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Deep Dive 9 Aug 2020 - 6 min read

Follow the money: Marketers must finally step up on digital ad supply chain, say Nestle, AANA, IAB, OMD and MFA - or no complaints when their ticket gets clipped

By Paul McIntyre - Executive Editor
OMD CEO Aimee Buchannan: "There's no way another agency can be doing it any cheaper. They have to be making money somewhere else." L-R: Nestle's Martin Brown; Aimee Buchannan; The Guardian's Dan Stinton and Pedestrian Group's Matt Rowley

OMD CEO Aimee Buchanan: "There's no way another agency can be doing it any cheaper. They have to be making money somewhere else." L-R: Nestle's Martin Brown; Aimee Buchanan; The Guardian's Dan Stinton and Pedestrian Group's Matt Rowley

Nestle's head of eStrategy, Marketing and Brand, Martin Brown, says 50% of advertiser digital budgets going to working media is "not good enough" - 70% should be the baseline. With Canberra digging into the digital ad supply chain and PwC finding half of digital ad dollars are eaten up before they get to publishers, marketers must get a grip on where they are spending their money. If PwC's numbers are right, north of half a billion dollars can't be accounted for each year in Australia alone. Nestlés Martin Brown - and AANA chair - OMDs Aimee Buchanan, Guardian Australia boss Dan Stinton and IAB chair and Pedestrian Groups Matt Rowley debate quality media, transparency, remuneration, brand safety and suggest cutting out programmatic middlemen could be key.

You need to know this:

  • AANA, IAB & MFA have produced a guide and checklist for marketers to help avoid ad fraud, brand safety and data issues and improve understanding of digital ad supply chain
  • It follows a report by PwC and the UK’s ISBA that found half of programmatic dollars are lost to middlemen and that 15% - around a third of the money eaten up by the supply chain - could not be traced
  • OMD CEO Aimee Buchanan says the 15% “unknown delta” is not fraud, but industry needs to clarify where it’s going
  • But Buchanan says the other side of transparency equation is sustainable rates
  • Nestlé marketing chief Martin Brown says 50% working media is a “poor result” and that 70% minimum should end up with publishers
  • But Brown warns “frenzy” of news cycle may be stopping some publishers getting the revenue their audience and engagement merits
  • IAB chair Matt Rowley says some parts of the digital supply chain ad value, that data and viewability tools carry a price. “But after that, if there is still a gap, then you want to know where that [money] is going.”

 

'Half my advertising is wasted...'

Forensic analysis of the digital ad supply chain published by PwC and ISBA earlier this year found only half of marketers’ media dollars actually end up as ads on publisher sites, otherwise known as ‘working media’. The rest ends up with middlemen and fully 15% could not be traced. Applied across Australia’s $3.5bn online video and display advertising market, that equates to north of half a billion dollars unaccounted for every year.

OMD CEO Aimee Buchanan says it is wrong to construe the missing 15% as ad fraud, but the industry needs to quickly get a handle on where that money is going. Meanwhile, to address the greater losses, she says OMD is increasingly cutting out middlemen and going direct with programmatic deals to ensure brands are not needlessly wasting money.

Martin Brown, AANA chair and director, eBusiness, Strategy & Marketing, Nestlé Oceania, says advertisers can’t complain about poor outcomes if they do not understand the ad supply chain. Most, he suggests, have not done their homework when it comes to digital advertising’s component parts. “I would say the marketing industry in Australia would seriously benefit from investing in building their knowledge,” says Brown.

Hence the AANA, along with the IAB and MFA have produced a new guide: the Australian Digital Advertising Practices 2020 update (or ADAPs 2020).  The report breaks down the digital ad supply chain, shines a light on key aspects of viewability, ad fraud and brand safety. It's is billed as essential reading for marketers that want to understand where their media spend is going to end up - not just half of it.

“I would say the marketing industry in Australia would seriously benefit from investing in building their [digital supply chain] knowledge. And if you do not … it puts you in a poor position to complain about poor outcomes afterwards.”

Martin Brown, AANA chair and director, eBusiness, Strategy & Marketing, Nestlé Oceania

More money, more problems

It speaks volumes that ISBA and PwC’s study of the programmatic supply chain took far longer and cost much more money than anticipated, largely because of the complexity of the supply chain – and its lack of standardisation.

PwC analysts and data specialists tried to trace from nose to tail the ad dollars spent programmatically by 15 large advertisers. They found that 15% of spend could not be accounted for. That means about a third of the supply chain cost is unattributable – and that is at the premium end of town. The long tail would likely be far worse, said PwC.

Moreover, PwC could only fully map 12% of ads from brand to publisher, so almost nine in ten ads couldn’t be fully traced end-to-end.

Needless to say, the study confirmed what many big advertisers have known for some time: too much of their money is being taken out by middlemen. Worse still, they don’t know who is getting what. And yet digital and programmatic advertising continues to take more and more ad dollars.

 

Nestlé: Marketers have most to gain, and most to lose

Digital accounts for 40% of Nestle’s ad spend, and around two thirds of that portion is automated. In a bid to literally save billions of dollars, Nestlé has dramatically slimmed down the number of supply side platforms it works with, from dozens to fewer than ten. It’s part of an ongoing strategy that the CPG giant believes will improve transparency and efficiency – and ultimately leave more money to fund the quality content it wants to be associated with.

As chair of the AANA, Nestlé’s Martin Brown says all parts of the industry must “step up” in weeding out wastage and bad actors, “but marketers have most to learn, and arguably most to gain or lose” by remaining ignorant of the supply chain.

“Understanding how your content choices affect viewability is purely a factor of knowledge and can make a significant impact on your RoI; critically marketers and brand owners need to know how to navigate the risks of brand safety,” says Brown. “And you must absolutely understand your obligations to privacy. So there is lots of knowledge to build, and if you do not [educate yourself on the digital supply chain] … it puts you in a poor position to complain about poor outcomes afterwards.”

“We've had quite a few instances of getting to the pointy end of a negotiation with a client in a new business pitch, and they've pretty much said you've got the right resourcing, but it's too expensive. And if I'm at a point where I can't commercially and viably sustain that structure for them, there's no way another agency can be doing that any cheaper. They have to be making money somewhere else.”

Aimee Buchanan, CEO, OMD

OMD boss: Marketers creating their own problems?

The ADAPs update provides a solid foundation across the digital supply chain and its component parts. But the sustainability of commercial models is the flip side of the transparency debate. “There is still a big gap in people’s understanding of what that requires,” suggests OMD chief executive, Aimee Buchanan.

“We've had quite a few instances of getting to the pointy end of a negotiation with a client in a new business pitch, and they've pretty much said you've got the right resourcing, but it's too expensive. And if I'm at a point where I can't commercially and viably sustain that structure for them, there's no way another agency can be doing that any cheaper. They have to be making money somewhere else,” says Buchanan.

“And if clients don't fundamentally understand that, then I think we're not talking about the two parts of the pie that need to be put together.”

Buchanan says it is perfectly acceptable for clients to sign off contracts that are not fully disclosed, provided everyone is clear on terms of engagement. But she suggests brands taking that approach must ask themselves not just where their money is going, “but why is the money going there”.

 

Ask sharper questions, get sharper results

Buchanan says the 15% ‘unknown delta’ referred to by PwC has been “misconstrued as ad fraud, it’s not”, but she says it is imperative to fill in the gaps, which should be the industry’s next focus.

However, she thinks that a much higher percentage of advertisers’ media spend should actually end up with the media owners providing the eyeballs and engagement. The supply chain is complex “by design”, says Buchanan.

That makes it all the more important to be armed with the right questions, says Matt Rowley, Chair of the IAB and CEO of Nine's  Pedestrian Group.

“In any commercial negotiation, you've got to have your eyes open and you've got to be asking the right questions. That’s where ADAPs comes in, to arm you with those questions and the data to understand what the market looks like,” says Rowley.

Meanwhile, he says the IAB’s latest work on standards such as OpenRTB puts the industry “on the precipice” of being able to track a buy through the programmatic ecosystem all the way from advertiser to publisher – which just a few months ago appeared largely beyond PwC.

If that proves true, advertisers are then “armed with the questions that they need – which is what is contained in ADAPs, and why everybody should read it – but also have the data to arm those conversations,” suggests Rowley.

“As a publisher, we want working media to be as high as possible. But there are people who rightly have a space in the value chain. For example, you might be using their tools for data, or viewability and this stuff doesn’t come for free. But after that, if there is still a gap, then you want to know where that [money] is going.”

Matt Rowley, CEO, Pedestrian Group & Chair, IAB

Cut out the middlemen

Creating private exchanges is one way of reducing the digital dollars lost to middlemen. Simply going direct and automating the execution is another.

“About 90% of our buys have some sort of direct component, and that is about control and visibility,” says Buchanan. “We are deciding where those placements go instead of outsourcing it to a publisher or another provider. As a result of that, we have a lot more supply chain visibility.”

A more direct approach also reduces brand safety risks, says Buchanan.

“We know the environments that they're appearing in. We have more control over whether they're contextually right. And then from a cost point of view and visibility point of view, we have transparency.”

As a result, she claims OMD has a working media rate that is “30% better than the industry average … If you are bypassing the SSP, it means you don’t have a big chunk of it disappearing from our side.”

Dan Stinton, Managing Director, The Guardian, says the masthead is “seeing really strong growth in our direct business” through private marketplaces and direct ‘programmatic guaranteed’ approaches, (where buyers agree to buy a certain number of impressions and the publisher guarantees them at a set price). Stinton says those approaches provide “a lot more efficiency” for both sides of the deal.

“Effectively, you're leveraging the efficiencies that digital can bring, which I think is much better for the advertiser, because it means your dollar will go further,” says Stinton. “But at the same time, you're able to ensure that you're getting the right context and brand safety and durability and all those things which are harder to achieve in the open marketplace.”

Matt Rowley agrees. While programmatic advertising makes up a relatively small part of the group’s revenue, he says “almost 60% of it is programmatic guaranteed”.

“The working media number at 50% is a poor result. We should all be working to get that significantly higher. I think a 70% threshold should be a starting point.”

Martin Brown, AANA chair and director, eBusiness, Strategy & Marketing, Nestlé Oceania

Nestlé: Publishers should be getting 70% plus

Nestlé has been trimming its digital ad supply chain for the last couple of years, and creating more direct relationships throughout the supply chain was one of main recommendations of the PwC/ISBA report.

“For us, it's really important to ensure that at a global level, we're accessing publishing content that fulfils our viewability and fraud standards, and that that's the basis on which we're developing those relationships,” says Brown.

He thinks fewer, more direct approaches will lead to greater transparency – and ultimately a higher share of budgets actually ending up with quality publishers.

“The working media number at 50% is a poor result. We should all be working to get that significantly higher,” says Brown. “We will always lean towards quality content and we are driven by a desire to get working media higher,” he adds. “I think a 70% threshold should be a starting point.”

Naturally, Dan Stinton and Matt Rowley agree, as does Amy Buchanan. However, Rowley, as IAB chair, cautions not to throw out the good actors with the bad.

“As a publisher, we want working media to be as high as possible. But there are people who rightly have a space in the value chain. For example, you might be using their tools for data, or viewability and this stuff doesn’t come for free,” he says.

“But after that, if there is still a gap, then you want to know where that [money] is going.”

“Too often digital media is treated as homogenous. I understand why there is going to be sensitivity for advertisers around recent things such as Black Lives Matter on social media, because the risks there are high. But I think that's quite different when the news media are reporting on this.”

Dan Stinton, Managing Director, Guardian Australia

Brand safety: spend more time whitelisting than blacklisting?

The ADAPs update provides an ad fraud and brand safety checklist, arguing that while the two issues are separate, the means of addressing them are often the same.

While few marketers willingly hand over dollars to fraudsters, brand safety is regarded as the bigger issue, given the risk of immediate damage in an age of social media. Covid and global social issues such as Black Lives Matter have brought brand safety back to the fore, but publishers suggest brands have been too quick to pull dollars.

“Too often digital media is treated as homogenous,” says The Guardian’s Dan Stinton. “I understand why there is going to be sensitivity for advertisers around recent things such as Black Lives Matter on social media, because the risks there are high. But I think that's quite different when the news media, such as The Guardian and other publishers are reporting on this. I think that's a very, very different requirement.”

Stinton thinks there has been an “over-correction” by some brands and their agencies.

“If you take the coronavirus example, we've had larger audiences on digital news sites than ever before. We've had more engagement - with session times which are just off the charts - than ever before.”

As such, he thinks brands and their agency partners should spend more time “whitelisting sites where they want their advertising to appear than blacklisting terms in a fairly blunt way.”

Nestlé’s Martin Brown sympathises with Stinton’s view. But he warns that some brands are put off by the overheated news cycle.

“Brand owners need to have a position as to whether or not their brand wants to be repeatedly present in what is newsworthy and interesting and informative content - but might not be a particular narrative that ultimately they want to be associated with,” says Brown.

“That might be the reason why advertisers are blacklisting certain content and certain narratives, because, honestly, the news cycle can get into such a frenzy that it doesn't become a valuable space for your brand to associate with.

“Right now, in the midst of the tension that exists across the news cycle at the moment, the strongly held emotions and really quite divergent positions people have got on issues mean that you've got to be super sensitive to this and be aware and make conscious decisions,” says Brown.

Given the increasing fluidity of brand safety in an accelerating news cycle, he suggests a combination of whitelisting and blacklisting is required. Above all, says Brown, “it just means having a very clear position and being proactive”.

Download the ADAPs update here.

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