The programmatic relationship between agencies and advertisers is evolving as advertisers review and reset contracts and look to alternatives to agency trading desks (ATD’s).
A report by the World Federation of Advertisers (WFA) found that while 40% of the worlds biggest brands use ATDs for programmatic ad buying, 90% are reviewing and resetting contracts and business models to improve control and transparency.
The findings are based on a survey of 59 WFA members across 18 industry sectors with a total global ad spend in excess of $70bn (£55bn). All are increasing programmatic spend, by 16% on average, while 17% of digital ad spend in Europe is now done programmatically.
And alternatives to ATDs are rising in popularity. Independent trading desks have seen usage increase by 12% while in-house or hybrid models are now used by a fifth. According to the WFA, these were used “only on the fringes” two years ago.
The shift follows growing concerns over transparency in the media buying world. The survey found that while 29% of advertisers are satisfied with the level of transparency their ATD provides, up from 21% in 2014, transparency with ITDs is greater and satisfies nearly half of all users, an increase from 36% in 2014.
And two-thirds of advertisers reject the idea that agencies and holding companies should act as “principal” in the media buy. 62% of respondents disagreed with the statement “we have ‘opted-in’ to principal trading and are comfortable with the potential conflicts of interest”.
Meanwhile, 33% of advertisers said their trading desk model was ‘non-disclosed/non-transparent’, while 34% also agreed there was nothing in current contracts that included arbitrage or principal trading.
Matt Green, global media and digital marketing lead at WFA, says issues with ATDs have risen because programmatic ad spend has grown so rapidly. That means many clients have gone into programmatic spending without understanding what it really is and without robust contracts, meaning more and more clients now want to reset contracts.
“The rise of in-house, hybrid models and independent trading desks demonstrates that the original trading model left much to be desired,” Green comments.
Despite concern over ATD’s, clients are not necessarily rushing out to change their contracts, they are simply reviewing them. Green believes that is sensible as the way programmatic spending works in its current form isn’t necessarily the most clear or productive. Advertisers need to understand what model works for them, depending on the type of client, culture, business structure, resources and data assets they have.
The type of model appropriate to each business can vary depending on each sector and businesses should take note of this.
“Businesses that are seen as pioneering in terms of programmatic, such as the travel industry or confused.com and Comparethemarket, tend to have a complete in-house operation. FMCG leaders may be sophisticated but they don’t necessarily take this approach,” Green says.
Clients and agencies need to have “frank conversations” to create more transparent relationships. Though Green says this may cost clients more in terms of fees, he says it is something they will have to do or risk losing ATD business.