How to Penetrate the Impenetrable $100 Billion Programmatic Supply Chain

How is it that 30% of programmatic technology costs are untraceable? undiscoverable? unattributable? That statistic, which represents roughly 15% of programmatic ad spend, is what ISBA and PwC say is an “unknown delta” between buyer spend and seller ad revenue in their newly-published Programmatic Supply Chain Transparency Report. At a time when we’re all scrutinizing our budgets like never before, the report reminds us of how hard it is to untangle this impenetrable supply chain, and why it’s so hard to determine cost-to-value when most of us can’t even understand cost.

Not enough progress

Five years have passed since Jon Mandel opened the pandora’s box of fee transparency. Although many of his assertions focused on client and agency relations, an entire chapter of the K2 Intelligence report that followed speaks to non-transparent trading practices in the programmatic supply chain. Remember the accusations of shenanigans behind “undocumented” fees uncovered by The Guardian in late 2016? Or when, in May 2017, the ANA reported that 42 cents of every programmatic media dollar was consumed by supply chain data and transaction fees instead of working media?

Programmatic trust was certainly a hot topic during that time period. And for a while, it felt like we were making progress. Alas, five years later, we’re once again seeing evidence that “the winning bid in the DSP often does not match the gross revenue recorded in the SSP.” Many of us can probably remember when the ANA’s Bob Liodice first announced, “Where there’s mystery, there’s margin.” Indeed, ISBA’s research demonstrates that the programmatic supply chain remains quite mysterious. But it doesn’t need to be.

The buck starts (and stops) here

Let’s all agree that if following the money were easy, we would never have had this problem in the first place. And while there’s evidence that we’ve moved the needle in the last five years, ISBA’s research proves that screaming “transparency” from the mountaintops is insufficient. This needs to be a ground game, and it’s winnable with our wallets starting with a few deliberate steps.

1. Admit we have all been duped. The first step in our collective road to recovery is admitting that we can’t follow the money. Understandably, that would be a difficult first step if not for the fact that we are all together in the same boat, collectively enshrouded in the same thick fog. Even so, to make such an admission easier, let’s all agree that today begins a period of amnesty. It’s time to absolve all media buyers, brand managers, publisher operations leaders and sales executives for our industry’s collective inability to fully account for where our money has been spent. The only condition of this amnesty is that the absolved take direct action to remove the mystery from supply chain costs.
2. Require all fees be separated from the media. One of the central reasons it’s so hard to understand programmatic tech and data costs is because fees are buried in the transaction. The norm in our industry is to pass the transaction from party to party net of fees. Bid a dollar in your DSP and they’ll bid 90-cents with the SSP, who will then bid 80-cents into the publisher’s ad server. Imagine if these transactions were executed at the gross bid price, and that each of these 10-cent fees were invoiced separately to the buyer or seller. The result would not only be instant transparency, but technology and data providers would need to become more accountable for delivering value relative to their costs.
3. Reduce the distance between buyer and seller. LUMA Partners’ famous Display LUMAscape shows well over 100 companies in twenty separate ad tech categories that fill the space between advertiser and publisher. Their Video LUMAscape clocks in at roughly 30 categories depending on where you target your spend. And as Jounce Media so astutely pointed out in their February 2020 blog, a single supply path between buyer and seller can easily become ten. Which is why ISBA and PwC found nearly 300 distinct supply paths between their fifteen advertisers and twelve publishers. It’s also why, of the 267 million impressions served, PwC could only match 31 million (12%). This research removes all doubt that it’s time for us to unwind this unruly mess and rid the industry of partners that are not transparent.

We need a clear path forward

Some famous hiker probably coined the phrase, “the journey is the destination.” For many who love the outdoors, getting lost in the woods is what it’s all about. But while circuitous routes and meandering paths are often the point of quality outdoor time, the same cannot be said for business. And especially when it comes to the business of programmatic advertising, crooked paths and dark corners are no friends to a productive relationship between ad buyer and seller.

ISBA and PwC remind us that it’s hard to follow the money when it comes to programmatic advertising. It’s an ecosystem that was built organically and cobbled together over a decade, rather than devised with a master plan in mind. But marketers can speak with their wallets by rationalizing every provider in their supply chains and excluding those that cannot clearly demonstrate value relative to costs. The result would be far fewer hops between buyer and seller, a smaller and healthier ad tech ecosystem, and more working media buying power driving value to the principles in our industry.

David Kohl is TRUSTX’s President and CEO. He’s a passionate advocate for improving the health and vibrancy of the media and advertising supply-chain, and he brings more than 25 years of M&E industry strategy and operations consulting to the TRUSTX leadership team.

This article was originally published on May 19, 2020 as a TRUSTX blog on the state of transparency and accountability.