Agency Trading Desk Myths & Memes Debunked (Part I)

Fear, uncertainty and doubt has worked well for many incumbents in the technology and online media game over the years. Why should sell-siders be any different when it comes to Agency Trading Desks (ATDs)? Don’t worry…they’re not.

With buy-siders generally tight-lipped about the subject of ATDs, the resulting vacuum is being filled by constant industry sniping and chatter. Since the advent of the ATD, they have had aspersions notoriously put on them – perpetuating FUD. That the industry trade media and blogs are the only place that a consistently negative view of ATDs can be found should come as no surprise. Yet, the recent spate of chicken-little articles, posts and heated comments represent what is apparently a really threatened sell-side point of view.

While agencies are notoriously silent about their and their client’s businesses (as they should be), two anti-ATD blog posts (The Trouble With Agency Trading Desks and Thumb on the Scalewarranted a response from a different point-of-view…the advertiser. The spin and rhetoric have reached epic proportions and so a debunking of popular myths and memes follow below:

Double-dipping. From the best defense is offense school. It is as if the basic math around billable hours and the service-layer around managing Demand Side Platforms have no value. Data-driven media buying is very different from traditional demo-driven index based methods and takes alot of time as clients and agency partners get up to speed. Moreover, the measurement planning, analytics, technical and media accounting and media reconciliation that are required to manage these campaigns are also very different. 

The notion of “double-dipping” belies a basic misunderstanding of the process: DSPs are not exactly push-button. It is nothing like an in-house production studio – it is very strategic not simple production. Leveraging the expertise associated with intricate technical aspects of tags and data sources alone is a significant effort. Also as a reminder, digital advertising used to be commissionable or marked-up like traditional media. Meanwhile, where is the outrage at ad networks double-dipping with advertiser data?

Profit-margins. The implication that agencies shouldn’t be seeking profitable service offerings is simply outrageous. In the end, it is a service business and comprised of talented specialists that care about client business. With the prevalence of small-scale site retargeting making up alot of the business today, the ad volume and associated fees that ATDs are charging suggest that they may be running somewhat in the red; at least, until the business scales up or broadens to warrant the resource investment

Advertisers squeezing too hard here run the risk of running the people (not machines) doing the work into the ground – not good either. ATDs are not charitable organizations so it is not clear why they should be expected not to earn fees or why they have to justify it ad nauseaum. That said, it is in ATDs best interest to be very transparent with clients about the fees they are charging.

Agency Technology Investment. Holding company ATDs, for the most part are not building their own buying technologies in-house. The spin-out of Adnetik being an exception and who’s success remains to be seen. Instead they are licensing DSP tools/white-labelling and applying their tech-savvy marketing teams to enable a platform for the benefit of clients. While their marketing often use the term platform, they mean technology and the service-layer to support it – not literally hardware and software. 

In some cases, agencies may be using their business intelligence tools to support ATD reporting – that makes sense and is nothing new. Agency analytics teams have been using home-grown BI for years. Advertisers really just need to ask their agency questions if they don’t understand how all of it works…this recalls a famous Chinese proverb: He who asks a question is a fool for five minutes; he who does not ask a question remains a fool forever.

Data-hoarding ATDs. Really? The sell-sider rhetoric on this point is very misleading. Most ATDs are essentially service-providers, consultants armed with a DSP SLA (service level agreement) and the expertise. While agency BI tools attempt to provide handy storage of performance data (with debatable proficiency). Historical benchmarks and campaign reporting data are not the same as actionable behavioral user-level data, i.e. cookies. No, afraid that data is sitting inside ad networks, ad servers (which, by the way sometimes turns out to be the same cookie used by the ad exchange) or in a Data Management Platform. 

Now that said, there is simply no excuse for an ATD or agency to clandestinely re-purpose
so-called 4th party data from ad campaigns for later use. That is a major ethical lapse and sell-siders (publishers) should not tolerate. Ironically though, at the same time, far too many major ad networks are happy to re-purpose advertiser and publisher campaign performance data when it can maximize their revenue.

Mandate. Just what are sell-siders so afraid of? Perhaps their advertiser clients getting the most experienced and savvy teams working on their behalf and more transparancy. That is a huge benefit for client-side marketers that remarkably all too often have few senior digital media natives in-house. As a result, there is a huge-learning curve and time means money in a service business. 

The flip-side is that an agency holding company not consolidating their technical and negotiating expertise on one team raises management competency questions. With the level of technology change today, a centralized team is exactly what holding companies should be doing to effectively manage their resources. A better question and especially so for site retargeting is, that ad networks are still being considered. If old-school planner-buyers are concerned then they ought to put in for a transfer to the ATD.

Conflict of Interest. Wow – look at who is talking. Most advertisers would probably prefer the dedicated separate team within their ATD (usually closely directed by their agency-of-record) than what naked and supposedly independent sell-siders and technology vendors have to offer to protect their interests, i.e. nothing. It seems no different than a client directly buying from a media vendor, where that really new “big idea” has actually been shopped to several other advertisers (probably not all that new.) Plus, if an advertiser decides to pass, 100% probability that “idea” will be offered up to an advertiser’s competitor. Hey, clients can certainly pay a premium for category exclusivity – that option is always available.

On the other hand, AORs by definition get the concept of category exclusivity. With ATDs, there is semblance of brand stewardship and a compeitive firewall. Moreover, an ATD’s media planning agency partners are very unlikely to put any one client account at risk. That’s because in game theory terms, branding is a zero-sum game, i.e. it is about brand X winning, which means that brands A, B and C lose. As such, the ad strategies that are successful cannot be shared, nor the ones that didn’t. The problem is that sell-siders and technology vendors often have the opposite – industry specialists. 

The Machine Knows Better. Of course it makes sense to leverage automatic optimization and novel algorithmic approaches to improve results. However, far too many of the sell-siders and arms vendors out there purport that an ATD just can’t keep up. That may or may not be true but consider the source. How many sellers are transparent enough to report on the performance of their supposed-machine learning technologies? Some will do it but only when asked.

In any case, marketers will always have a need to explain and justify their actions. The client-side CFO does not want to hear about magic or blackboxes. They want to understand how to allocate cash to generate ROAS and ROI in a predictable way. People can be held accountable in a way machines cannot. The simple fact is that advertisers need expert brains to adjust to the changing marketplace and resources – managing campaigns on their behalf.

Early-in-session User Performance. One of the more clever rhetorical devices that pops up when sellers realize they are about to get disintermediated. It essentially questions the competition’s inventory quality suggesting that either directly or indirectly that only they have access to the special ad inventory. That’s right, through first dibs or exclusive relationships, the seller’s inventory “performs better” and therefore more valuable than the other. It is possible but  depends on the seller’s definition of perform – for their bottom line or for their client’s? BTW, still waiting for the data or performance reports that back-this up after multiple requests. Ironically, most of these sellers are also getting a portion of their inventory from the same exchange sources as the ATD; the real question is just how much.

Simplistic Wall Street Metaphors. This is an oldie…first of all day-trading media is a very one-dimensional way of viewing media consumption. It is not the same as a financial asset that has intrinsic value (stocks, bonds, options)…however it does make for nefarious and ominous metaphors with the recent financial crisis and all. Digging past the hackneyed writing, RTB by definition doesn’t allow positions to be taken in the same way as financial trading. These are real-time transactions, i.e. a spot market where ATDs aren’t owning inventory or taking a position. It seems that there is a fundamental misunderstanding of financial atribitraging.

It seems like the amount of technology required to squeeze out any kind of profit through exploiting information inefficiencies across many RTB decisions is more likely going to come from a DSPs that can hedge across multiple advertisers. ATDs just don’t have the financial structure, engineering or research staff to pull this off. In practice, this is nothing more than another red herring. Any ATDs that could save client’s big money would want that to be known.

Kick-backs. One of the more outrageous charges about kickbakcs was refuted in public and so the matter should be closed. Yet, the meme continues to proliferate. It may also depend on the definition of a kick-back. Is free user training or better support a kick-back? How about box seats to the Cubs game and fancy meals? Without knowing the internal accounting between DSPs, exchanges and ATDs it may never be known for certain. Clients can always ask for audit rights but like all memes this one can be difficult to prove or disprove.

Did I miss any or do you have any others to add? Feel free to submit a comment below!

  • Thanks for all the email support but it is interesting that there are no public comments.

    I expected this post to raise a few eyebrows but this blew the prior traffic record away.

    According to Google Analytics: Thursday, 6/1 was 2.5x the highest visit volume which was back in March (Fear & Loathing in the Ad Technology Stack).

    67% was US-based with 23% from the UK.

    40% from NYC DMA, 22% Chicago and just 5% from SF and then Boston.

    Busy digital marketing people viewed on an iPhone at 8%, Android at 5% and both iPad and Blackberry at 3%.

  • A very thoughtful and well written piece. Thank you for that. The essence of the problem that I am seeing in the market is that an agency building an ATD is essentially an agency building a new business designed to provide digital buying efficiencies for their clients. In its’ purity, there is no conflict there. The problem is that they ARE building a new business. With that comes significant investment, risk, cash flow issues, personnel issues, etc. The result has been that agencies are pushing client spend through ATDs in a biased manner and, essentially, building these businesses with the clients money. Given that none of these businesses can be imminently scalable, staffed competently, efficient, etc. day one, bias is built in by design. We hear repeatedly from agency folks themselves that they are highly “motivated” to move dollars through their own ATD even at the expense of performance and scale. That’s the first part of the conflict issue -these are new businesses whose growth is funded by client ad spend. The second issue that I see is once these businesses are up, efficient, proven, scalable, etc. they then have to endure. Advertisers will demand, rightfully, increased rate transparency and the squeeze will be on. What will we end up with? ATDs that are essentially providing the exact same services as GOOD networks provide today, without the capital to continue to invest in technology. Even leveraging new tech partners takes huge investment ahead of the curve. In fact, an ATD will be inherently handcuffed as revenue concentration issues (and subsequent overhead support) will be built in by design and that is not a healthy concept. The loss of a large advertiser due to an AOR change could make the whole house crumble. I’m just not sure what all this got anybody. GOOD networks provide what all this leads to- quality end to end campaign delivery leveraging state of the art technology, data, and domain expertise.

  • mac

    Great piece Dom, well above and beyond the call of duty. It’s been and will continue to be a hard transition out of the ad network era, harder on the sell side for sure. But truth be told it’s not an easy task educating a generation of display strategists, planners and buyers to understand that media/audience buying no longer needs to be outsourced to a middle man. The marketplace is there and has been frankly for some time. When you bring the pieces together then the light bulbs go. Sr. leadership and client directs tend to get this quickly, for all the points you hit on. The sell side has done a great job cultivating strong relationships with these groups, as they should, and that coupled with this recent Ad Hominem fallacy has gotten some of their heads spun around who actually provides value in the chain.

    The upside is, data driven display has never been smarter, more efficient, and more transparent than it is today. And the marketer themselves has never been more empowered.

    I’m really proud of how far we’ve come in such a short amount of time. This was long overdue and always a matter of time.



  • Comment came in from a colleague about ZAP – developed by holding company WPP’s (full disclosure: was a contractor at Grey SF) Media Innovation Group.

    Uniquely includes includes DMP, DSP, search management and of course pub-side Open AdStream (full disclosure: I’m an alumnus of RealMedia) functionality. Actually in the late 90s, RM Europe had an agency side ad server but it was not marketed here to compete with DFA, MediaPlex and Atlas (whatever happened to this?).

    All told, WPP is definitely offering a different relationship/configuration than InterPublic, Omnicom and Publicis.

    Unlike Havas’ spinout of Adnetik as a standalone technology company, MIG while uniquely home-grown by WPP is still under the WPP umbrella.

  • Hey Dom,

    Starting my career from an ad network (the alternative to contracting an agency trading desk), this is a breath of fresh air. I’m now at an Agency Trading Desk and we’re very proud of the work that we’re doing for our clients. ATD’s are an easy target because everything we do is transparent. The learnings belong to the marketer.

    A little bit about the alternative to using DSP or ATD: Networks use competitive first party data (Telecom 1 vs. Telecom 2), bid on exchange inventory without transparency, contract on a CPA pricing model and USE ONLY RE-TARGETING, cookie bomb, deliver all of a CPC campaign on a single gaming site that doesn’t appear as click fraud via third party data, and they do not share site-level data. You’d think that by employing these tactics, they’d outperform DSP’s. They don’t.

    Demand should move the market, and marketers are demanding analytics that networks can’t or won’t provide. Any analytics they do provide are not true insights as they only apply to their own distribution sources. Using networks is good for attaching CPA to media cost with opaque attribution data. If digital is the best platform for analytics marketers should make sure they own the data, best practices and true insights, as you do.

    Thanks for sharing. – Flood

  • Jeff – thanks for the comment. We will have to agree to disagree though.

    What is wrong with agencies trying to make a buck through an innovative service? ATD’s give advertisers a chance to unbundle what ad networks have historically packaged up and admittedly quite conveniently.

    However, the problem with your arguments is that as an advertiser they makes no sense. With respect to your first supposed issue, what you perceive as a bias is non-starter. Why shouldn’t ATDs consolidate and centralize? To do otherwise is just assanine although but the utter confusion that would ensue would work well for sell-siders. That’s why so much of the innuendo just comes off as sour grapes.

    Regarding the second issue – it sounds like you may have believe your own PR. Advertisers really don’t (or shoudn’t) care about your spiffy technology and team except perhaps VCs. Unless your INSERT ALGORITHM HERE can measurably move my top and/or bottom-line – just don’t care. Show me applicable results and I’m listening.

    The real conflict is the one that sell-siders have and that is perhaps conveniently falling on deaf ears. And for advertiser’s – that should really be more of a concern. Their choice is: a) work with an arms dealer that sells it to anyone and everyone that pays or b) an ATD that offer comparable tools and team that will work to help make their client win.

  • UPDATE: From a traffic standpoint, three consecutive days of record traffic – clearly this subject has struck a nerve!

    Another interesting comment came in about a perceived conflict that ATDs and agencies could have.

    “An example of this would be the publicis acquisition of razorfish from msft. As part of the deal publicis is required to spend a certain amount of $ w msft properties…Also basic economics, holding companies buying in bulk via all agencies should get a lower cpm. Would this necessarily be the best media for the client or the media that offers the highest margins for the agency holding company or trading desk?”

    These deals have little to no agency profit margin impact. First, most digital media agencies are not making a spread off traditional media buy. If they did, they would probably all be broke these days. Although back in the mid-90s my old boutique agency Streams was able to charge for both. These days, it makes more sense for agencies to charge a consulting fee or have a retainer for the incredibly labor-intensive process that is planning, buying and managing digital media. And don’t forget to include the analytics time to measure it all.

    Second, have never heard of holding companies actually planning and managing campaigns; that makes no sense since they are financial animals not operating companies. Instead, media is planned and bought on a client-specific basis: either ad hoc or maybe through a reverse auction. Sure, a holding company may have a negotiated discount off of the rate card CPM but that is going to be re-negotiated again on a client-specific campaign basis.

    Third, agencies just can’t foist media down their clients throat – it just doesn’t work that way. All clients have the final approval over the buy – they scrutinize, challenge and tweak media plans. It would stand to reason that they are therefore keenly aware of the rate card, holding company rate, their last rate and proposed rate.

    As Mythbusters would say: BUSTED.