Today sees the publication of the new Programmatic Media Supply Chain Study from the US Association of National Advertisers (ANA).
Media Marketing Compliance has seen an advanced copy of the 125-page report, which marks the culmination of two years of work to investigate the workings of the Open Web online display advertising market.
This is the first study of its kind to track dollars throughout the entire programmatic eco-system and measure the actual exposure of ads, not just the transactional and data costs associated with the trading methodologies.
Crucially, the ANA study answers the open 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 a web or app user.
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 established industry thresholds, invalid traffic (including fraud) and the perceived lack of validity of Made-for-Advertising websites.
The bottom line is a 64% erosion in advertisers’ spend through the combination of transaction and data costs and poor exposure metrics.
The ANA study estimates that some $22 billion is being wasted on inefficient and ineffective practices, and this represents one dollar in four in a market worth $88 billion.
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.
For example, 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. Eighty-six percent of all impressions in the study came from just 3,000 websites.
It 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.
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.
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.
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’. They recommend the addition of internal expertise to control this area of complexity.
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.
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.
There are 15 specific recommendations in the study that have significant contractual implications and this is a good time to review those recommendations and the extent to which they should be adopted, with the associated amendments to existing contracts.
The report includes proposals for advertisers to have direct contracts with their DSPs and their SSPs, and it specifies the number of SSPs that advertisers should employ (a maximum of seven) and what to look for.
Clearly any review of contracts has implications for compliance auditing and this should be incorporated into contractual wording.
If you would like to find out more about the contents and implications of the ANA study, contact us to set up a convenient time for a walk-through of the findings.