It’s Complicated: As in the Agency-Marketer Relationship
The relationship between digital marketers is, well, “complicated” (yes, with air quotes). On one hand, it’s probably one of the greatest assets marketers have, to be able to outsource major chunks of work to someone else. On the other hand, that relationship can hurt the marketer (often without their knowledge), especially when it comes to transparency around digital media spend.
What makes the digital marketer - agency relationship so challenging?
A lot of things, and I’ve covered this topic in the past here: https://www.dhirubhai.net/pulse/what-concept-buy-media-its-1995-dr-augustine-fou-/
But in short, the media agencies incentives are misaligned with the marketers’ incentives; and this is further complicated by ad fraud, the work of bad guys who make money by creating counterfeit digital goods -- fake ad impressions, fake traffic, and fake data -- to generate enormous profits for themselves.
"media agencies must maximize their own profits... that's fine; but in programmatic digital ads it's at odds with marketers' getting better ROI and outcomes."
The media agencies must maximize their own profits, because their bosses have to answer to Wall Street. When agencies agree on total amount of ad budget and ad services with the marketer, their top-line is capped. The agency must then go out and procure the ad inventory they already promised to deliver to the client. But the media agency can choose to buy higher quality inventory which costs more, or to buy lower cost ad inventory that still passes all the fraud filters. The agency can maximize their own profit margins by buying lower cost supply -- more leftover dollars means more profit for the agency.
But low-cost inventory comes from fraudulent activity -- fake traffic, fake clicks, click bots, and other forms of digital ad fraud - not humans visiting webpages. These bots will never turn into paying customers for the marketer. So, as the agency is maximizing their own profit margin, they are actually harming the marketer, because the low cost inventory will not drive any business outcomes for the marketer.
"In programmatic digital media, there is INFINITE supply due to ad fraud ..."
This dynamic is not the fault of the hard working media buyers who work at the agency. And this complexity has not always existed -- just in digital programmatic buying. This is because when the media agencies bought TV ads on the behalf of the marketers, they could negotiate lower prices due to the large amount of media they were buying. And TV ad slots were finite and scarce.
In programmatic digital media, there is INFINITE supply due to ad fraud -- as much ad inventory as needed can be created out of thin air. So buying low-cost inventory means buying fake inventory created by fraudulent means. This is why marketers must NOT incentivize their marketing media agencies on the amount of digital media they procured, or the lowering of average CPMs. Both of these create the incentive for the agencies to buy the lowest cost media possible. Marketers and their agencies must do the hard work of measuring whether the digital media actually drove incremental sales. If not, then it is not worth investing in.
"What can marketers do? Ask questions -- where, when, what, how..."
Other questions a marketing practitioner can ask of their media buying partners include the following:
- Where did my ads run? (insist on line item details so you can see the long-tail fraudulent sites eating up your ad impressions and budget)
- When did my ads run? (overnight hours between 2a - 5a are plagued with bots, since humans are asleep)
- What did you pay for my ads? (this detail will reveal whether the media agency is “arb-ing” your dollars - they tell you it costs $35 when it actually cost them far less)
- How is ROI being calculated? (it’d better not be “how much inventory did you buy for what average cost;” instead it should be how much lift in brand metrics and/or sales did it drive).
Additional details can be found in this article:
https://www.dhirubhai.net/pulse/hard-questions-ask-your-media-agency-digital-consigliere/
About the Author: “I advise advertisers and publishers on the technical aspects of fighting digital ad fraud and improving the effectiveness and transparency of digital advertising. Using forensic technologies and techniques I help to assess the threat and recommend countermeasures to combat fraud and improve real business outcomes.”
Follow me here on LinkedIn (click) and on Twitter @acfou (click)
Further reading: https://www.slideshare.net/augustinefou/presentations