ISBA/PwC: 15% of programmatic supply chain costs ‘unattributable’

ISBA/PwC: 15% of programmatic supply chain costs ‘unattributable’

An investigation into the supply chains of the UK’s £2bn ‘premium’ programmatic ad market has shown that 15% of all marketing spend disappears into a black hole, while only half of investment makes it to publishers.

The UK’s programmatic ad market and its complex supply chains have long been known to leak money to middle players, but this is the first time anywhere in the world that advertisers have fully quantified its end-to-end value.

The report, published by ISBA, the trade body for UK advertisers, the Association of Online Publishers (AOP), and auditor PwC, reveals that:

  • On average publishers only receive 51% of advertiser spend
  • 15% of advertiser spend – an “unknown delta”, representing around one-third of supply chain costs – could not be attributed
  • 10% of advertiser money is spent on the demand side technology
  • Demand side and supply side platforms each represent an 8% cut
  • Agency fees represent 7% of spend

There are thousands of technology companies and supply chains operating in the programmatic space, creating a complex market that is extremely hard to audit. Consequently, PwC said it took more than a year to even obtain the data.

Yet despite the market’s now infamous opacity, most advertising is now digital and almost 90% of digital display ads are traded programmatically.

Responding to the report’s findings, major advertisers have warned that the market is in desperate need of standards and transparency, and they may take their money elsewhere if that is not delivered.

“While digital display is an effective sales driver for us, the findings of the study are stark: there is a big hole in the value chain,” said Graeme Adams, head of media at BT Group.

“We desperately need to see a common set of standards adopted and more openness in this market, so that every penny spent is accounted for. If this happens, we’ll invest more in the channel; if not, we will cut back and reshape our trading approaches.”

Other brands involved in the study include Unilever, HSBC, Disney and Nestlé.

Meanwhile, Phil Smith, director general of ISBA, told Mediatel News that the industry must come together to create standards and protocols that will allow for buyer and seller confidence.

“We don’t want this report to be used to sling mud in some sort of tit-for-tat manner; and we’re not suggesting the adtech market has done something ‘wrong’. But we need auditability.”

Smith added that a taskforce would now be launched to create transparent supply chains and allow companies and consumers to benefit “properly” from online advertising.

The concern of both ISBA and PwC is that if the problem is not solved by the wider ad industry, the Competition and Markets Authority will make an intervention.

Sam Tomlinson, partner at PwC, told Mediatel News that he was pro-programmatic, but the scale and complexity of the market, which has grown rapidly over the last seven years, marked it out for change.

Tomlinson also urged advertisers to ensure they appointed high quality agency teams to help them navigate and make the best investment choices, as well as invest in verification tools, maintain high quality ‘inclusion lists’ of publishers, and adopt best-practice such as ads.txt.

‘A lack of understanding and consistency’

To compile the report, PwC collected data from 15 advertisers, eight agencies, five demand side platforms (DSPs), six supply side platforms (SSPs) and 12 publishers, representing approximately £0.1 billion of UK programmatic media spend.

A total of over a thousand distinct supply chains were identified, with 31m out of 267m ad impressions tracked end-to-end from the advertisers to the publishers.

The rest could not be mapped due to low data quality, which PwC said reinforces the critical conclusions from the study.

PwC also said it encountered “a lack of understanding and consistency” among the adtech suppliers as to how they could legally share data and what permissions were needed; a “lack of uniformity” on data storage and formatting; and the fact that data captured by a DSP for an impression is not equally captured by SSPs, which hindered impression matching.

ISBA added that these challenges and complexities do not serve the principal interests of advertisers or publishers.

[textbox title=”What is the unknown delta?” position=”left” width=”40%” background=”#D2EEF9″ title-background=”#EFEFEF” font-size=”15″]It’s extremely difficult for PwC to understand what the unattributable 15% represents – but its proof of an overly complex market rather than anything nefarious.

However, it could be due to a combination of limitations in data sets necessitating occasional estimations; DSP or SSP fees that aren’t visible in study data; post-auction bid shading; post-auction financing arrangements or other trading deals; or foreign exchange translations.

ISBA now wants industry-wide collaboration to investigate further and make supply chains fully auditable.[/textbox]

Alarmingly, the study represents the ‘premium’ parts of the programmatic market – only including the highest profile advertisers, publishers, agencies and adtech. It is not known how the ‘long tail’ of the market compares.

In the worst cases of supply chain ‘leakage’ from the PwC report, only 49% of advertiser money reached the publisher throughout the duration of the study, and in the best-case reached 67%. However, the average was 51%.

In 2016, Mediatel News revealed that in worst-case scenarios, the Guardian only ever secured 30p in every pound spent when it purchased its own ad inventory.

Nick Manning, the co-founder of agency Manning Gottlieb OMD and a previous CSO at consultancy Ebiquity, told Mediatel News that advertisers should be “alarmed” that four years on still only half of their budgets reach the publishers who supply the audiences, particularly because further “value erosion” continues to take place through a lack of online viewability and ad fraud.

“Full transparency of data and money is long overdue and has resisted the efforts of advertiser associations to promote it,” he said.

“The supply-chain players now have to address this issue, and advertisers should disinvest in online display unless they get full visibility.”

PwC’s Tomlinson added that by effectively auditing the supply chain and understanding where money was going could help boost the amount ending up with publishers.

“Programmatic done better, would mean a better world for publishers,” he said.

The IAB, which represents the interests of the online advertising market, also said transparency in digital advertising’s supply chain is critical for its sustainable future.

“Programmatic advertising is complex, but it is not a dark art and we shouldn’t lose sight of the valuable role it plays in supporting our open, ad-funded web,” said Jon Mew, chief executive of the IAB UK.

“Collaboration will continue to be essential to shine a light on the value added at each stage of the supply chain.”

Richard Reeves, managing director at the Association of Online Publishers, added: “We already see a great willingness from the wider community to engage in addressing these challenges, and I am confident that through collaboration we can start to move closer to a fully transparent, more efficient ecosystem.”


Join us on May 14 for the Future of Media Trading – a free streamed event that will discuss these issues in more detail.

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