Media agency price war led to programmatic trading arbitrage, says former BBC sales boss
Former MTV, BBC and Zenith Optimedia executive Chris Dobson has said that television will be the last screen medium to embrace programmatic trading, because there is no immediate incentive for the TV industry to change.
“Any projection for the growth of the television advertising market is still healthy. Look at the upfronts in the US. Billions of dollars of trading is done against a metre system that is fatally flawed. But the industry seems to be happy if clients are throwing money at it,” he said at Spikes Asia.
He also said he had “sympathy” for media agencies trying to squeeze money out of their clients through programmatic trading because of a price war that emerged at the beginning of the millennium.
“TV will be the last medium to come kicking and screaming into the programmatic space,” he said. However, Dobson said that the TV industry will be “disrupted” by the access to the consumer that programmatic trading provides.
Clients are getting the worst of both worlds from SOME trading desks.
No price transparency and 500% + markups
A black box procurement strategy that delivers bottom of the barrel inventory that is dressed up as premium due to it’s source.
If you’re not asking for transparency on both price and inventory procurement you will be taken advantage of. Guaranteed.
@Frank Black – I call bullshit on that. Clients are not being taken advantage of as they are getting the SAME AUDIENCE FOR CHEAPER, which is essentially what a good agency trading desk can do. Dont know which agency you think makes 500% markup but I can guarantee you its not the big end of town.
The debate has never been about whether clients are getting a good deal (of course they bloody well are, otherwise why would there be so many clients VOLUNTARILY SAYING YES to it.)
The debate is about transparency of pricing – because clients want to know how much money the agency is making (I guarantee you its closer to 20% than 50%), but the agencies are saying bugger off its none of your business, as this is not a pure media buy-and-pass-through model.
Some clients have a hard time accepting an agency can be both an “agent” and a “principal” , though, rather hypocritically, most large clients insisit on defining the relationship in their own client contracts as one of principal/independant party.
What’s lost in these basic positions, is the agency is doing something of value here, and taking a financial risk. They secure the inventory at their cost, they develop technology, software, systems, algorithms, employ people at their cost. And they repackage inventory into audiences and sell that. This is a fair business model and because its not simply buy-and-pass-through, the normal rules of client audit dont apply. When you buy a computer from the local computer specialist, you dont get to ask him how much he paid for each component, and how much profit he is making. You decide based on the price and what you’re getting, versus the alternative price and what you can get elsewhere in the market. Trading desks are the same – no agency is going to disclose their margins, and if some clients dont want it, fine they can pay higher prices the normal way. If they do, then they trade off some audit rights, to get accees to these cheaper pools of inventory and audiences that only the large trading desks can provide.
@Hmmm. Oh dear….I fear you have been listening to your own sales pitch.
If there is so much “Value” created by the TD’s then why is the big end of town (do i need to list them?) walking away ?
I’ll give you 3 reasons:
1. the price is transparent if you care to look. It’s right there in the DSP.
2. The tech is all on the shelf developed by tech Co’s and ready to go. Other than a DMP, what have the agencies developed ? nada, nothing, zip. Handing over your data to your agency is own creating value for ……? yes! you guessed correct ! THE AGENCY !!
3. TD’s are after margin. buy low sell high. The lowest price inventory is rubbish with viewability rates lower than 10% from so called “premium” sites.They optimize for reach and live off shady view based conversions. Savvy clients know this is a zero sum game.
Given the above. A 5X markup won’t wash.
Right on Frank! Yes @hmmm, please point us in the direction of a technology, a piece of software or a system that has been developed one of the trading desks. Bonus points if it’s anything people outside the agency are using.
I think you’ll find most trading desks buy the bulk of their inventory in real time, meaning that if you have a legal doc that the client will pay you for it, it’s essentially their cash you are spending. Inventory that is bought direct can be cancelled or passed back