Category Archives: FUD

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!

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Fear & Loathing in the Ad Technology Stack

Spring is upon us and many of us are coming from and going to conferences this week. With so many interesting events to chose from it is exciting to see all the innovations and industry continuing to grow; analyst Jack Myers put digital advertising at $47.6 Billion last year (8% share of total marketing spend). This is no doubt evidenced by the plethora of technology companies captured in Terrence Kawaja’s ubiquitous Display Advertising Landscape diagram. Yet, the colorful framework belies the complex and fierce co-evolution that is happening behind-the-scenes of the so-called Ad Technology Stack.

Focused on hitting their milestones and/or quotas, investor-fueled and publicly-traded ventures alike will be putting on the hard-sell this trade show season. Panel and exhibit hall attendees certainly know the drill. Prospects will be dazzled, plans hatched and hopes dashed with the latest BSO (bright shiny object) hanging in the balance. On tap across booth chit-chat, panel pontification, martinis and outdoor activities will be information (not to mention outright disinformation). Perpetual conversion machines are the latest rage!

After years of consolidation and financial speed bumps the current industry, while seeing more revenue has definitely shrunk in terms of choices. It should not be a surprise that many battle-scarred survivors have benefitted from this and effective technology lock-in strategies. The result for some technology buyers has been worse service levels and slowed innovation. Nonetheless, gaps in the incumbent’s vision or their inability to consistently innovate have spawned mini-me’s up and down the stack; some trying to create their own lock-in. Unfortunately, all this has all been accepted as a cost of doing business.

To buyers of stack technologies: caveat emptor.

We Know What You’re Up To

Once the technology deal is done – it is going to be too late. Control immediately begins to shift from the technology buyer to the seller. Why does leverage shift? In economic terms, the buyer may have just unwittingly entered into a deal with a micro-monopolist. While this could be arguably true for many industries, for stack buyers this has more severe consequences. The kind that are often obfuscated yet pervasive and only become fully understood in time. It goes way beyond simple buyer’s remorse.

Ad Technology Stack business models that rely on technology lock-in do so because their investors and management have found that such switching inflexibility works for them. One need only look around to find many mainfestations across the stack, mainly in two areas:

  1. Performance analytics – ownership, access and control of reporting data
  2. Behavioral data – for both advertisers and publishers

Due to information asyncronicity, technology buyers often don’t realize fast enough that they are really signing up to purchase a series of products and services -all when they are at the greatest informational disadvantage. As a result, stack buyers can easily become captives of their own making. A little diligence and research upfront can mitigate the common self-inflicted damage caused by lock-in.

Switching Cost and Lock-in

In game theory, a product or service has a switching cost when the buyer purchases it over multiple periods of time and experiences time, cash or opportunity costs to switch from one seller to another. Switching costs can also occur when a buyer purchases additional complementary products or services making substitutes relatively more expensive; increased complexity is positively correlated with higher switching costs.

Altogether this effectively shifts the supply curve and creates the “lock-in” effect thus raising costs for the buyer. Clearly, switching items in the stack can have unintended negative consequences. More specifically, when a businesses contracts with a stack company there are usually multiple economic components to what is effectively the total cost of ownership (TCO):

  • Implementation
    • Cash
    • Resource time
  • Learning Curve:
    • Application usage
    • Report data warehousing
  • Framework
    • Contractual
    • Network considerations
    • Opportunity

All of the above combine to create an effective transaction or cost of switching. Although implementation is an obvious one-time cost (sometimes the largest component), other costs are more subtle and may actually increase over time. Practical scenarios might include:

  • changing the ad server or site analytics technology
  • managing research or targeting page tags (and data sharing)

Staying Balanced in the Melee

While the lock-in strategy has worked well for technology sellers in the past, many Ad Technology Stack ventures are about to get their legs kicked from under them. Enter tag (data) management companies like BrightTag, Tagman, Ensighten and Tealium.These companies are exclusively, if not mostly focused on managing proliferating page tags which are a major culprit behind stack lock-in. Having one technology locked-in that you’ve planned for is probably better than fifteen that just happened over time.

In addition to to making the business of digital marketing actually manageable from a logistical tag and data-sharing standpoint, the larger possibilities are tantalizing for stack buyers wrestling with IT/development queues. Simply put, tag management changes the balance of leverage away from the sellers towards their customers. Analytics expert, Eric Peterson called this out  in a recent white paper saying:

“…as implementations become more involved and sophisticated the businesses willingness to switch vendors declines, even in situations where the relationship has been badly damaged by miss-set expectations, miscommunication, or outright lies”

Fear and Loathing

Yes, positive change is in the air for the industry. Widespread use of tag management systems make this an inevitability. However, reactions span the contninuum:

  1. Guarantee us business and we’ll integrate
  2. These companies are risky start-ups
  3. We have developed our own solution
  4. Interesting, but never heard of it
  5. No problem, we can work with anyone
  6. Great idea, we want to get to market first

No wonder that the reactions from the ad technology stack about universal tag management have been mixed – these tag management companies are upsetting the status quo and threatening lock-in!

Laggards are doing what they do: delaying and holding out. They are not happy about this. Some are attempting to make tying deals to lock-in even more. For this desperate and unimaginative bunch, it will be a slow and steady burn as the balance of power swings back; some may even get crushed. Others will respond by acquiring companies or being acquired. Still others will hit the wall or just become irrelevant.

More proactive technology sellers see this as an opportunity for competitive advantage and customer relationship-building. This breed of stack company is already knows how to adapt to the new reality of constantly being tested. They are fast failers and built to optimize, now using the opportunity to proactively to gain compeititve advantage.

Moving Forward

Technology stack buyers must balance the fear of being left-behind with a more reasoned approach. Sellers must be able to provide value today without depending on technology lock-in to be successful in the long-term; management discipline and technology agility are essential.

On the upside, one promising trend is that for the first time since the implosion of the Web 1.0 industry, business development (not strategic sales execs) executives are popping up across Ad Technology Stack start-ups. Having the organizational competency to vet and manage strategic alliances is a step in the right direction. Kudos.

Interoperability matters. Compatibility across the stack is a must-have and stack players that didn’t learn the lessson of Betamax (in hopes of another iPod) may be deluding themsleves. Such a fast-buck approach has the technology seller helping themselves at their customers long-term expense…almost becoming parastic. Investors and entrepreneurs take note: the new stack won’t tolerate old stack micro-monopolies: plan on more Schumpeterian creative destruction.

In the end, it is all about risk-sharing: stack buyers that don’t perform adequate diligence, risk being marginalized by lock-in. At the same time, stack sellers that cannot constantly adapt to the marketplace will become riskier bets.

Just make sure you’re not stuck with them.

[UPDATE: AdExchanger had an intro which didn’t quite capture the point. Whether you buy a la carte or bundled technologies doesn’t matter. What matters is how those technologies integrate (or don’t) with each other and how easily you can test them. Tag management/data sharing technologies (especially pure-plays) can mitigate the inflexibility of tag based lock-in.]

Why the Click Is the Wrong Metric for Online Ads

Story in AdAge by Abbey Klassen. Amazing that in 2009 this is still being written about….the comments even more telling. Here’s mine:

Wow. It’s great that this issue is being raised. However, this is nothing new. Same story since the Web 1.0 days as this could have been written over 10 years ago…actually, I did in the Lilypad white paper!

The twist today is that too many so-called online “marketers” either protesth too much (like the effect of branding but want to pay like performance) AND/OR opt for the easy way out and fallback on search – a FUD mentality. The former is solved by better media-side negotiating and the latter by training and education.

It is called branding and it’s about way more than measuring clicks.