The Way Forward: Performance Is The Only Digital Currency

A recent ANA report ought to motivate brands that have quietly questioned the ROI of their media spends to look under the hood of their long-standing relationships with agencies and buyers.

When I first heard that the Association of National Advertisers (ANA) was releasing research that looked into agencies’ media-buying markups, rebates, and kickbacks, my first thought was, “Why do we need research to tell us that? This stuff has been going on as far back as advertising itself.”

Then the Media Transparency Report came out, and it not only blew the lid off what we already knew about media buying for traditional channels (print, television, out of home), but also dug deeply into the lack of transparency on the digital side of ad buying. The findings set the stage for a bigger conversation that those of us on the tech side have already been having about the lack of efficiency—and unnecessary costs—that result from trying to retrofit traditional media-buying methods to work with digital ad-buying platforms.

At the very least, this report ought to motivate brands that have quietly questioned the ROI of their media spends to look under the hood of their long-standing relationships with agencies and buyers. At best, it will provide advertisers with the type of awareness that often precedes revolution. On the digital ad-buying side, this revolution will be take place in three key phases, culminating in a paradigm shift where performance is the only acceptable currency.

Phase 1: Reimagine The Role Of The Middleman

Let’s get something out on the table: The role of the media buyer as middleman in digital ad buying is very different from the role of middleman in traditional media. To be even more precise, there is little need for media buyers in between delivering the creative and running the live digital campaign. Too many publishers, too many formats, too many channels, and too many devices exist for humans to investigate, vet, and deploy properly.

As a result, agencies and media buyers currently partner with trading desks or use DSPs that rely on technology to identify and bid on media space. Because these platforms don’t rely on relationship-based negotiation, they eliminate the need for media buyers at the bidding stage, where they would traditionally offer the most value.

Where the media buyer does play a valuable role, however, is in securing premium ad space, reserved by publishers and not available through digital ad-buying platforms. Media buyers may also work directly with digital publishers to secure larger campaign opportunities or branded partnerships—again, ones that are not available through digital ad-buying platforms. In these capacities, the media buyer is the gatekeeper to strategic opportunities, acting as the key negotiator who is responsible for securing pricing that increases ROI for the advertiser.

What the ANA’s report makes clear is that advertisers don’t fully understand where media buyers can offer them the most value in digital ad buying. By using media buyers nonstrategically, advertisers put themselves at risk of absorbing even more costs in the form of marked-up prices at the bid level—or of the entire service provided by partners—as illustrated in the ANA’s Report.

Phase 2: Bypass The Media Seller

Many publishers (or media sellers/suppliers) like working directly with media buyers and agencies because, unlike digital ad platforms and DSPs, buyers and agencies aren’t as easily able to verify their click-throughs, traffic rates, and other KPIs. They’re also less likely to dig into topics such as ad fraud, and less equipped to compare performance of their ads on multiple sites simultaneously and in real time to eliminate poor-performing channels.

With media buyers as the only gatekeeper standing between media sellers and ad dollars, media sellers are able to compete on the basics: pricing and promises. To make the pricing side of the equation more appealing, sellers are willing to engage in the type of rebate and kickbacks unearthed in the ANA’s report—so much so that these types of incentive programs don’t always originate on the media-buyer end. The research describes at least one large media supplier as having conceived of and formalized rebate programs that encourage agencies and buyers to spend more on certain ad formats, and rewarded agencies for overall spend and year-over-year growth.

No matter who conceived these programs, both parties engage in them, and inflated media costs are never in the best interest of the advertiser. The result is usually lower-performing media at higher prices.

Phase 3: Pay For Performance

What the past two points touch on is that digital ad channels can be distilled down into totally quantifiable specs. When KPIs are also quantifiable—defined in terms such as click-throughs, conversions, or sales—then the only factors that should determine ad pricing are supply and demand and the channel’s ability to deliver advertisers’ desired results in the defined time frame.

One reason why Google and Facebook run such successful advertising programs is because they sell on performance. An advertiser sets its desired KPIs and budget, and Google and Facebook serve its ads to the audiences that are going to best help it meet them.

While traditional media buyers and sellers are accustomed to speaking in terms of unique monthly visitors, time spent, and other stats, these analytics are just a distraction from the only real question at hand: Do ads perform well on this channel and help meet the promised KPIs?

Smarter technologies can work with an advertiser’s KPIs to autonomously target the channels and audiences they’re after, learning and becoming smarter as they go. In these cases, the marketer or media buyer is just the messenger—delivering the creative and the campaign goals—but isn’t required beyond those initial contributions. They’re now free to work on higher-value tasks.

Ultimately, trying to replicate the role of media buyers in the digital ad-buying process doesn’t serve advertisers. And it doesn’t serve ad platforms long-term either, considering they won’t be able to meet the expectations that come with the hefty price tags media buyers are putting on their services and passing along to advertisers. The way forward is to reimagine the role of media buyers in digital ad buying. This is not to say that humans should be replaced by machines for digital ad buying. It’s more so that they never should have been there in the first place.