Buy-Side Big Shots Debate Trading Desks, Reviews And Rebates

cannes-trading-desksThis week at the Cannes Lions festival, Rubicon Project hosted its annual discussion of some of the world's most powerful digital media buyers. This panel has historically comprised the leaders of the four largest holding company trading desks, but this year was different – with senior buyers from IPG, Publicis, Dentsu and Bank of America.

The panelists included:

  • Arun Kumar, global president, IPG's Cadreon trading desk
  • Stephan Beringer, CEO, Publicis' VivaKi programmatic unit
  • Ashwini Karandikar, global head, Dentsu/Aegis's Amnet trading desk
  • Adam Shlachter, chief investment officer, Publicis Group agency DigitasLBi
  • Lou Paskalis, SVP media and communications, Bank of America
  • Moderator: Jay Sears, SVP marketplace development, Rubicon Project

Omnicom's Accuen and WPP Group's Xaxis were not present.

And here we go!

Rebates And Reviews

Moderator Jay Sears kicks off with a question about the crazy number of media reviews: more than 20 totaling $26 billion, according to Morgan Stanley. And he quotes Pivotal Research analyst Brian Wieser's recommendation that investors hold or sell most holding company stocks.

He throws the first question to Bank of America's Paskalis. What's driving pitchapalooza? Are rebates really a contributory factor? And when you talk with peers, do you maintain audit rights with agencies?

LOU PASKALIS: "Let me start by saying Bank of America is not in review. This has been the talk track for the last month. What are the drivers? I think the biggest one is pricing. We are seeing exponential growth in data crunching and the needs to support that, which are no longer 25-year-old planners who sleep six to an apartment and are happy with entry-level income, but you now need Ph.Ds.

Then, everywhere you go, and I heard it today from Twitter, Pinterest and LinkedIn, you need to make bespoke content for that platform. So you have exponential growth in content costs. All of this is saying we've got to change the pricing model and I think that's a driver.

Transparency and trust are also drivers. For some people there are concerns about rebates in various forms. Auditing is interesting, but you would have to audit the holding company … but I think an audit of a holding company would be daunting."

Sears turns to VivaKi's Beringer next, quoting his comments from last year's explosive panel to the effect that, "This is not an ethical business. The clients have become very suspicious and they are questioning many things."

Where are we from a year ago?

STEPHAN BERINGER: "What has happened is an acceleration of what I said. The question about transparency has come up, and rightly so. What we're seeing here is a very natural development because ultimately we have technology, we have data and things are getting more transparent. That's a natural fact. Let's go with it.

The world from a marketer's standpoint has become extremely complex. Clients have said to me, 'We are investing gazillions in these platforms and the only ones who are making money are the agencies.'

We need to think about how to organize ourselves and what infrastructures and architectures to deliver to our clients so that ultimately … we deliver an efficient model. There is a very legitimate need for clients to review the way they are being serviced. Last year, I said things are not as ethical as they should be. We're aware of all that but I think the fundamental reason for these reviews is a different one."

ARUN KUMAR: "There's definitely an issue of trust. If you look at the RFIs that have come out, a lot of the focus is on new agency models. The focus of a lot of reviews is, how do we operate in this new world order? It's not about transparency. It's about trying to understand, how do I get more value out of all these strategies?"

ASHWINI KARANDIKAR: "To Lou's point, what has changed is the understanding of the complexity. A lot of our global and regional clients have come to the table with the understanding that they have to embrace this change for the betterment of their business. … The mix of technology, data, people, channels, TV and whatever else is a pretty scary concept overall."

VivaKi 2.0

Sears asks Beringer to talk about the rationale for VivaKi's breakup and redistribution within Publicis Group's operating agencies.

SEARS: "Not too long ago your employee count dropped significantly. Tell everybody why that's good."

BERINGER: "The employee base did not go down, it actually went up. Mac Delaney, who used to be at VivaKi, is now at SMG and driving the whole programmatic business there. We believe that everything about automation, data, programmatic needs to reside at the agencies. It is the paradigm, the new agency business model.

If we want to scale this capability, this intelligence, across the agencies and integrate it into the service, we need to push certain capabilities into the agency. So what we've done is to build a layer of management, analytics, planning, buying, management and people into these agencies – all of them across the whole group, globally. And maintain at the center synchronization of data, technologies, partnerships, training and education.

The performance we're driving and how clients are perceiving this, in terms of the enhancements in what the agencies are offering them, is very positive."

IPG's Kumar goes next. He is on the record with AdExchanger disagreeing with the notion that desk decentralization is inevitable.

KUMAR: "What clients are asking for is greater visibility into programmatic strategies. They also want a data strategy that is integrated across everything the agency does. One of the things we've done is ask, how can we transform ourselves from being a trading desk into being an incubator for ad tech? And how can we develop platforms that allow our agency partners to access that intelligence? For instance, why should audience insights sit only with the buyers as it used to one or two years ago? Why can it not be made available to comms strategists who should be building audience segments off the data sets that are available?

That is what we've been changing, making sure that our agency partners understand how to leverage that data and getting greater synchronization between planning and buying. Up until a year ago it was buying leading strategy because they had access to the intelligence. When you democratize that you have the opportunity for media agencies to play a more strategic role and make sure the platforms work best."

Planning And Buying Changes

SEARS: "Lou, in the business that's being done by your agencies, is some of this getting pushed earlier in the planning process?"

PASKALIS: "Absolutely. The signal sets that are coming in now vs. a year ago are much more dynamic. We are getting much closer to the mindset motivation of the customer from a targeting standpoint. Occasionally we also get the context to match, but there's much more that can be done with the signal set. I'm talking about dynamic creative. I'm talking about almost a CRM mindset in digital that is more about a relationship and less about a transaction. And taking a long-term view of the customer as we start to find them over and over again.

This programmatic thing we talk about today is what media folks are mostly focused on, and creative folks are saying, 'Yeah, that's a media thing.' It's going to be the currency that we use in the future to drive relationships."

BERINGER: "We haven't even tapped into creative opportunity. If you think about the revitalization of the creative industry, we are starting to work on DCO, but that's just the beginning. There's a much bigger future."

Margins And Transparency

Sears asks about continuing concerns around agencies taking margins.

PASKALIS: "To quote Irwin Gotlieb, ‘Agencies are for the most part transparent about what they're not transparent about.’ As a client you have to understand, what is the model they're using that you signed off on? Once you understand that they either are or aren't going to be transparent with you and you've accepted that, you've got to trust.

We as an industry have to be very clear about the rules of the road. I grew up in an environment where the agency had a direct fiduciary responsibility that they were going to invest every dollar on my behalf for the greatest possible return. The world is changing. There are now trading desks.

With downward pressure on agencies from fee structures and upward pressure on agencies from the complexity we've all been talking about, if we can create a paradigm where the agency can service my needs within a fixed set of parameters … and they can make some money to offset some of the other costs, as long as it's a clean and well-lit environment, I'm good."

Amnet speaks up!

KARANDIKAR: "Programmatic media buying has been around for a long time. I'm kind of getting tired of this constant badgering over fees and transparency. If the agency and client can have a very clear discussion about what is the value that they offer and what is the fee that they charge, it is no one else's business how it is set up.

This is not a group discussion. There is actual business to be done and actual business outcomes to be delivered. If I'm delivering that, I don't care what anybody else says."

Applause!

SEARS: "Because people hid behind it for a while we're all suffering through the conversation."

KARANDIKAR: "And then the question should be pretty direct. What is the money you are making on it? And if you don't answer you're going to wind up losing business. As programmatic evolves beyond display, the money in play will be 100 times more than it is now. So can we move beyond this silly question and talk about what is the value I'm going to deliver?"

BERINGER: "I appreciate what you're saying and I agree with that, but the heat in the discussion is not about that. In a non-transparent model you're weaving in inventory that you've got in some shape or form and you are basically reselling something to your client that you have acquired with the buying power that was given to you by your client."

PASKALIS: "The industry needs to have an understanding about the business model. If you're in Brazil or the Middle East and rebates are part of the business, fine. I just changed all my vendor contracts. Now if you're making a rebate you potentially forfeit 100% of the value of this contract. Sign here."

KARANDIKAR: "I agree with you. So let's have those specific discussions instead of this thing that says everybody thinks you're a thief."

Automating Direct

Sears asks DigitasLBi's Adam Shlachter a question about automating "bigger, better stuff." How is that going?

SHLACHTER: "We're still in the early days of it. We're getting critical mass in terms of publishers, inventory, formats we need to serve all the different clients we have across all the partners they have. The standards are still evolving and don't necessarily exist on a universal basis, whether it's the currency we're trading in, how things are served, how things are measured from platform to platform, taking non-viewable inventory off the table. We have to get past a lot of those bumps in the road."

PASKALIS: "And fraud."

SHLACHTER: "There's no room for fraud whatsoever. That's why I didn't even bring it up. (laughs)

If we can get all the noise out and define rules of the road … and show the promise of how automation gets done in a more seamless way and gives us time to think more strategically and creatively. Where do I want to spend my time? I don't want to be distracted by friction in the market. Right now we're putting a tremendous amount of effort into getting this right, working with our publishers and with companies like Rubicon. If we can get it right, it's not just good for us. It's laying the groundwork for a lot of folks in the industry."

Fraud, Seriously

PASKALIS: "My problem with that is the groundwork we are laying right now is in Pompeii, and Vesuvius is erupting, and it's fraud. It was an $8.3 billion global problem in March, it was a $9.2 billion global problem as of last week, according to the ANA. I want to stop everything and fix that before we move on. We cannot continue to be in denial about the 8 million-pound gorilla in the room. Until we fix that, all of this is theoretical and it's less interesting to me and to my leadership by the hour.

This is the biggest threat we're facing. All this other stuff is just the operational blocking and tackling that we're going to go through. If we can't fix fraud, this doesn't matter and we're back to publisher direct and other models."

SEARS: "Where does that start? Some of your peer group that is allowing this money to go in should be demanding better behavior."

PASKALIS: "You've got to follow the money. Where is the money going and how are we shutting it off? Are we using a probabilistic mitigation solution or a deterministic mitigation solution? If we're using a deterministic mitigation solution, how often are we blacklisting? If we're not blacklisting every hour, we've got problems. We're not. We've got to get there. We've got to work as an industry to find and drive fraud out of our business.

Right now they're coming over the wall and taking our money. I kind of feel like Nero fiddles, Rome burns."

CannesPanelrubicon_usethis

2 Comments

  1. Excellent discussion! The one point I am missing (the one agencies usually try to avoid) is the conflict of interest: buyers and traders should not be from the same company! My recommendation to every client: try different trading desks and DSPs, not only the agency's inhouse desk. It's an open market - let them compete (and please don't listen to them if they say that they would be the only ones fully understanding your media strategy)!

    Reply
  2. Julian

    Jay Sears' constant criticism on agencies and agency models has become quite mundane. He is consistently pressuring panel guests to exploit business models he knows nothing about with the intent to break the workflow model between agency and clients.

    Reply

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