Programmatic: a digital weapon of mass destruction

A few evangelical experts are leading everybody else at great speed towards a little-understood destination. Here, CPUK’s Roy Jeans explains the consequences.

Hands up all those people in a media agency that would go onto Mastermind answering detailed questions on programmatic buying. Even more importantly, hands up all those marketers controlling the budgets flowing into those media agencies that would feel confident enough to do the same.

Over the past few months we have had the ongoing fallout from the US-based ANA report on transparency, with a discernible increase in global media pitches almost certainly a by-product; a long and comprehensive mea culpa from Toshihiro Yamamoto, digital vice president from Dentsu Tokyo, apologising for overcharging clients; and more recently Facebook’s somewhat belated acknowledgement of their ongoing inflated metrics for measuring video-view performance.

My wife is a psychotherapist, dealing on occasion with quite difficult cases. A rhetorical question that she sometimes asks me is this: why is it that when people hear voices they are always saying “Kill the wife. Kill your family. Kill yourself”?

She’s never had a client where the voices are saying “Buy the wife some flowers. Take her on holiday. Do some charity work”.

Of course it is in the nature of their condition that the voices that they hear are compelling them to act in the way that they do, but I couldn’t help but think of her question when I read Toshihiro Yamamoto’s statement.

When was the last time a media chief announced “We have dramatically over-delivered and undercharged for many years. We have underestimated our audiences. We are clear about our exact responsibilities and obligations to our clients”?

I have variously been GM of Zenith, MD of Initiative, MD of Magna and Global CEO of rapport, so I have been at the heart of UK media negotiations for over 25 years.

[advert position=”left”]

I could certainly be accused of knowing where the media bodies have been buried – in fact as a long-term media negotiator I could map out the whole cemetery if required.

But then again I am confident that when I was negotiating the media deals on behalf of my agencies, and therefore clients, they would have been sufficiently aware of the parameters that we were operating within – not just regarding price but also audience and cover/frequency targets.

In fact a whole audit industry sprung up to assess these negotiations, with detailed periodic reports underpinning and policing our relative performances.

However, as has become increasingly clear from the ongoing announcements from all corners of the media landscape, this is no longer the case. Add in a series of private conversations that I have had with a number of concerned clients, and the situation is unambiguous.

There has never been a bigger disconnect between the client – whose money it is – and the beneficiaries of the labyrinthine journey where the money flows. The key to most of this disconnection is the programmatic world.

In his 2002 Berkshire Hathaway shareholder report, CEO Warren Buffet described the nascent “derivatives” market as “financial weapons of mass destruction…bad for both investors and more crucially the wider economy”.

He had attended an investor presentation where some of the US’s finest financial minds had attempted to convince him to invest in derivatives.

They were unable to explain with sufficient clarity how derivatives worked, what the downsides were, and the limits to any potential losses. Buffet concluded that they were playing with fire. He was right of course.

Fast forward to 2016. In conversations with clients (some of them global spenders) there is a strong sense that history is beginning to repeat itself.

Most clients do not understand the details of programmatic buying. They are also distrustful of its effectiveness, and feel that it has grown too quickly, with too little emphasis on guarding against its downsides.

In many ways it is media’s Twenty First Century equivalent of derivatives. The parallels are clear – a few evangelical experts are leading everybody else at great speed towards a little-understood destination.

There is a strong sense that agencies do understand the “what” of programmatic, but certainly not the “why” (from an audience perspective certainly). And it is this key distinction that suggests three likely immediate developments (two currently in play, with a possible third to follow).

Development One is what could be called the Kobalt Solution. About 20 years ago some key clients in Holland – Masterfoods, ABN Amro and the large retailer Ahold – created their own client-owned media buying agency called Kobalt.

Their logic was that the complexity of the media market could be better handled with an in-house operation – they could track where every Euro was spent.

It worked well for many years before it was sold – but the principle had been established. I have spoken to a small number of clients who have mentioned this to me as a serious option.

Development Two is what could be called the Knowledge Solution. Here the most media and tech-savvy clients are demanding complete access to the programmatic process from planning to execution, with all points in between in the spotlight.

This is very simple, and is happening now – smart clients are effectively forcing less-smart clients to subsidise their output. Simply caveat emptor.

Development Three is what could be called The Armageddon Solution. This would be some sort of legislation driven by persistent concerns about the whole programmatic area.

Almost certainly propelled by a combination of Second Tier (but still significant) spenders, but perhaps also underpinned through trade body initiatives.

This solution, superficially appealing as it is, will fail.

Like water flowing down a hill, media companies will also find a way to generate (profitable) revenues. And like it or not, if you want to compete for these audiences what you cannot do is simply walk away.

Unlike the best investor in US corporate history, you cannot look at programmatic and simply say “I’m out”.

Roy Jeans is chairman of Communication Partners UK