Time to Turn on the Lights: Ad Tech’s Need for Radical Transparency

If you can’t measure it, you can’t manage it. This concept is pretty basal when it comes to organisational strategy. Unfortunately, when you apply this logic to the digital media supply chain, it becomes clear the entire system has become virtually unmanageable, writes Michael Barrett, president and CEO, Rubicon Project, exclusively for ExchangeWire.

We see this in the growing frustration among marketers and advertisers. We see it in the public call for digital publishers to be more accountable for the ads they are delivering and the audiences they are selling against. We see it in market leaders, like Proctor and Gamble’s Marc Pritchard, speaking out, demanding a collective call-to-action to “supply a transparent, clean, and productive media supply chain”, or risk losing its business.

While the obscurity around industry practices is understandably frustrating, several factors have shaped the current climate. With the seismic growth of the digital ecosystem, things have become more complex, and the methodology by which publishers, agencies, and exchanges conduct business is obscured by an increasing amount of math, science, and data. Protecting proprietary information has taken priority over openness and full-disclosure. The digital landscape has become something akin to the Wild West: an ungoverned territory with no uniform code where no one is accountable. While this freedom has allowed for unprecedented innovation in ad tech, it has made it next to impossible for marketers to measure ROI on ad spend or effectively control their brand. That’s a problem, because it’s advertisers that fuel growth and support the whole ecosystem. If buyers are alienated, the whole industry suffers.

Fortunately, the recent choir of concern has raised new awareness around best practices, and many in the industry are now focused on transparency and addressing the perceived shortcomings in the marketplace. It’s clear that to improve our industry, we need to embrace transparency in a radical way. This will expose fraudulent behaviour, make true value measurable, and further fuel industry growth. It will also prime the market to better optimise and manage growth, which will need to be managed, because digital advertising is big business, and it’s about to get bigger.

According to most industry analysts, this year will be the first that brand advertisers and marketers in the US will spend more money on digital advertising than on television advertising. Fuelling digital’s ascendency has been the rise of programmatic advertising. In fact, four of every five US digital display dollars will transact programmatically in 2017, totalling nearly USD$33bn (£25.9bn). Automated ad buying market share is expected to rise to 84% by 2019. The market is poised for tremendous growth, and the industry is in a position to optimise and feed that growth, if we don’t continue to hide in the dark.

It’s clear that it’s time to turn on the lights and to embrace radical transparency. But what does embracing radical transparency really mean? And how do we put it into action?

Transparency means different things to different people. To me, it’s the essential condition for a free and open marketplace, whereby the rules and reasons behind regulatory measures are fair and clear to all participants. It means letting others make informed, accurate decisions. It means operating above board, and facilitating trust. It means further investing in a clean and ‘well lit’ marketplace. To put transparency into practice, the industry needs to focus on four things:

First is transparency around auction dynamics. Everyone should understand how the auction works. Is it a first-price or second-price auction? In order to achieve transparency, there must be a clear understanding of how the auction operates.

A second area of transparency is around the ‘ad tech tax’. The industry needs to have understandable commercial models. There must be clarity around what companies are charging across the value chain. This has to change in order to satisfy the market’s need for a level playing field.

A third aspect of transparency is around pricing – knowing exactly what the buy price was and what the sell price was. Without this information, you don’t know what you are being charged and you don’t know what the value of your inventory is.

The fourth area of transparency is with consumers. The great promise of digital media has always been about having a one-to-one relationship. Consumers should be able to express what they want to see and what they don’t want to see in a safe and trusted way. That should be at the very heart of this one-to-one conversation.

Clearly, there is a lot that ad tech companies must do to improve the ecosystem. But advertisers can take steps to help, as well. For instance, they can make sure their third-party vendors respect data. And second, they can deliver payment on time. Having to face DSO’s over 100 days from one’s agencies is an enormous strain on the industry and literally risks putting good companies out of business. A ‘fair pay’ attempt on behalf of advertisers that sets a clear time standard by which all players are compensated sets a precedent for good behaviour. Publishers and exchanges will then be called to reciprocate and abide by standard rules that are fair and clear.

Overall, transparency needs to happen to keep the market healthy. It’s a challenge, but it’s not impossible. Proof of how transparency can be achieved can be found in today’s private marketplaces, which are thriving. These marketplaces are safe zones where everything is fully transparent and the buyer and sellers use tech platforms to transact with each other in a controlled way. This has helped to give an extra level of security and safety to the marketplace. It has all the technical advantages of RTB and programmatic, but reduces the risk of an open marketplace. This is probably why we are seeing an increasing demand for private marketplaces, especially for premium inventory such as video. Yet, we’ve only just begun. There’s more work to do, and more improvements that can be made.

As an industry, it’s high time for all of us to bring the transparency that marketers demand and rightfully deserve… in a radical way. Radical transparency doesn’t mean transparency in the abstract: it means taking action and setting tangible goals that can be measured. After all, if you can’t measure it, you can’t manage it, and if you can’t manage it, you can’t improve it. If we, as an industry, don’t react with speed and leadership to this call to action, we risk having others determine our industry standards, practices, and, ultimately, value. Reversely, if we can commit ourselves to radical transparency, we all stand much to win.