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The thoroughly broken promise of programmatic advertising

John McGee


'The most controversial finding in the report was that as much as 15pc of programmatic digital ad spend disappears into a black hole.' (stock image)

'The most controversial finding in the report was that as much as 15pc of programmatic digital ad spend disappears into a black hole.' (stock image)

'The most controversial finding in the report was that as much as 15pc of programmatic digital ad spend disappears into a black hole.' (stock image)

Six years ago, a parody video called The Wolf of Silicon Valley went viral in the global advertising industry. Depicting a group of obnoxious sales guys working for a fictitious firm called Silicon Valley Banners, the video shows the firm's morally bankrupt boss reeling in a gullible advertising client with the promise of substantial click-through rates, high conversion rates and access to transparent monthly reports.

As the firm's staff look on, straining hard not to laugh, the senior snake-oil salesman finally bags the client's money and a 50pc margin in the process.

Little does the client know, however, that most of his advertising inventory will be frittered away on low-quality websites in Nigeria or Kazakhstan.

It's entirely conceivable that many people working in the digital advertising industry at the time probably experienced varying degrees of impostor syndrome - or the fear of being rumbled by clients or peers - because The Wolf of Silicon Valley was so dangerously close to the bone.

Fast forward six years and it seems like Groundhog Day all over again.

Not only is the entire digital ecosystem as opaque as it ever was but bad, and sometimes corrupt, actors like our fictional villains of Silicon Valley Banners still inhabit huge swathes of an often-murky ecosystem while clients' money is dubiously dissipated, sometimes fraudulently, in all directions at an alarming rate.

Evidence of this is to be found in a report published earlier this week by the Incorporated Society of British Advertisers (ISBA) which, together with the Association of Online Publishers (AOP) and PwC, published a damning indictment of the digital programmatic advertising market.

The most controversial finding in the report was that as much as 15pc of programmatic digital ad spend disappears into a black hole. Nobody knows how, nobody knows who gets this chunk and nobody is held accountable.

So for every £1m (€1.15m) in advertising spend, £150,000 simply vanishes.

One thing is clear: it's certainly not going to publishers who are ultimately supposed to be the beneficiaries of this ad spend. According to the report, publishers could, at best, expect to see only 51p out of every £1 invested. If they are lucky, non-premium websites - which did not form part of this report - might only get around 30p per £1 spent.

The ISBA report also noted an average of 18pc of client spend went on demand and supply-side platforms and technology while 7pc went on commission to agencies. In other words, as much as 49pc of a client's advertising spend goes on a myriad of fees and commissions while a sizeable chunk just simply disappears into a black hole.

PwC noted it was incredibly difficult to provide a transparent audit trail given the complex nature of the adtech ecosystem.

This in itself is a staggering admission that something is clearly wrong in a market that is increasingly accounting for the lion's share of all advertising budgets. It also shatters the many promises of programmatic that have been touted by agencies and the thousands of adtech companies over the past few years.

The report comes on the back of a year-long investigation by PwC for the ISBA and AOP that tracked digital campaigns for some leading brands across a wide number of premium websites.

It also follows on from previous reports in recent years by the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA) in the USA, both of which painted a similar grim picture of a market that had been allowed to run amok without transparency and accountability.

"I get a definite sense of déjà vu with this stark assessment of the programmatic ecosystem. It's like a game of whack-a-mole when it comes to keeping track of how media is bought and sold," says John Dunne, managing director of the Dublin-based agency Ignite Digital.

"We have a burgeoning programmatic marketplace that needs to be disentangled from opaque trading practices and made more transparent and simplified," he adds.

That may well be the understatement of the year.

Why it has taken this long to finally twig what has been really going on in the programmatic advertising space - when the dogs on the street could have told us - beggars belief. But at least it's a start.

Why does any of this matter? For starters, advertisers need to wake up and take greater responsibility for what is happening to their hard-earned cash. As they control the purse-strings, they need to ensure that greater transparency and accountability exists at all levels in the supply chain. Clearly this is not happening.

This will also require much greater co-operation between all the stakeholders who have a moral and legal obligation to ensure that clients' money is not being wasted or disappearing into a black hole and nobody wants to accept culpability.

For publishers trying to grow much needed digital advertising revenues while competing on an uneven playing pitch against the likes of Google and Facebook, there may even be an opportunity to collaborate and take greater ownership of the digital space with their own exchange and platforms.

This could provide an attractive and more accountable alternative to the existing hegemony which, as the ISBA report clearly indicates, leaves a lot to be desired.

Sunday Indo Business