Programmatic Non-Disclosed Buys — Buyer Beware

May 18, 2017

By Bill Duggan

For years, agencies worked as "agents" when buying media for their clients. As agents, agencies looked out for the best interests of their clients and negotiated the best media rates. Today, many agencies are acting as "principals" rather than agents. In a principal relationship the agency may or may not be looking out for the best interests of their clients; and it's possible (even likely) that the agency is putting its own interests ahead of the client. Hence the line we have heard from ANA members — "Is my agency working for me or itself?"

In programmatic buying, agencies often act as principals. The term in programmatic is "non-disclosed media buying" (versus "disclosed media buying"). A non-disclosed model typically refers to an arrangement where an agent and/or intermediary purchasing media on an advertiser's behalf does not disclose the actual closing/winning bid prices of media purchased, instead providing only a final price, which includes margin and fees. By not disclosing the actual prices paid, margin (and potential arbitrage) are unknown to the client.

Whether to purchase programmatic media on a disclosed or non-disclosed basis is a critical decision for every advertiser, per the just-released report, "Programmatic: Seeing Through the Financial Fog," from ANA, ACA, Ebiquity, and Ad/Fin. The report recommends careful consideration of this decision. Advertisers which do not explicitly plan for and address programmatic disclosure will likely find themselves faced with considerable challenges to transparency. In a disclosed model, an advertiser should be able to access its transaction data, fees, and costs across the supply chain. In a non-disclosed model, one likely won't be allowed access to this information, instead agreeing to accept an aggregated report for all media and services provided. Given the murkiness and complexity of programmatic buying, there are hidden fees and costs in the programmatic "financial fog." And that costs advertisers money! In an era where advertisers are obsessed with ROI and accountability, they would be wise to pay close attention here. Otherwise, buyer beware.

Interestingly, the Wall Street Journal recently reported how the agency trading desk model is evolving as clients demand more transparency in digital media buying. That article says:

  • In recent years, trading desks have been making hay with an arbitrage revenue model: buying digital ad inventory in bulk ahead of time, marking it up, and selling it back to marketers. But now, marketers are looking at that approach with more scrutiny and are demanding more information about the original costs of ad inventory and what extras — such as data — their agencies are adding on top to justify the inflated ad prices. … What's causing the change? It seems marketers are getting more educated on the digital media ecosystem following the high-profile Association of National Advertisers report into media transparency last summer, which shed light on some of the techniques agency trading desks allegedly use to make big profit margins. 

The media buying world has gone programmatic and "Programmatic: Seeing Through the Financial Fog," is a must read for every advertiser investing in programmatic media.

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