Last week, the Incorporated Society of British Advertisers (ISBA) released its Programmatic Supply Chain Transparency Study, carried out by PwC in association with the Association of Online Publishers (AOP). With the results based on end-to-end mapping of programmatic advertising supply chains – never before achieved anywhere in the world – this ground-breaking study enables the industry to move on from futile speculation and push forward with truly quantifiable evidence towards a fully transparent ecosystem that works more efficiently for both publishers and advertisers.
Only half the money advertisers invest in programmatic advertising currently reaches publishers.
The study’s two key findings are simple. First, only half the money advertisers invest in programmatic advertising currently reaches publishers with the rest going on supply chain costs. Second, and perhaps more importantly, 15% of advertiser spend cannot be accounted for within the supply chain, representing a significant ‘unknown delta’. With the fees to suppliers within the supply chain largely as per publisher and agency contracts, that sizable 15% should be publisher revenue, so it is vital the industry works together to discover where it is going.
The study speculates the unattributable spend could be due to additional DSP or SSP fees that aren’t visible in the study data, post-auction bid shading, post-auction financing arrangements or other trading deals, foreign exchange translations, inventory reselling between tech vendors, or other unknown factors. Given the study was conducted with publishers at the premium end of the market, the unknown delta is likely to be even greater in mid and long tail sites.
Mapping the programmatic supply chain from end to end is a phenomenal achievement, accomplished thanks to the persistent appetite from the advertising industry and ISBA. AOP was pleased to play an active role in the study, and help bring together the two ends of the supply chain in the common goal of understanding what happens in the space between. We worked with twelve of our highest-profile publishers from across the news and magazine sectors, and encouraged supply-side platforms (SSPs) to release log-level data so this could be compared with data from demand side platforms (DSPs). Previous studies have only focused on the demand side so participation of the sell side made the results of the study far more representative.
A collective responsibility to take action
From advertisers and agencies to ad tech providers and publishers, there is a collective responsibility to act on the findings of the report, increasing transparency and removing complexity in the supply chain. From the ad tech community in particular, publishers should be able to expect collaboration and support, a response with ideas on how to address the unknown delta, and for ad tech providers to take some responsibility for establishing new standards.
All industry participants need to work collaboratively to understand and reduce the unattributable investment, which requires commonality in data sharing to enable more effective campaign monitoring and auditing. This goal can be achieved through standardisation of terms for data sharing, implementation of consistent data taxonomies, definitions and retention policies, and improved use of campaign IDs throughout the whole supply chain.
There are practical steps publishers can take to audit their relationships with individual supply chain members and optimise the revenue flow.
Recommended steps for publishers
Within their own business operations, there are practical steps publishers can take – with support from AOP – to audit their relationships with individual supply chain members and optimise the revenue flow. While these actions alone won’t close the delta, they can still make a difference.
First, publishers can ensure their SSP contracts are fit for purpose by updating them with clearly defined and consistent terms and by implementing annual reviews to account for tech innovations or changed operational practices. They can require SSPs to make log-level data available for audit, exercise the right to audit SSPs at least bi-annually, and implement more regular audits of charged versus contracted rates. AOP can support publishers by helping to develop best practice terms and protocols around data access, sharing, taxonomies and retention.
Second, publishers can use the findings of the study to identify individual supply chains that deliver low revenues and ascertain areas for improvement. AOP will help by sharing knowledge around successful supply chain developments.
Third, publishers can quantify and understand the impact of Exchange Bidding (EB) fees on their revenue. The study reveals EB fees of 5% are applied against publisher revenue – an average of 1% of advertiser spend – but some participants are seemingly unaware of this practice. AOP, leveraging its positive relationship with Google, will centrally co-ordinate and work with them to ensure publishers have a better understanding of EB fees and how they are applied.
Finally, publishers can evaluate SSP commercial practices to better understand their impact on unattributable investment for key supply chains. Specific areas for publishers to consider could include post-auction bid shading, post-auction financing arrangements or other trading deals, variable fees to cover FX and other discrepancies, and reselling. AOP can help by sharing publisher findings about SSP commercial practices and will develop industry-wide campaigns to change bad practices where appropriate.
The publication of the ISBA study is a positive catalyst for change and a great starting point for driving greater transparency in the programmatic supply chain. All industry participants must work collaboratively to address the challenges identified and to move closer to a fully transparent, more efficient ecosystem, but in the meantime, there are practical steps publishers can take to optimise supply chains and begin to recover lost revenues.
The ISBA study is a positive catalyst for change and a great starting point.