way too many players. It’s confusing for buyers, it’s confusing for sellers, and ultimately it’s confusing for the board of directors for the company that’s responsible for billions and billions of dollars that’s being spent.”

Part of the problem, James Dutton, founder of Insightr Consulting added, is the growing gap between the technology platforms and human knowledge about how they operate.

“The gap we’re seeing between the technology and the knowledge of the experts running the platforms is growing month by month, year by year. One of the challenges we get when we look at that is as the technology increases in capability, are the teams executing these platforms able to use the platforms to its fullest extent?

“I talk about this as the Microsoft Word problem. I’m sure most of you have Microsoft Word installed in your work laptops, but you probably use 5% of its features. So the same question comes if your agency is running a DSP [demand-side platform]: Are they maximising the value that’s coming from that platform? Are they maximising the capabilities of the partners that they’re working with.”

He agreed with Huang’s suggestion the industry needs to be simplified before the stack gets out of control.

“I think the way we see new technologies being built because of a problem in the industry is tantamount to saying ‘If we don’t solve the underlying problems, how much more technology are we going to have to add to that stack in order to get to a situation where brands are getting value from the supply chain?’”

Powers questioned “what the hell went wrong?” to get us to a point where brands don’t trust agencies, and intermediaries aren’t trusted by brands or agencies – “where everybody is just slinging stuff at everybody and slinging the blame”.

John Matthews, group head of performance and media at APD, said a root cause is how brands extract value from and remunerate their agencies.

What went wrong?

“The vast majority of clients across the region really do need agencies because they don’t have that size, they don’t have that scale. It’s how they work with those agencies and I think it’s really comes down to two things. One, it’s fairly remunerating the agencies, because obviously there is a fair amount of work that needs to go in. And secondly, treating the agency as a partner… I think agencies over time they give you access to a huge amount of resources, scale, to expertise…And I think it really is how as a brand , it’s not just about clients, but it’s about how you extract that value from the agencies themselves.”

Matthews also said media agency pitches had devolved to focus on cost instead of outcome – forcing media agencies to find new revenue streams.

“I think there are agency relationships that work very very well. I think there are certainly times when pitches are procurement led and it comes down to cost rather than value. And I think when that’s the issue, you’re forcing the agencies – you know they’re businesses, they’re going to need to make money in other ways other than the fees,” he said.

Deepika Nikhilender, CEO of CtrlShift agreed, noting tightening margins are putting pressure on agencies.

“I think there is still a shocking number of clients out there who aren’t remunerating the agencies fairly for digital marketing especially. And in this fairly fragmented world, they are putting a lot of talent in specialist areas like strategy, innovation, content creation, or even data and technology. They have to adapt their talent so continuously and often they can’t extract that value if you’re paying them commission-based compensation. So I definitely think there is room for this to change and the partnership between the brands and the agencies have together to make this change happen.”

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