Why the world’s leading auditor couldn’t fully audit the programmatic supply chain…

PricewaterhouseCoopers are an incredible company and in my humble opinion (from meeting them) the media assurance team are brilliant and totally understand the space. PwC’s report on the programmatic supply chain is excellent. It feels funny that I should need to write that, but it’s been surprising to me to see people throw shade at their expertise and business model (some saying that consultants can’t get close to the detail and that they want complexity so they can have work). It’s likely a defensive mechanism from industry actors who want the programmatic challenges highlighted by their report to go away. The cat is out the bag, again. It’s time to progress, again.

First, is a lack of transparency bad per se?

I’ve been somewhat sceptical as to whether it was optimal for advertisers to go down this ‘transparent only’ route. In a commercially driven industry (which let’s be honest, advertising primarily is), if you erode margins of value adding companies you disincentivise innovation and talent which is really, really, really (yes, three * really) bad.

There are still many companies who operate opaque financial practices, are they bad companies? No. But they need to be upfront and clear with how they operate to their customers.

It’s when companies masquerade as transparent in their approach, sometimes even contractually, and they are not, that’s where the problem lies. Reports like the one commissioned by ISBA and conducted by PWC focus on the advertisers who use this model and it looks at their corresponding supply chains.

Obsessing over the % of ad spend a publisher receives is flawed

I hate with a passion the term ‘working media’, it assumes that all variables on every impression are the same, by using averages from ‘pools’ of advertisers. Ebiquity has previously used the term ‘ad tech tax’ and more recently ‘value erosion’ to describe the money taken by intermediary parts in the advertiser-publisher supply chain. Some headlines born out of the recent PwC report include Campaign Magazine’s ‘Programmatic market a 'mess' with half of money still not reaching publishers’ and Marketing Week went with ‘There is a big hole in the value chain’: Brands lose 50% of the money they invest in programmatic ads’.

I’d like to think the readers of my posts understand how stupid these terms and headlines are, but if you don’t, a good comparison to make would be with the buying and selling of bananas. Bananas are planted and harvested in many countries, India being the biggest exporter of them. For a banana to reach your home it has to be handled by many intermediaries. These intermediaries are responsible for the safe storage and transportation of banana’s so you have them available at a location in which you can purchase them. Should these intermediary layers that harvest, drive, fly, store and deliver your bananas be unable to charge for their services? Of course not. They add value in the process. In the same way technologies add value in the process of ad buying & selling, so calling them a ‘tax’ or ‘value-eroding’ is basic at best.

WTF is the 15% ‘unknown’

I actually don’t have anything to add to the cliff notes that PwC made in their report. It has also been clear that even in cases where there isn’t anything nefarious happening that this unknown 15% can still occur (fx rates, reselling, billable event discrepancies etc.). This definitely needs to be resolved as a transparent supply chain is now undoubtedly the programmatic industry’s north star.

So, what needs to happen to enable transparency for those who want it?

I completely agree with the recommendations in the PwC report about contractual and technical reform. This is the theory, but how do you implement it? Who owns it?

PwC recommendation 1 – contractual reform

Excellent work by the industry bodies - shout out to ANA, WFA and ISBA - has essentially solved for the brand-agency-agency trading desk transparency conundrum. Good contractual frameworks mean that brands can get insight on how their agency makes money from their media spend.

These frameworks need to extend deep into the programmatic supply chain. There needs to be a contractual framework which ties all participants in the supply chain to on-site third-party auditing, commonality in non-aggregated data format/access as well as full disclosure on fx rates used in purchases (as programmatic is primarily transacted in USD).

PwC’s recommendation 2 – access to data

The time it took PwC to gain access to data is INSANE – over 18 months. Potentially with the right contractual framework (which should be prioritized) it means that log data may not be necessary, but routine and regular access is critical.

I would actually like to advocate for an ad tech inspection framework, similar to that used by OFSTED in the UK for assessing schools. For those unfamiliar, the framework is transparent and schools are given notice on when they will be evaluated. The framework isn’t used to point fingers, instead it’s designed to give parents confidence in their child’s schools processes and it provides schools with practical areas of improvement. Perhaps this might be a little extreme, but I feel that something along these lines wouldn’t be terrible. It’ll allow the best actors to prosper.

This access to data may, and I say may, require distributed ledger technologies (DLT). ‘Trusting’ suppliers to act in your interest through a hunch/gut feel isn’t sufficient. Trust is gained through disclosure. Yes, the mapping of disparate datasets is difficult, but we can’t wait another two years to see if we have made progress. We also can’t keep starting the process from scratch every time, there could be a central repository of data with permissioned access on a publisher by publisher and brand by brand basis.

The IAB Tech Lab has made brilliant technical strides in recent years, for instance Ads.txt & Sellers.json, although nearly always with negative industry feedback from those resistant to change, but it feels like they could be the ones who own the technical implementations alongside JICWEBS, TAG and MRC.

What can advertisers do now?

There are absolutely no silver bullets to mitigate the challenges and maintain scale and efficiency (i.e. direct buying is very rarely the answer). Some practical steps are:

• Lean into the contracts which your agency/supplier operate programmatic under (put some stringent timeframes on data requests as well)
• Get a good team – I know this sounds simple, but I know a lot of senior agency programmatic leaders who do the right thing and just don’t conform to doing the nefarious practices their trading directors may try to implement. Seek these people out and pay a premium for their services
• Get access to reports from platforms – sadly these can be gamed (sigh), but it’s a start. Start to see which exchanges/publishers your buyers are buying from and can the total number be scaled down to mitigate commercial risk
• Try to create a ‘spirit of good practice’ with your partners, if you go in all guns blazing, you’ll likely move one step forward and nine steps backwards

Is anyone incentivised to change?

In a marketplace of equities, it’s all about incentives. Let’s find ways to incentivise the supply chain to be productive for advertisers and consumers. Let’s reward those that do add value and lets not crush their rates down in the process. The waterfall charts we are now all so familiar with are ‘nice to have’, they shouldn’t be used for ‘working media’ goals. Poor procurement practices incentivises poor behaviour. These poor behaviours are often realised through untraceable off-grid commercial arrangements.

Is programmatic going anywhere?

Finally, I’m biased, I love programmatic, when it’s harnessed well it enables fantastic advertising. Blanket ‘programmatic is bad’ misses the point. Programmatic is infrastructure. Thinking it’ll go away is like thinking roads will go away. It’s how you use them that matters and we need to start applying more stringent rules for all actors - perhaps even a programmatic license?!

Big thanks to PwC, ISBA, advertisers, ad tech providers, agencies and publishers in producing this game changing report. We’re getting closer to the now north star of total transparency, a few more steps with widespread collaboration and we’ll get there. Programmatic FTW.