How improved transparency will remove unnecessary margin eroding “hops” between buyer and seller while improving buyer ROI and seller yield.
Part 4 of a series on programmatic market transparency.
In part 1 of this series, we outlined the three conditions that we see as necessities for the programmatic marketplace to remain in balance for years to come.
In part 2, avoiding another RTB unicorn, we discussed how improved transparency between buyer and seller will lead to a healthier and more sustainable marketplace for sellers. In part 3, we covered how transparency will help both sides to use tech to better effect desired outcomes.
In today’s piece, we will cover how transparency will bring an end to the margin-eroding wasted ‘hops’ that exist between buyer and seller and destroy publisher margin and buyer ROI.
Most smart buyers recognize that information balance needs to return to digital media if the productivity and targeting advantages of programmatic are to be realized across both direct response and brand buying. Generally, brands would prefer to see their “spend” going directly to the content creators (Publishers) rather than passing through a series of tolls. Buyers realize that these redundant and wasteful "hops" that are injected into programmatic trading erode performance for both sides. When both sides have transparent information on what's actually occurring inside ‘the pipes’, wasted “hops” can be removed to the benefit of both sides. Knowing who is making the buy is important here, despite some on the buy side's desire to hide their identity.
Simply stated, the smart money on the buy side knows that if they want the “good stuff”, publishers have to be confident that programmatic channels are fair, balanced, and delivering to the content owner the value required to sustain and grow operations in the evolved ecosystem. Today’s unnecessary hops destroy publisher margin, wreck buyer ROI, and perhaps most importantly as we rush to a mature and sustainable market -- destroy any good will between buyer and seller sides as they argue over what really happened.
Both sides seek a single truth regarding the ‘goings on’ inside programmatic. To get closer to a single truth, both sides will need to be as transparent with one another as they are on an insertion order.
If you want an example of how transparency is used to reduce waste in the programmatic system, look no further than the reliance on third party fraud vendors such as Double Verify and Integral Ad Science - services that depend on transparent flow of information to insure buyers are receiving value. Or look at Appnexus’ April institution of the IQ Score which requires full domain transparency so that the marketed domain matches the domain of the actual impression.
Further improvements can be made to the market with a commitment to transparency. If the buy side knows what site, publisher and user they are buying, they can do a better job assessing value. If the publisher knows who is buying, when and at what price, they can do a better job getting those users packaged up for that buyer in a predictable long-term deal for a fair price.
Potentially most importantly, both sides can work together and look into their own trading data to determine where the wasted hops are occurring. If both buyer and seller have similar information, they can work together to police the waste. If buyer A cleared an impression at $2 and publisher B saw only .44 cents, there will be necessary dialog as the two parties work together to set up either a direct deal or a way to create more shared value and less waste.
The above advantages aside, there are still many on the buy side who seek to perpetuate imbalance and want to keep information asymmetrical. Some on the buy side will not allow the sell side to know who they are. Some on the buy side say "It's not fair for me to show who I am, you’ll change your pricing based on who I am. My business will suffer" Let's examine this resistance:
- First, the buy side is demanding publishers to be 100% transparent on all things seller (inventory) related. So maintaining they don't have to do the same is obviously not fair to sellers.
- Second, each buyer values each impression based on their own analysis and their own data, so to argue that the price is changing due to a publisher discriminating based on the buyer is not a feasible argument, given competition. If the buyer bids in line with their assessment of impression value (versus a more exploitative strategy) the clearing price should theoretically approach true market value -- as other buyers value and bid on the same eyeballs for different reasons.
- Third, full two-way transparency will help buyers. By empowering publishers to identify the areas where a relationship's commerce could be improved, dialog will help buyers and sellers to make tweaks to the buyer’s strategy to improve results and strengthen relationships. And remember, publishers want good brands just as much as buyers want good sites.
- Finally, as mentioned above transparency will expose the tolls along the programmatic highway and drive down or out those stages that are not producing enough value and destroying the efficacy of media investments.
So the call to action is simple. Lets work together and not against each other. We can achieve technical, analytical and informational balance between the buy and sell sides so programmatic commerce participants get optimal value for their trades and both sides have a sustainable long-term marketplace.