Transparency will unlock the value and increase the effectiveness of programmatic

Customers Data Management General Marketing Jun 29, 2016

It has been three weeks since the ANA released 'the report,' as it is commonly referred to in the media industry, and to say the report, which found that “nontransparent” practices are pervasive in the media buying ecosystem, sent shockwaves across the marketing community would be an understatement...

JSD Header Image

It has been three weeks since the ANA released ‘the report,’ as it is commonly referred to in the media industry, and to say the report, which found that “nontransparent” practices are pervasive in the media buying ecosystem, sent shockwaves across the marketing community would be an understatement – it appears to have shaken some marketing executives and their C-Suite to the core. Since its release, I have had multiple meetings with large multi-national marketing leaders and each meeting started out by asking me the same question: “You worked on the agency side, the client side, and now in Martech; what is the real story? Is it really as bad as they say? Are we getting ripped off?”

Of course, I don’t pretend to hold all the inside knowledge of the media industry. It is an incredibly complex marketplace of buyers, sellers, and service providers. And to be clear, I believe – and have seen firsthand – the vast majority of media agencies do the right thing for their clients day-in-and-day-out. Nevertheless, if marketers want the ‘real story,’ and if they want to lead the effort in making the media industry more transparent, then they need to continue, or in many cases start, developing internal media competencies and asking the right questions. Marketers will no doubt spend significant time in the coming weeks and months determining how they can bring more transparency across all channels of their media buying, and I argue that it is well past the time that they take a hard look at their digital media investment, and I believe programmatic is a great place to start.

It should come as no surprise that another recent study released by the ANA found that a majority of marketers are concerned about the opaque nature of the programmatic advertising value chain. Marketers, and in many cases, media planners and buyers often have no idea how much of their programmatic budget is used to pay fees to various technology middlemen and how much is actually used to buy media. While the promise of programmatic is to increase the efficiency and effectiveness of the media buying process, the myriad of platforms, networks and exchanges that now sit between the two principal players – marketers and media companies – is anything but efficient and hinders marketing effectiveness and ROI.

At Krux, we estimate that marketers can lose as much as 60% of their budget on opaque fees that are never itemized, and if they are listed, few are fully questioning their value. This lost value is demonstrated by the figure below, which shows how $5.00 in ad spending eventually becomes just $2.00 in actual media.

waterfall 1

 Of course, the list above is not exhaustive as many will surely point out. Nevertheless, it doesn’t have to be this way; we can do better.

As someone who has spent most of his career focused on driving marketing effectiveness, I believe that recapturing the value lost in the current programmatic ecosystem will enable marketers to reap the benefits of programmatic targeting capabilities and increase their ROI. To that end, even with all the ecosystem headwinds, I have seen multiple in-market studies and market mix modeling (MMM) reports showing strong ROI from programmatic campaigns with the same creative, both compared to direct digital media buys, as well as other media channels – linear broadcast, print, etc. That is why my colleagues at Krux developed a solution for marketers and media companies to transact programmatically in a transparent manner that eliminates most of the waste highlighted in the image above; we call it Krux Link.

We designed Krux Link to solve the glaring inefficiency and lack of transparency we saw in the programmatic marketplace. Krux Link is based on a simple premise: marketers should understand how much they are paying to buy media and data, and how much they are paying in third party fees. As such, Krux Link simply replaces the current toll road between buyers and sellers with a simple and transparent $0.25 facilitation fee in a policy-controlled and secure peer-to-peer transaction platform. Period.

Waterfall 2

More than ever, marketers are being asked to account for and defend every dollar invested, and many are pressured to reduce ‘non-working’ costs and maximize reach. (The working vs. non-working debate is a topic for another post.) As such, they must start asking the questions: how is my digital media investment being spent? Who is getting paid what? How does that map back to my objectives? And what are the KPIs and performance targets that determine success? Basic questions? Yes. Consistently asked and documented? No.

The recent ANA report was the shot across the bow, and the push for more transparency won’t fade anytime soon. And that’s a good thing.