Chaos, confusion and ignorance: a recipe for margin stuffing
Dominic Mills wraps his head around the mysterious and murky programmatic supply chains that are in desperate need of a shake-up. Plus: The world according to Sir Martin; and Gathering round WACL week
Historians of 19th century Europe like to tell the story of a little-known war between Denmark and Prussia, the causes of which were so obscure that only three people are said to have understood it. One died shortly after, one forgot and the third went mad.
I like to think there’s a parallel today with what we could think of as Automated Trading V1, the full complexity of which's eco-system was laid bare last week by an ISBA/PwC study. You get the feeling that, with the exception of the good people at PwC, nobody understands the entire supply chain end to end, so complex and torturous is it.
ISBA describes the study as groundbreaking, which it is. But it is also heroic, not just in terms of effort by PwC, but also in terms of the willingness of different players to put themselves in the spotlight and open up their actions to forensic analysis.
I’m talking here of the 15 advertisers (including BA, BT, GSK), eight agencies (PHD, Mediacom, Zenith among them), DSPs, SSPs and 12 AOP-member publishers (such as Bauer, Immediate, News UK, The Guardian and TI Media).
As someone closely involved in the study noted, what it tells you is that “no-one is in control”. Perhaps it is too much to ask that any single entities might be, except that at one end it is ultimately driven by advertisers and designed to service their needs, and at the other by publishers, whose inventory is the golden goose, so they are the ones who need to start owning the solutions. So three cheers for ISBA for putting a flag in the ground.
One area publishers could tackle immediately is in auditing their SSPs. Most, it seems, do not - a problem compounded by the fact that their contracts might be out of date, having failed to evolve in tune with the market.
There’s excellent commentary from industry leaders here and Nick Manning here, and anyone tuning in to Mediatel’s Future of Media Trading live-stream on Thursday will get more, not least from David Pidgeon’s interview with ISBA’s Phil Smith and report author/co-ordinator Sam Tomlinson from PwC at 10.30.
I’m just going to highlight two things. One, that campaigns from advertisers participating in the study appeared on no less than 40,000 different sites, including one selling Nepalese calendars. How does that happen? How is there any sense that advertisers have any control when they are mindlessly chasing audience down the long tail at the lowest cost?
More pertinently, why is this still going on, when there is plenty of evidence — such as from JP Morgan Chase in 2017, which reduced the number of sites it used from 400,000 to 5,000 with no less effectiveness — ?
Were this to happen, then Private Market Places (PMPs), which seem to have been forgotten in the madness, may see more use and bring obvious increases in control to both publishers and advertisers.
The second is how the industry has allowed a system to evolve to a point where it cannot track what is going on. I’m referring here to the mind-bogglingly complex permissions needed by PwC to untangle the threads, which is one reason it took a year to set the study up.
In one case, four separate parties had to approve the release of one data set for one part of one supply chain. And note that PwC found almost 300 unique supply chains.
Yet without a better, let’s say standardised, permissioning system, the chances of bringing any transparency to automated trading will be minimal.
But looking at the fees taken out along the way by all the different participants in the supply chain — an average of 8% for DSPs and 8% also for SSPs (the latter representing 14% of publisher revenues), and demand-side tech fees of 10% on average — it’s obvious that different parties’ interests are hopelessly misaligned as things currently stand. And that’s before we even mention the 15% that disappears into the ‘unknown delta’, also known as a black hole.
For many, the greater the complexity, the better. For them, mystery equals margin stuffing and transparency the opposite.
But, if we are to achieve Automated Trading V2, the clean version, that is what must happen.
The world according to Sir Martin
Let me also recommend Future of Media Trading viewers stick around till the final session at 16.05 on Thursday, which is me interviewing Sir Martin Sorrell.
He’s in ebullient form and takes us both on a world tour, including the likely post-COVID scenarios in China and the US, as well as dipping in to more detail on what media agencies need to do to survive, in-housing, big tech, Amazon (“if Jeff Bezos isn’t copying your business model, then it probably isn’t very good”), and sectors most likely to recover fast.
I won’t give away more, except to say that if you are familiar with his previous ’V-‘ and ‘U-‘ shaped analogies to describe the shape of economic recovery after the 2008 crash, he has a new one for us: the reverse square root sign.
Like me, the not-mathematically inclined might have to look it up.
Gathering round WACL week
There’s general consensus that the latest IPA Census figures told a mixed and, in parts, decidedly disappointing story.
BAME performance, for example, has gone backwards making you wonder that if the industry couldn’t improve the stats during a (relatively benign) economy, what hope there is post-COVID.
Some of the same applies to women. On the positive side, women now make up just over a third (34% to be precise) of C-suite roles, up a couple of percentage points from the year before and from 19% back in 2002.
But not in every area. Women’s share of junior roles has increased — to 59.5% — and, perhaps in tandem, the gender pay gap has gone backwards.
So how do you even begin to tackle all this? Bit by bit, organisation by organisation, using example and inspiration.
And nowhere is there a greater concentration of female talent than WACL, so it’s good to see what is sometimes unfairly classed as a dining and networking club for the elite doing its bit with its Gather event next week for younger women in the industry.
Like anything else with a once-physical dimension, Gather has gone virtual — easy for men to tune in too! — and offers a variety of sessions from coaches, mentors, a psychotherapist (former AMV creative Pat Boles), and Syl Saller, outgoing Guinness CMO. It’s free and it’s on Facebook Live.
But the session I really want to see features one-time media agency boss Lindsay Pattison, now WPP’s chief client officer, on why dependability doesn’t have to be dull. She’s being interviewed by a one-time leading media executive at Omnicom. The twist? Her interviewer is David, the P in PHD and her husband.
I’d love to have been a fly on the wall when they came up with that as an interview theme.
You can find out more and sign-up here.
Join us on 14 May for the Future of Media Trading - a free, streamed event where Dominic Mills and Sir Martin Sorrell headline a full-day of insightful content.