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Agency Trading Desks

November 2, 2011

Basics Marketers Need to Know & Questions to Ask

The purpose of this document is to educate ANA members on agency trading desks regarding what they are, what they do, potential benefits, questions to ask, and more.

What Is an Agency Trading Desk?

There are various definitions, Forrester Research's description follows:

A centralized, service-based organization that serves as a managed service layer, typically on top of a licensed demand-side platform (DSP) and other audience buying technologies; manages programmatic, bid-based media and audience buying. Works as an agency's internal "center of excellence," supporting agency teams wishing to tap into this new buying model on behalf of agency clients.

Agency trading desks have also been described as:

Media Impacted  by Agency Trading Desks

The agency trading desk model was initially trialed on display advertising. This was done by tapping into auction-based advertising  exchanges such as Google's DoubleCiick Ad Exchange, Yahoo!'s Right Media Exchange, and other sources of real-time bidding (RTB) supply (companies that provide publishers with tools to make inventory biddable and better manage yield optimization across buyers) through DSPs. Generally speaking, the inventory made available through these supply sources has been inventory that publishers had traditionally allowed advertising networks to sell which was considered unsold inventory.

In addition to display, agency trading desks are also now actively buying online video, mobile, social media, and search. Agency trading desks may also be buying digital out of home and addressable television in some very limited instances.

Who Has Agency Trading Desks?

All the major holding companies and a few independents have agency trading desks.

Holding Companies

The holding company trading desks primarily ser vice that holding company's media buying agencies and clients.

Independents

The Origin of Agency Trading Desks

The first agency trading desks started in 2007 or 2008 and came into existence for these fundamental reasons:

Benefits of Agency Trading Desks

Agency trading desks are an operationally efficient model that can offer multiple benefits:

In summary, the goal of agency trading desks is to help clients improve performance  and get more value from their display advertising (and potentially other types of digital media spend) by (a) taking advantage of a new buying model and (b) bringing much of the service which was outsourced (to networks, for example) inside the agency's walls.

How Trading Desks Make Money

Business models vary across agency holding companies;  however, all trading desks are compensated via some form (or combination) of:

In at least one case (WPP's Xaxis), there is profit margin for agency trading desks via incremental media fees. Xaxis buys some media, at its own risk, and then resells that media to clients, often at a premium. According to Xaxis, they add value by combining  various data sources to provide better targeting and insights and further  optimize the inventory by overlaying technology such as frequency capping and attribution  modeling and then make it available to clients for less than they would have paid for it from an ad network or publisher. Xaxis said it's transparent with clients about its business model but does not disclose the price the company pays for media due to the real-time nature of pricing  and the confidentiality agreements with partners (who do not want clients to know which publisher the company is buying from so they can protect their "premium"  business).

Criticisms of Agency Trading Desks

Criticisms of agency trading desks include:

What Clients Need to Do

While agency trading desks could indeed offer many benefits, marketers need to be educated on how their compa­ ny's money is being spent and take responsibility for understanding the pricing model, unique role, and value that each player in this sector provides.

Every holding company (and independent)  conducts its business differently.  Marketers who work with a trading desk should understand and be comfortable with their agencies' models. The following questions and action steps are important.

Comment to agencies- the use of a trading desk should be clear and transparent with a client and discussed with a client before a trading desk is engaged. Agencies need to initiate discussions re: the value proposition of the trading desk and its compensation.

An alternative would be for your agency or you to work directly with a DSP.

Continue the Conversation

ANA invites comments from the industry on this blog: http://www.ana.net/blogs/show/id/22302

Acknowledgements

ANA conducted two recent roundtable discussions to better educate members on the topic of agency trading desks, and we would like to thank and acknowledge the participants:

Julie Berger
Vice President, Managing Director
Digital, Horizon Media

Teri Gallo
Vice President, Marketplace Development
Mediabrands Audience Platform

Quentin George
Chief Innovation Officer
Mediabrands

David Gould
Executive Vice President,
Global Digital Managing Director
Starcom MediaVest Group

Brian Lesser
Chief Executive Officer
Xaxis

John Montgomery
Chief Operating Officer North America
GroupM Interaction

Joanna O’Connell
Senior Analyst
Forrester Research

Source

"Agency Trading Desks." White Paper 2011.

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