Michael Greene presented on Demystifying Programmatic Buying: What’s really happening with Trading Desks and RTB on June 11, 2014 at the Association of Canadian Advertisers Executive Forum in Toronto.

1. © 2014 AudienceScience Inc.
Demystifying programmatic buying:
What’s really happening with trading desks
and RTB
Michael Greene
Director of Research, AudienceScience
11 June, 2014

2. © 2014 AudienceScience Inc.
Programmatic buying is the future.
But as it is practiced today, it is failing to live
up to its potential for advertisers.

3. © 2014 AudienceScience Inc.
What is programmatic buying?
Auction-based
ad pricing (RTB)
Automated
workflow
Advertiser
control over
where, when
and why ads get
delivered

4. © 2014 AudienceScience Inc.
The potential benefits for advertisers are
massive
Less media waste
• Better targeting
• Lower CPMs
• Frequency control
• Smarter optimization
More efficiency from
headcount
• More workflow efficiency
for AOR – fewer
repeated, low-value tasks
• Real-time optimization
means no need to
predict the future in
planning
• Deeper insights

5. © 2014 AudienceScience Inc.
Programmatic buying is big – will total
over $20B by 2017
Source: IDC, 2013
$3.5B
$14.7B
$2.2B
Projected RTB ad spending, 2017

6. © 2014 AudienceScience Inc.
Agency trading desks are the centralized
organizations that drive programmatic
spending

7. © 2014 AudienceScience Inc.
What’s holding back even bigger growth
today?
• Concerns over inventory quality. Premium
publishers make only a subset of their inventory
available programmatically/via RTB.
• Audience data limitations. Ecosystem largely
dependent on third-party data of ranging quality.
• Uneven technology availability globally. Few
programmatic technology companies have
expanded their footprints globally, especially
into smaller markets.

8. © 2014 AudienceScience Inc.
These are solvable problems and are
being actively addressed today
Inventory quality
Data reliability
Global applicability
Premium publisher adoption is
growing and technology companies
are improving at combatting issues
like viewability, fraud, and bots
Nielsen and ComScore now offer data
validation services and marketers are
moving towards more reliable data
sources
Still an issue, but a couple tech
providers have built out substantial
global footprints

9. © 2014 AudienceScience Inc.

10. © 2014 AudienceScience Inc.
Are advertisers
getting the
transparency they
require?

11. © 2014 AudienceScience Inc.
What does transparency mean in digital
media?
1. Where exactly are my ads running?
2. Why are they running there?
3. Who is seeing my ads?
4. How many times are they seeing them?
5. What intermediaries are involved in the process?
6. What am I paying for the intermediaries and the ads?
7. What was the result of the ads against my KPIs?
Seven questions your digital media team
should be able to easily answer:

12. © 2014 AudienceScience Inc.

13. © 2014 AudienceScience Inc.
Transparency matters…and not just because
it is written into your AOR agreement
More
efficiency and
less waste
Deeper
insight
Better
governance
Smarter
strategies

14. © 2014 AudienceScience Inc.
What is arbitrage?
ar·bi·trage noun är-bə-ˌträzh
The practice of buying something in
one place and selling it almost
immediately in another place where
it is worth more

15. © 2014 AudienceScience Inc.
Arbitrage isn’t new to digital: it provides the
cash necessary to fuel an overly complex
digital advertising supply chain
“Advertisers may deal with more than
20 intermediaries before getting to the
media owners with access to eyeballs.”
- The Boston Consulting Group
“Cutting Complexity, adding value” May 2013

16. © 2014 AudienceScience Inc.
Agency trading desks have allowed agencies
to benefit from arbitrage…some openly admit
to it
“It doesn't say in Genesis that
everything we do has to be on a
fully disclosed basis to clients.”
- Irwin Gotlieb, CEO of Group M, speaking
with regards to its trading desk business
practices, March 2013

17. © 2014 AudienceScience Inc.
How arbitrage works in programmatic
buying today
AOR issues IO to trading
desk at $5.00 CPM
Trading desk takes 10%
services fee, issues order
to DSP to execute at a
maximum $4.50 CPM
DSP executes campaign
at $2.00 CPM
DSP charges trading desk
$3.00 CPM, pockets
$1.00 CPM as arbitrage
margin
Trading desk charges
AOR/advertiser $5.00,
takes $1.50 in arbitrage
margin and $0.50 in fees
$5 CPM =
$1.50 in trading desk arbitrage + $0.50 in trading desk fees +
$ 1 DSP arbitrage + $2 in working media

18. © 2014 AudienceScience Inc.
Media
AOR
Holding company
trading desk
DSP 1
DSP 2
DSP 3
Ad
exchanges
Publishers
Data management
(DMP)
Advertiser Third-party data
providers
10% flat fee –
60% arbitrage
margin
15% flat fee or
20%-
60% arbitrage
margin
Marked-up data
fees by 10%-33%

19. © 2014 AudienceScience Inc.
What can we take away from this?
• A large % of your budget goes to middleman fees. A
mix of transparent and non-transparent costs account for
anywhere from 20% to 80% of your budget.
• You and your AOR likely have little insight into
execution. Complexity leaves you and your agency far
removed from what ads are actually being served,
where, and why.
• Data is not secure. Advertiser customer data is typically
pooled with other trading desk client data. This helps the
trading desk scale, but leaves the advertiser with no
control.

20. © 2014 AudienceScience Inc.
How can you put the right
safeguards in place?

21. © 2014 AudienceScience Inc.
Ask your AOR and trading desk the
tough questions
• What are the fees associated with using the trading
desk? Does the trading desk arbitrage?
• What technology providers (DSPs, DMPs, data
providers) does the trading desk use on our behalf?
What are their fees and do they arbitrage?
• Does the trading desk use multiple DSPs on our behalf?
Why? Have they evaluated the inefficiencies?
• Where is our data stored and with whom is it being
shared?
• Can we get a login to the DSPs and DMPs used on my
behalf so we can see what is happening with our
campaigns and our data?

22. © 2014 AudienceScience Inc.
Alternative option #1: manage through
contractual terms
Alternative option Benefits Drawbacks
Include contractual terms
with AOR to cover trading
desk arbitrage and data
rights
• Maintains current
workflow structure
• Allows easy access to
programmatic
technology
• Costly. Doesn’t cover all
arbitrage opportunities
• Trading desk still
operates separate from
AOR with limited
business insight
• Still limited visibility due
to supply chain
complexity
• Global advertisers will
likely have to manage
multiple trading desk
relationships

23. © 2014 AudienceScience Inc.
Alternative option #2: ask your AOR to
manage programmatic technologies directly
Alternative option Benefits Drawbacks
Refuse trading desk
services and ask your AOR
to build relationships with
programmatic vendors
• Simplifies supply chain
and removes trading
desk fees and arbitrage
• Allows for deeper
insight and better
planning as AOR sits
closer to entire media
plan and your business
• AOR may lack
programmatic buying
skills and resources
• Programmatic
technology vendors may
still arbitrage or work
under trade rebate
agreements with AOR
• Global advertisers with
multiple AORs will end
up with multiple
regional technologies
and limited governance

24. © 2014 AudienceScience Inc.
Alternative option #3: license
programmatic technology directly
Alternative option Benefits Drawbacks
Build direct contractual
relationship with DSP and
DMP.
Can be managed through
combination of internal,
AOR, and technology
partner managed-services
• Cheapest by far. Limits
supply chain complexity
• Can choose vendor who
does not arbitrage (e.g.
AudienceScience)
• Global
governance/system of
record. Choose a system
that can scale across
regions and agencies
• Best data security. You
maintain all data rights
• AOR may lack
programmatic
knowledge/capability
and may be resistant to
working with tech of
your choice
• Requires strategic
leadership and vision
from advertiser
• Need knowledge to vet
technologies

25. © 2014 AudienceScience Inc.
Summary: what’s the future for
programmatic?
• Programmatic is here and it isn’t going away.
• Arbitrage and uncertain data rights make the current
trading desk model is far from optimal for advertisers.
• Advertisers should explore their options now and think
globally as programmatic expands in scope and scale.

26. © 2014 AudienceScience Inc.
Thanks
Michael Greene
Michael.Greene@AudienceScience.com