Achieving programmatic transparency: a £3bn task

Nick Manning crunches the numbers following the release of ISBA’s long-awaited study into programmatic supply chains. The results for brands and publishers are dire.

At last it’s arrived and what a time to appear.

The new ISBA/PwC report on programmatic supply-chain transparency has finally emerged after an elephantine gestation period and what sounds like one hell of a labour.

The good news is that it shines a much-needed light into the murkiest corner of our entire industry. The bad news is that it demonstrates once again that the programmatic open display market is often riddled with waste, complexity and dubious practices.

This isn’t the first study of its kind. The WFA report of 2014 has passed into folklore with its waterfall that deconstructed a 40% loss of budget through the programmatic supply-chain before a single ad appeared (and before poor viewability and ad fraud ate a lot more). The fact that the new ISBA report shows that 51% of an advertiser’s budget now reaches the publisher might appear on the surface to be a small cause for celebration.

Except that it’s still an incredibly small number. The old adage that 50% of advertising budget is wasted takes on a whole new meaning. Yes, we all know that the digital supply-chain entails more charges, but they surely don’t have to be anywhere near half the budget.

The ISBA/PwC report does not, perhaps wisely, project a value for this loss of budget, but the numbers look remarkable.

In 2014 the UK online display market was worth some £2.4 billion, according to the IAB, and some 15% of the market is estimated to have been traded programmatically, so a 40% value loss in associated costs was worth c.£150 million.

For 2020, pre-COVID, e-Marketer predicted that programmatic would account for 90% of the UK online display market total of £6.6 billion. So a 50% value loss in costs equates to nearly £3 billion, a 20-fold increase in 6 years in the ‘take’ for the intermediaries.

An entire industry worth billions annually has been constructed between the people who spend the money (advertisers) and the people who provide the audiences (publishers). Of course, a proportion of this is necessary and the numbers vary significantly for individual advertisers and by vendor, but there is no doubt that this is now a gigantic market, especially compared to the reduced market size of established media.

And it’s a vast industry in which a lot of businesses benefit from the comparative lack of transparency and would like to keep it that way.
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It is worth stressing that these market abuses deprive the publishers of their lifeblood. High quality content of all kinds, not just news, costs a lot of money to produce in a market where a lot of content is available free-of-charge. The hunger for high quality reporting has especially never been greater, with audience numbers through the roof for strong, factual content when it is needed most. The truth has never been harder to discern among the spin.

Conversely, the numbers for factually incorrect, often crazy, content are also booming. Dangerous misinformation is rife, leading to actual civil unrest such as the lockdown protests in the US, the vandalism of 5G infrastructure and the rampant conspiracy theories regarding vaccines. ‘Fake News’ is now a real threat to life and limb, not just forests.

And as audiences peak for the high quality media, the ad revenue just isn’t there to support them. The starvation of programmatic revenues contributes to this vicious spiral downwards, leading to more paywalls which can act as a barrier to great journalism, such as the FT’s data analysis of COVID-related deaths.

The absence of ad revenue means that some media outlets rely even more on the largesse of their owners, opening up the possibility of more proprietorial editorial influence. The strongest media owners have to pay for themselves to preserve independence.

And, of course, a 50% loss of budget damages advertising effectiveness, but this may not be evident if the data is unreliable. If you can’t follow the money, as the ISBA study shows, how can you measure the true ROI?

At these challenged times, a loss of 50% of buying power is potentially catastrophic for some brands.

It could have been different. The 2016 ANA report put the cat among the pigeons and it could have been thought that the ensuing brouhaha and new contract templates would rectify many of the worst practices. There is no doubt that the most extreme kind of ‘undisclosed’ contracts have since waned, but many other behaviours have persisted in a quagmire of conflicting systems, NDAs and wilful obstruction. New cross-nullifying clauses on data-sharing have sprouted behind the scenes and beyond the reach of many advertiser contracts.

The ISBA report is as thorough and detailed as it can be under the circumstances, but the accompanying rubric teems with well-managed frustration. Only 12% of the report’s impressions could be fully tracked over a 15 month period, and the number of companies involved (50+) and supply-chains (290) tells you all you need to know about how dysfunctional the market is.

Buried away within the report is the revelation that participating advertisers’ campaigns appeared on an average of 40,524 websites. Call me old-fashioned, but even the best systems cannot manage the control and optimisation of this spread of activity, and such a big number hardly screams ‘targeted’.

As referred to in my Mediatel News column in April, the machines have been allowed to run out of control in the pursuit of impressions, whether real or viewable or not. In that world, all impressions are equal.

As ISBA says, the market is ‘ripe for fundamental reformation to make it fit for purpose’, but for that to happen some bitter pills will have to be swallowed, and painful consolidation is necessary.

ISBA’s conclusions are undoubtedly correct; standardisation of contractual and technology aspects that facilitate data-sharing, tick; industry-wide collaboration to investigate and reduce unattributable costs (15%), tick; but the key, as ever, is for advertisers individually as well as collectively to take control and force their commercial partners to open up the data and money drains.

To repeat; some advertisers’ budgets are being halved through obscure costs, some of which are legitimate, but very few advertisers can really know what they should actually be paying and what value they are getting.

The danger is that programmatic becomes associated with a lack of transparency. There is no reason for this to happen and no reason why advertisers should not have open access to where their money and data is deployed, with the right navigation and with willing partners throughout the trading cycle.

The best time to make changes is often ‘now’. The ISBA report is, perversely, even more important now than if it had appeared when planned. At a time when budgets will be scarcer, advertisers have the opportunity to flex their buying muscles and, working with their trusted partners (yes, underpinned by far-reaching contracts to cement trust), drive real change.

They should analyse the findings of the ISBA/PwC report, participate in the industry-level dialogue, and they should withhold their investment in any channel (not just online) where they cannot achieve the complete transparency of data and money that is essential to the accurate calculation of return-on-investment and ‘working/non-working’ money.

After a full review, new systems and processes can be put in place to make programmatic work as it can and should, including the constant optimisation that is vital and the viewability and ad fraud control that should be table-stakes, but often isn’t. New remuneration and reward structures can and should incentivise good practices.

It’s all possible with the right approach and the right help.

And a good time to start is right away.

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Nick Manning is the co-founder of Manning Gottlieb OMD and was CSO at Ebiquity for over a decade. He now owns a mentoring business, Encyclomedia, offering strategic advice to companies in the media and advertising industry. He writes for Mediatel each month.

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