By: Mark Green
A long time ago, the advertising business was simple. Advertisers hired an agency to create and place advertising and gave them 15% of their adspend as compensation.
Today, every aspect of agency compensation is negotiated. This procurement squeeze led agencies to specialize into business areas to drive profits. In media investment, they went further and built differentiated profit centers in data, analytics, and targeting. Startups provided innovations. Then the agencies and other agency-less competitors duly bought the startups to scale their capabilities. The specialization started in digital and migrated to television. According to Magna Global, 60% of programmatic digital ad spend is captured by these profit centers (25% for Data Targeting and Verification, 15% for Trading Desk, 10% for DSP, 5% for Exchange, and 5% for Agency of Record.) The percentage of television adspend captured by these profit centers is more opaque.
Not surprisingly, digital publishers wanted a piece of this pie too. Google and Facebook duly kept the data and targeting in-house, forcing advertisers to accept the publisher’s self-verification on audiences.
Advertisers traditionally leaned on agencies to explain and guide them into new methods and services, but that is now changing. The Association of National Advertisers (ANA) exposed agencies as having conflicts of interest in a report on media transparency. The US FBI is now investigating to see if there is fraud here. Not surprisingly, advertisers are becoming more involved and taking their own advice, as they realize that agencies are no longer just their agents but resellers too.
Outwardly, advertisers call for transparency. Inwardly, advertisers explore ways to transform their marketing. Many ideas are being considered: going brand direct, owning their customer data, managing it directly through customer data platforms (CDP), taking media placement in-house, and implementing iterative marketing by A/B testing everything. They grapple with several strategic questions, including: How do they organize their data and tech stacks? Most importantly, how do they get sufficient transparency to manage them?
There are three dimensions to transparency.
On method and process audits
Heeding the call for transparency, the Media Ratings Council (MRC) offers to audit various media measurement and analytic practices to ensure that they do what they claim and meet the MRC’s minimum standards. Most support the idea of minimum standards and practice audits: even though many do not do them for practical reasons.
Practice audits certify fixed methods and processes. On the practical side, this limits audits to mature practices that are no longer evolving. Companies that focus on continuous innovation and process improvements need to fix their methods and processing by stopping their innovation and improvements to qualify. Consequently, the MRC can only certify mature ecosystem practices.
The other rub is that the MRC is trying to go beyond quality standards and delve into imposing metric standards. Granted there is more prestige to be had here, but metrics is a dangerous realm for the MRC to enter. Getting alignment on metrics before market forces have spoken is messy and bad for the industry. Competing interests and digital versus television (in the case of cross media), spark fights over definitions. If resolution is found, the winning voices will come from the bigger players. Worse, defining metrics as standards means putting the MRC on a collision course with innovation.
Instead of going down the rabbit hole on designating and governing metrics, the MRC should stick to its knitting of auditing consistency and quality. Are the methods and processes of companies sufficiently documented and executed? Do these methods and processes accurately do what they claim?
Leave the metric debates to industry associations, confabs, and most importantly, market forces.
Allow reputable third party consulting practices to audit the methods and processes of companies that are evolving current or building new capabilities. This would provide faster, more economical, and independent perspectives on evolving capabilities. This is a new business opportunity since industry organizations and agencies are not independent.
On performance audits
While methods and process audits inform advertisers on the quality of practices, they do not tell advertisers anything about the performance of their campaigns.
In most cases, advertisers rely on the service companies who siphon off 60% of the money before it gets to the publisher to tell them how their campaigns performed. In many cases, advertisers do not have direct granular visibility to performance either. This is hidden behind walled gardens, analytic models, and deal terms. In many cases, the advertiser has no independent confirmation that their alleged performance is real and accurate. Examples of opacity are everywhere. Facebook restates performance. YouTube places advertisements next to terrorist videos. Attribution companies are actively reworking their models after advertisers told them that their numbers did not add up. K2 reports that some media agents are not being transparent about their deals either.
The business relations between all these companies that service the buying and selling ecosystem have too many connected business interests, in between their own secrets and proprietary methods, in order to be independent. What advertisers need are consultancies that do not contract with vendors to audit, evaluate, and report claimed performances. The reason, these contractors need to be independent and not competitive with any of the vendors, is that they will need to sign non-disclosure agreements with every vendor that they audit. And vendors will only co-operate here if the consultant has a business model that does not compete with them and has no interest to divulge their secrets.
On adspend audits
In addition to performance, advertisers want an accounting of how their marketing spend is spent.
Just as a CFO would never run a business without a Controller, regardless of certified practices, a CMO should never run campaigns without an independent auditor inspecting how the money is spent. To govern the ever-evolving complexity of marketing, the time has come for advertisers to retake control of how their money is spent.
This is the easiest of the audits. There is no judgement on the quality of methods or evaluation of performance. Here, it is a simple matter of bringing transparency to the money trail. Who received what money in relationship to the money that the advertiser spent.
Advertisers can clean up the transparency problem themselves by hiring these three types of auditors, on methods and processes, on performance, and on adspend. While consultancies may offer all three services, it is imperative that advertisers hire firms that specialize in auditing and do not sell the services being audited. Conflicts of interest are a slippery slope.