We all remember the chart from the early days of ad tech that showed how $1 coming from a marketer could become as little as $.25 to the publisher after being reduced by agencies and ad-tech firms. The world’s largest marketers came out in unison telling the industry this must stop. They were partially right, but the hyper-focus on working media dollars is both under-dimensioned and short-sighted.
Imagine a marketer—Marketer A—is so frustrated with the so-called ad-tech taxes that it not only decides to buy all media in-house but avoids programmatic altogether and only buys directly from publishers. Let’s say Marketer A pays $X, with no audience data layered on top of this buy since that would involve ad tech. But at least 100 percent of Marketer A’s spend is working media dollars going to the publisher.
Now imagine a marketer—Marketer B—works with a smart programmatic agency or provider. This marketer pays publishers half of $X for the same display banner inventory programmatically. To ensure the same quality of inventory and to layer on data and optimizations, for argument’s sake, let’s say the ad-tech fees equal the cost of the inventory such that both marketers pay the same in the end. With 50 percent of the budget going to fees, did Marketer B just get sucker-punched by ad tech? Let’s take a look.
With the ability to layer both first- and third-party data into the buy as well as verification, Marketer B now has great a great lever for reducing waste and driving performance on the same publisher inventory purchased by Marketer A. Marketer B has the ability to exclude under-performing audiences or prioritize high-performing audiences, all in real-time. So for the same costs, did Marketer B really get taken? No, Marketer A did. Marketer B had superior optimization tools, which ultimately delivered a more efficient media buy.
This is of course an extreme example, but I see marketers not allowing or inspecting for enough nuance in the ecosystem, like marketing cavemen: “Ad-tech fees bad. Money to publisher good.” This simply isn’t true. If I can get a caveman moment here, I’d suggest, “Paying for no value bad. Paying for value good.”
Here are three simple ways marketers can ensure their ad-tech dollars are creating value.
Look at all the fees
Marketers too often focus on the agency fee and the DSP fee but forget there can be an entire world of fees behind the DSP. Understanding a DSP’s business model will assist greatly in uncovering some of these fees behind-the-scenes. For example, some DSPs may offer a low overall fee but then charge for other features. Before entering into a contract with a DSP, understand what the total fees in a realistic campaign will look like.
Also, a handful of DSPs (the demand side) also own an SSP (the supply side). Owning both sides of the equation allows the company to make money on both sides of the deal. So a reasonable DSP fee doesn’t tell the full story. Not only is it possible the supply side fee is higher than the DSP fee, but that same company could prioritize its own supply source in the auction via its DSP technology and most marketers wouldn’t be the wiser. Overall, sell-side fees can be just as significant as buy-side fees, so marketers should strive to understand the full ownership chain and the fees associated.
Ensure value is really being created
Imagine it costs 1 percent of the CPM to buy pre-bid fraud protection from a verification vendor. The results are in, and that vendor helped reduce fraud levels from 2 percent to 1.5 percent. Most marketers would say this was worthwhile. But since when is paying 1 percent of something for 0.5 percent benefit worthwhile? Instead, I recommend marketers and agencies know exactly what each feature costs and what it’s returning. This helps prove the value of third-party data and other technologies while helping to eliminate the cost of others.
Focus on value
When a consumer buys a tube of toothpaste, it’s probably a good thing they don’t know what percent of their money is going to working toothpaste dollars because it’s probably depressingly low. Yet, very few consumers complain that toothpaste is too expensive. It’s not worth making our own toothpaste, there aren’t significantly better options and we all value the end result. I believe the same is true with marketing technology and services. Those that create value already are priced at least somewhat fairly, there aren’t significantly better options and we’re better off spending money on that technology or service than not.
I believe that with the right discipline, nearly every penny of digital can be measured for effectiveness, including both the technology components and the media or data. We should hold ourselves accountable to have the discipline to truly know what is delivering value and what is not, and therefore direct our money as such.