The Programmatic Black Box

August 19, 2015

By Bill Duggan

Programmatic buying — defined by AdExchanger as “the automation of media buying and selling processes and decisions, enhanced through data” — has great promise. Benefits include efficiency (lower CPMs, faster processing speed), targeting, effectiveness, scalability, and ROI. Programmatic media is the new reality, is big, and is getting bigger. Programmatic has expanded beyond desktop digital display to mobile, video, television, radio, out-of-home, digital place-based media, and print.

However, there are transparency issues with programmatic. The supply chain between the advertiser and the publisher is complex and murky. It’s been called a “fog” and a “black box.” The opacity of programmatic buying is costing advertisers money — and likely costing publishers money too. Below is a simplified view of the programmatic supply chain (source: AdFin).

Given the multiple intermediates, there is a lack of transparency — especially financial transparency — in the programmatic buying process. Various industry experts estimate that for every $1 invested by an advertiser in programmatic buying, only approximately $0.40 gets to the publisher. The remaining $0.60 is dispersed across the various intermediaries.

Some pieces of the supply chain add lots of value, others don’t. Low-value intermediaries prey on those who don’t investigate. I’ve heard experts claim that some marketers pay as many as three intermediaries for the same service.

So what should marketers do? Knowledge is power. Marketers should ramp up their programmatic intelligence.

The foundation of understanding programmatic is understanding the programmatic supply chain. Ask about the role of each player in the process. Such a long supply chain means there are numerous intermediaries of intermediaries. Advertisers need to talk to the tech providers. Know the partners of your partners. Inquire about the flow of money between working dollars (to the publisher) and non-working dollars (to the various other intermediaries).

As greater transparency occurs, savings can be realized for marketers and publishers, which would optimize the promise of programmatic buying.

For more on the issu
es surrounding media transparency, and what’s being done to alleviate them, read this month’s ANA magazine, which covers the topic in depth and features the perspectives of Bill Koenigsberg of Horizon Media and the 4A’s, Jon Mandel of Dogsled Enterprises, Douglas J. Wood of Reed Smith LLP, Dave Morgan of Simulmedia, ANA Chair Tony Pace, Bob Liodice of the ANA, and Marc Pritchard of Procter & Gamble, among others. 

Read ANA magazine here

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