In what it says is an attempt to establish some “accountability and transparency in programmatic media,” the ANA has released a report [download page] in which it estimates how the flow of spending from advertisers moves through the supply chain to an exchange. The bottom line? The data it analyzed revealed that 28 cents of every dollar spent by advertisers gets eaten up by the demand side’s “tech-tax.”
A good portion of the report is dedicated to the methodology behind the study, which deals with a sensitive topic that is top of mind for media-buyers at the moment. This article highlights some of the findings from ANA’s analysis, which may be disputed by other industry players.
A couple of methodological details:
- The results are based on an analysis of 16.4 billion disclosed media impressions bought between 7/15/2015 and 12/31/2016 across 6 agencies, one trading desk, and 5 DSPs;
- Some 6.6 billion impressions, 445 campaigns, and 30 brands were analyzed at the campaign level, inclusive of demand-side fees; covering
- $36.4 million in “all-in” spend, broken out to $26 million in working media/inventory spend and $10.4 million in execution and data fees.
The primary source of the data was programmatic transaction logs and associated metadata from each DSP buying media for participating advertisers. Notably, the study kicked off in May 2015 by inviting more than 100 major US and Canadian advertisers to participate. The 58 that expressed “sincere” interest had to be whittled down to just 7 as the remainder either were not able to – or chose not to – be included.
The ANA writes that the advertisers not participating “in many cases did not have the data ownership rights to conduct a financial analysis of their programmatic investments. For some which dropped out, this is suggestive of an accountability gap in the contracts and processes between the advertiser and their respective media buying agencies.”
So here’s how the advertiser dollar broke out on the demand side:
- 6 cents went to agency fees;
- 12 cents went to execution costs, including DSP, verification, and ad-serving fees;
- 9 cents went to third-party targeting data; and
- 1 cent went to other fees.
(This may underestimate the demand-side tax, the authors note, as more than 95% of the analyzed impressions did not use an agency trading desk.)
That means that the remaining 72 cents was received by publishers, correct?
No, says the ANA – as sell-side fees must also be included in the waterfall. In this case, the ANA did not look at actual data, but applied an estimate of 15-25% for SSP, exchange and sell-side ad-tech costs, using industry sources as a guide.
As a result, the ANA reveals that “a typical $1 of advertiser spend yielded $0.58 to publishers for our sample of disclosed programmatic transactions, with a range of 54-61%.
In other words, somewhere around 54-61 cents of every $1 went towards actually buying inventory.
Unfortunately, these figures do not take into account viewability (roughly 60% in H2 2016) and/or non-human traffic…
In other findings from the report:
- On average, demand-side fees used to purchase media programmatically added 45% to the cost of the display inventory and 35% to the cost of video inventory;
- With one exception, all participants had a “significant” portion of inventory labeled as “Blind” or “Malformed” – resulting in an average of 7-26% of analyzed inventory identified this way; and
- Some 84% of the campaigns analyzed used third-party targeting data.
The full report can be downloaded here.
More Methodological Details: Advertisers who were recruited met the following qualifications:
- Advertisers that wanted an independent view of programmatic media costs and fees;
- Advertisers with plans to run programmatic campaigns of at least $1 million in Q1”“Q3 2016;
- Advertisers which had not opted in to an non-disclosed programmatic model; and
- Advertisers which did not rely exclusively on an “in house” trading desk.
Note that “the study analyzed disclosed programmatic media buys only, which may not be representative of non-disclosed transactions where fewer controls exist to manage the supply chain.”