Programmatic transparency: the way ahead
As we approach the fourth anniversary of the ANA’s prescribed solutions to media transparency, Nick Manning looks at what has changed and where more significant progress can be made
In the 1970s, China’s first head of government Zhou Enlai supposedly said of the 1789 French Revolution that it was too early to tell what its significance was. Some things take a while to show their full effect.
The infamous ANA media transparency exercise of 2016 may not be as historically important and its effects may also still be emerging, but its fourth anniversary sees some important glimmers of light behind the fog.
I spent large parts of early 2016 helping the ANA produce its solutions document (‘Prescriptions, Principles and Processes for Advertisers’), which was published on 18 July that year. It outlined seven areas where marketers could make substantial improvements in media governance. It was accompanied by a media agency contract template produced by Reed Smith and based on ISBA's original version, published a year earlier.
It is fair to say that progress since then has been fitful and frankly, not as great as expected. We recommended that advertisers appoint a ‘Chief Media Officer’ to take responsibility for the increasing range of media needs; this doesn’t seem to have happened even though the need for strong media governance has grown more urgent since 2016. In-housing wasn’t a ‘thing’ back then.
While there has been some take-up of the ISBA and ANA media agency contract templates, the recent (and now famous) ISBA/PwC report demonstrates that the programmatic supply-chain stretches beyond the audit reach of even the best contracts (and additional confidentiality clauses have entered the supply-chain since the ANA exercise to muddy the waters).
However, and despite the inertia, the ANA recommendations of 2016 all hold true today, especially regarding the all-important area of online display media .
The most remarkable revelations from the ANA’s K2 Intelligence report related to the online display market where arbitrage and other unseen media trading benefits were (and are) rife. Programmatic trading in the U.S. has grown from 73% of the total US online display market to 85% this year. In absolute money terms, it has grown by 250%, with a degree of opacity and complexity that was even less apparent in 2016.
What is now clear is that the whole subject of media transparency can only be resolved when the programmatic market becomes fully visible to advertisers in terms of data and money. This unlocks everything else.
And there are some signs that progress is finally being made.
The UK Competition and Markets (CMA) review, published on 1 July, is potentially a major milestone. It follows hot on the heels of the ISBA/PwC report (and others) in calling out the programmatic advertising market as needing reform to provide transparency for advertisers. Other countries, crucially including the U.S, are also looking at this market as being ripe for change through regulation.
Among choice quotes is the CMA statement that: “Market participants typically do not have visibility of the fees charged ….this makes it very difficult …to make optimal choices on how to buy or sell inventory, reducing competition among intermediaries”.
Although the CMA is not empowered to legislate for change, this subject is now clearly on the UK Government’s radar as it addresses the imbalances of the digital media market for the benefit of consumers, publishers and advertisers.
In Australia, the IAB has chipped in with five areas that can be actioned immediately to help advertisers and agencies achieve better consistency in the supply-chain. The IAB in the UK has also made welcome comments since the ISBA/PwC report.
Omnicom has launched what it describes as a transparent programmatic buying process, which purports to provide 12% more working media than current buying methods. If it lives up to its promise this could encourage other major groups to follow suit.
The recent and excellent report from the financial analysts Redburn shows that the number of U.S advertisers using agency trading desks has fallen by over 60% since 2016, reducing the opaque ‘undisclosed’ trading deals that were exposed in the ANA’s K2 Intelligence report.
There has been been some erosion of agency margins as part of a wider trend following the ANA exercise. Margins peaked in 2015/2016 and have been declining ever since. While this is not in itself an unalloyed advantage, it is evidence of a market in transition.
Plus, the ISBA/PwC report itself was notable for its inclusion of publishers, media agencies and adtech companies, with planned cross-industry moves to improve standardisation.
However, not all the news is positive. The removal by Google of third-party cookies in its Chrome browser in 2022 could potentially set back attempts to enable tracking through the programmatic eco-system. And the ISBA/PwC report reconfirmed that too much cost goes into the supply-chain.
While ISBA/PwC estimated this at 49% of the advertiser’s budget, the CMA study estimated it at 35%; even this is described as inefficient and too high to provide publishers with much-needed revenue.
So what can be done to make a real difference? There are two initiatives that could unlock progress.
Firstly, the issue of programmatic transparency should be elevated to the advertisers’ Boardroom.
The UK online display market is estimated to be worth $5.5 billion (CMA); not all of this is subject to the transactional costs described in the ISBA/PwC report, but a substantial amount of money is being spent in an opaque supply-chain with little tangible proof of appearance or effect, with ad fraud potentially adding to the loss of value further downstream.
No other expenditure of this scale would undergo so little scrutiny by companies. The growth in the programmatic market since 2016 has been dramatic and yet the expenditure remains largely un-policed.
It is now time for this expenditure to be measured and accounted for with high, common financial standards within the overall scope of a company’s financial reporting. For example, different advertisers arrive at different “working media” numbers using different accounting approaches. The same is true of different brands across a portfolio within the same company. Data standardisation is good, and even better when accompanied by financial standardisation with generally accepted accountancy principles.
Google will remain a substantial player in the online display market for the foreseeable future and after third-party cookies go away, it is likely it will be even stronger"
This move would elevate media to its rightful position within the C-suite.
Secondly, there is an interesting paradox in the supply-chain in that while it is complex, the CMA report spells out in detail the extraordinary presence throughout of Google.
Google has a substantial market-share in all aspects of the online display market (potentially supplemented by the data from its owned and operated vehicles), to an extent that concerns the CMA enough to suggest that Google’s adtech assets be reviewed.
Google itself deflects arguments about its market strength by pointing out that its vertically-integrated presence allows for ‘efficiencies in areas such as cookie-matching’.
So a high market-share throughout the eco-system can be an advantage after all.
Google will remain a substantial player in the online display market for the foreseeable future and after third-party cookies go away, it is likely it will be even stronger. Google will no doubt emerge as a major player in the connected TV market, where programmatic trading will become the norm.
Google’s market strength in online display can be turned into a positive in the drive towards transparency through the standardisation of data- and money-flows through their eco-system. Although there is a debate about its involvement throughout the eco-system and while Google likes to keep ‘church’ and ‘state’ apart, it is worth looking at the potential to provide better transparency where Google properties play a significant role in the delivery of impressions.
This does not exclude the involvement of Facebook and other adtech players, but Google is rightly identified by the CMA as having particular strengths in the online display market.
The ISBA/PwC report made a good start in including adtech players (including Google) in the process of achieving clarity, and it will help Google’s position as the gatekeeper of the display market if its market presence can be exploited for benign purposes.
In short, the media transparency movement has been slower than hoped since 2016, but more significant progress can be made with a move towards financial standards consistency combined with the constructive involvement of Google (and the other adtech players), co-ordinated by the relevant trade bodies.
It could be a great leap forward, and on the subject of China, the Zhou Enlai quote was actually a misunderstanding. He was talking about the 1968 Paris student riots which were quite recent in the 1970s. We won’t have to wait that long to see the effects of the ANA exercise if further actions are taken now to build upon the progress made since 2016.
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.