ANA Programmatic Study: from 'car boot sale' to department store

Nick Manning: the ANA Programmatic Study exposes a ‘car boot sale’ market

If the programmatic market resembles a car boot sale, as the latest ANA study published today suggests, then a more robust approach by advertisers and a flight to quality of execution should enhance the market’s status.

Normally at this time of year there are reports of ‘Winter Wonderlands’ that don’t live up to their promise.

The operator of one of these ended up in jail, with the immortal words of the judge ringing in their ears: “You said you would go through the magical tunnel of light coming out in a winter wonderland. What you actually provided was something that looked like an averagely managed summer car boot sale.”

A similar sense of being short-changed could apply to the Open Web programmatic display market.

The promise of a data-led nirvana where technology could identify in milliseconds the right browsing audience for your brand or product with relevant messaging.

What could possibly go wrong? Well, quite a lot actually, according to a report published today by the US Association of National Advertisers about the state of the programmatic ad market.

Finally, a full end-to-end report

Usually after a bad experience we avoid being short-changed again by steering clear of the people doing it.

But for the last decade or so advertisers have been systematically relieved of large swathes of their budgets for little return day-in, day-out. This happened mostly because they expected their chosen partners to stop it from happening but they didn’t.

There has been plenty of proof of advertisers being short-changed dating back to the original WFA study in 2014 and several others since, notably from ISBA/PwC; these have identified the amount of budget that reaches the publisher after the various agency and adtech providers have taken their cut, but they did not report on arguably the most important part, i.e. the ad exposure itself.

The argument was that the high transaction and data costs (up to 50% of budget) were justified by the precision and effectiveness of the audience thus reached.

Now, for the first time, we have a full end-to-end report on the value loss for advertisers across the whole Open Web supply-chain, uniquely including the sharp end of where the advertising appeared (or didn’t).

Rewards don’t justify the costs

The new ANA Programmatic Media Supply Chain Transparency Study is the first of its kind to track dollars throughout the programmatic eco-system and measure the actual exposure of ads.

It is a monumental document that has involved over two years of painstaking work and its breadth and depth alone are evidence of just how important the issues it addresses are to advertisers. It comes in the same week as the latest Adalytics report on Google’s distribution practices that demonstrates yet again that the trading machines are out of control.

Crucially, the ANA study answers the question as to whether the high transaction and data costs of programmatic trading are justified by consequently enhanced advertising exposure.

The answer is no.

The ANA study estimates that only 36% of the money spent by advertisers on Open Web inventory bought programmatically is meaningfully seen by someone.

That ‘someone’ may not even be the intended audience, but let’s not get too choosy at this stage.

The study shows that on average publishers receive 71% of the money spent by advertisers, although this figure doesn’t include agency commissions and fees.

After this, there is a further loss of effectiveness through viewability below MRC thresholds, invalid traffic (including fraud) and the perceived lack of validity of Made-for-Advertising websites.

Over a third of post-publisher money ‘lost’

There is some complexity in the study over unmeasurable impressions but this is further evidence of how hard it is to track everything even using log level data.

The bottom line is a 64% erosion in advertisers’ spend through the combination of transaction and data costs and poor exposure metrics.

The argument that the 29% transaction and data costs (excluding agency fees) reported in the ANA study are justified by the precision targeting they supposedly enable is blown apart if the eventual ad exposure simply isn’t there and this study shows conclusively that 35% of post-publisher money is lost in ineffective impressions.

In fact the argument that the technology and data inputs make the subsequent impressions hugely valuable should logically lead to true value actually being enhanced beyond the value of the original investment.

If only 36% of that investment is so-called ‘working’, then that argument cannot hold, unless the 36% that survives is record-breaking in its effectiveness.

The accuracy of these numbers will be debated no doubt and we can expect the usual blowback on some of the reported data. There are quirks in respect of the ‘unmeasured’ money, but we shouldn’t fall into the trap of being side-tracked by ‘missing deltas’, the amount or value of MFA sites or the true extent of fraud.

These are terrible numbers.

How to waste $22bn

In fact, there is a strong argument that the 36% net ‘TrueAdSpend’ figure in the ANA study is actually higher than might be expected.

Some will question the level of invalid traffic compared to other data sources, and it should be said that the MRC thresholds for viewability are a very low bar. Agency fees are also missing from this analysis.

The participating sample of advertisers is also fairly sophisticated and more adept at controlling programmatic than most.

Yet we shouldn’t get bogged down in debates about the absolute accuracy of the study and should recognise that it confirms for the first time what has been clear for several years. At Ebiquity some seven or so years ago we estimated that the total erosion loss could be as much as 75%. For some advertisers it might still be.

We should dwell instead on the solutions to this unacceptable state of affairs in a sector worth $88bn, where the ANA estimates that $22bn is being wasted.

No correlation between price and ad quality

The ANA study runs to 125 pages because it contains a raft of pragmatic actions that advertisers can and should take to address the loss of effective value.

The report calls for a massive reduction in the number of websites and apps used from an unmanageable average of 44,000, estimating that 75 to 100 trusted sellers (on multiple domains) would deliver virtually all the reach advertisers need.

It also contains this bold stat: 86% of all impressions in the study came from just 3,000 websites.

The study also recommends that the number of SSPs being used should reduce from an average of 19 to a maximum of seven. One study participant used 53. The study recommends that advertisers should only choose SSPs that provide log level transparency, and some don’t.

Perhaps most tellingly, the ANA study also concludes that there is little or no correlation between price and ad quality, which in a market that is auction-led is something of an indictment.

As indeed is the finding that Private Market Places at higher unit prices are not much different in quality to the Open Market, with 14% of PMP spend appearing on MFAs, for example.

One of the more unfortunate aspects of this situation is that the solutions to these problems are eminently achievable through the right application of expertise and appropriate business practices.

There is no intrinsic reason why programmatic media trading should not work if correctly applied in the service of good advertising, well-executed.

Do we have the right people to sort this out?

The ANA study includes 15 crucial questions that advertisers should ask of the teams responsible for their programmatic discipline. These cover the number of websites used, MFA, inclusion lists, direct contracts with adtech players (including SSPs) and plenty more.

However, the final question is the most important: Are we staffed appropriately internally (on the client side) to be active stewards of our media investments?

The honest answer for most advertisers is another resounding ‘no’.

The ANA study runs to 125 pages because the subject is a big and complex one and the solutions require an intricate level of dedication. Anyone charged with executing them ideally needs to have a deep knowledge base in media and specifically programmatic and they need to use the ANA study as a ‘bible’ to get the right results.

The other reason that advertisers need internal expertise is that they cannot rely on their agency, measurement or adtech partners to resolve the value loss.

How do we know this? Because programmatic trading has been with us for over 10 years and the supply-side (including agencies) has not fixed the problem. The money has been too good in an eco-system that benefits the sell-side through what the study calls ‘information asymmetry’.

There are too many interconnected commercial interests across the eco-system.

Only the advertiser themselves can fully protect their own interests, aided by independent partners for specialist input.

The end game: flight to quality

The ANA study reiterates their 2016 recommendations to the effect that ‘advertisers which outsource their media management without active internal stewardship do so at their risk’.

One of the quotes in the study from the interviews conducted by Kroll is that ‘our sources were clear in their belief that it is rare for anyone at the advertiser to truly understand how programmatic buying operates’

Extreme complexity demands a forensic approach, and the ANA document provides the basis for such practices; it also calls for a new approach to contractual processes and their associated legal and financial actions. These are not covered in detail in the study but they are an essential part of any long-term solutions.

One of the other findings in the ANA study from the interviews conducted by Kroll is that there is minimal oversight by advertisers into the supply-chain because contracts only go one level deep, so the ability of advertisers to track money and data downstream is minimal.

It should be clear by now that the logical end-game of the ANA study is a flight to quality. If advertisers reduce the number of sellers, websites and apps that they use, many others who add little or no value will suffer or fail.

The same is true for the adtech sector, where a reduction in the number of SSPs in particular has real-world implications.

Among other recommendations, the ANA recommend that advertisers should adopt ‘TrueCPMs’ that accurately reflect the real cost of buying high quality inventory that reaches the right audiences in the right contexts. The industry’s obsession with low costs has helped produce the current state-of-affairs, partly encouraged by procurement practices that need also to be revised.

Hopefully this study is powerful enough to stimulate advertisers to take the actions outlined and specifically hire the right people to do so, armed with the study’s playbooks.

If the current Open Web programmatic market currently resembles a car boot sale, as the ANA study suggests, then a more robust approach by advertisers and a flight to quality of execution should enhance the market’s status, leading to better advertising at correct pricing and cleaning up a messy and dysfunctional market.

It may never get to be Harrods, but real progress will have been made.

Nick Manning is the co-founder of Manning Gottlieb Media (now MG OMD) and was CSO at Ebiquity for over a decade. He now owns a mentoring business, Encyclomedia, offering strategic advice to companies in the media and advertising industry, and is non-executive chair of Media Marketing Compliance. He writes for The Media Leader each month.

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