Ad Tech Tax Cuts Vs Quality of Supply

Despite the ongoing attention to the so-called 'ad tech tax' in the digital advertising ecosystem, it remains a challenge for marketers who continue to spend media dollars in programmatic channels, writes Oleg Korenfeld (pictured below), global chief platforms officer, Wavemaker Global. In this piece for ExchangeWire, Korenfeld explains why, in a complex market with many players, it's important to understand where these 'taxes' are being applied before advertisers can determine which are valid and delivering value, and which 'charges' they might avoid without affecting performance.

When we think about tech tax in programmatic activation there are two main buckets to consider: the 'daisy chain' tax and the 'enhancement' tax. Just to be clear, a tax does not necessarily mean something negative. However, like taxes we pay in our everyday lives, some go to bureaucracy and are wasteful, and some are paying for better infrastructure to get us from point A to point B faster and more efficiently.

Let’s first start with the clearly bad and wasteful type of tax. What I call 'daisy chain' tax. This happens when a buyer does not look past their demand-side platforms (DSP) when it comes to supply sourcing and curation. There are many supply aggregators that package and repackage inventory still operating on the same open exchanges. Each one of them takes a fee (daisy chain tax) along the way, so by the time your impression ends up on the publisher’s page, the publisher is seeing a fraction of the CPM you were willing to pay in the first place. So, if you are not managing how many hops it takes between the DSP and the publisher, you are likely ending up bouncing from one aggregator to the next before finally ending up on a publisher site.

Oleg Korenfeld, Global Chief Platforms Officer, Wavemaker

Ads.txt has helped with some of the supply-chain clarity over the past year or so, but it still has limitations on the DSP side of transparency, and there is still nothing like ads.txt available in mobile – a space that is still the wild west and requires rigorous control. So, as buyers, we must be responsible for managing the whole transaction from start to finish. We must educate ourselves on how publishers actually make their supply available in general, with direct IOs, private marketplaces (PMPs), and open exchanges. A good way to work through managing this supply waterfall is working with supply-side platforms (SSPs) to set up specific rules about the types of publishers and aggregators you want to be available to you, if you decide to use their platform when selecting supply sources in the DSP, and by working directly with publishers to make sure that you are on the same page with the way supply is made available through custom and more automated multi-publisher private marketplaces. At Wavemaker, we are making an extra effort to help aggregate and curate the supply channels that have the most direct access to the end user, because our programmatic buying teams select supply sources in DSPs they work with.

Alternatively, peripheral products and tools that you pay for as inputs, if managed properly, are enhancing your opportunities to buy more focused and appropriate inventory. Things like data providers, device graphs, campaign safety, ad servers, and attribution, are supposed to ensure that you need to buy less inventory to achieve the same KPIs. If the balance of the inputs versus KPIs of the total output is right, your enhancement tax should be more than paying for itself.

Interestingly, in programmatic activation, the CPM level is often not a useful metric of how good a deal you made for the supply you ended up getting, when you consider the dynamics of the marketplace. If you pay a higher CPM to get a more accurately identified supply source, and it ended up performing better against your KPI, while overall media is the most expensive cost in the entire execution, buying less media with higher CPMs should net out to be more cost effective.

So, with more specific differentiation between the types of taxes we are seeing, identified by that which is necessary and which is wasteful, we can understand what 'working media' is at this point. It is usually assumed that working media is what is left over after all the taxes are taken out. However, if the 'enhancement' tax narrows down the media pool to what you need to buy more accurately, you will not need to buy as much media to hit your KPIs. This tax is, therefore, working extra hard to make the media more effective.

Clearly, it’s extremely important to ensure that you have access to talent with the right skillsets in place to understand the nuances of the ecosystem and how to take advantage of it, rather than allowing it to take advantage of you. Automated and audience-driven media buying is still the most efficient method of investment, but only when its properly organised and monitored.