The Programmatic Conundrum

October 19, 2015

Programmatic advertising is wonderful. It has streamlined the media buying process, improved targeting capabilities and brought with it some great cost efficiencies for advertisers. But along with that comes some interesting decisions for agencies that do digital media.

What’s programmatic?

Without getting too technical, programmatic allows single-point access to a large amount of digital inventory across multiple ad exchanges and potentially thousands of websites. Similar to ad networks, it’s no longer necessary to hand-pick websites and build complex media plans segmented by publisher. Campaigns can be targeted to a specific audience or channel and optimized towards campaign goals using pre-determined parameters.

Run. Analyze. Adjust. Repeat.

At DSA, we’ve been doing programmatic buys for several years now, and have found that it makes our buying process more efficient. We spend less time signing contracts and trafficking ads, which allows more time for optimizing and analyzing campaigns. And we still work with ad networks and other publishers directly when we feel it’s the right fit for a campaign.

 

Most programmatic buys are through real-time bidding (RTB). With RTB, media auctions happen in the micro-seconds it takes a webpage to load. Advertisers only pay a penny more than the second highest bid, so RTB ensures advertisers are paying actual market value for their media.

Sort of.

Programmatic and the Digital Agency

While programmatic has changed the media landscape significantly, it has also created some unique opportunities for digital agencies. Many now have an internal trading desk, and staff their own team to manage and optimize their campaigns. And typically, these in-house platforms also come with the opportunity to bake in a non-transparent margin to the media costs that clients may not be aware of.

For DSA, that creates a bit of a conundrum. We’ve always prided ourselves on a fee for service model, preferring to work in net dollars, and not inflate our fees based on the media spend. But if media is being bought with a hidden margin, it creates a few concerns:

  • Clients might not be aware of additional padding to their media spend beyond what’s already being paid to an agency.
  • Planners are thrown into the conflict of choosing between media options when one option offers a direct benefit to their agency.
  • Agencies may be incentivized to secure inventory at a lower cost to allow for larger margins, which can compromise the quality and targeting of inventory, especially when cost per acquisition or ROI goals are not carefully monitored.

For these reasons, DSA remains completely transparent with our media costs to clients, clearly differentiating hard media costs and agency fees.

If you’re an advertiser working with an agency, this is an important conversation to have. Are media decisions being made to benefit you as a client or to maintain a revenue stream for the agency?

If you’d like to find out more about programmatic buying, check out this great eBook published by Mediative. Or better yet, contact me at zgoodman@dsamedia.ca.

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