At ANA Conference, Holding Co Desk CEOs Pledge Alignment With Agencies

Association of National AdvertisersHolding company trading desks are moving to embed their capabilities locally within operating agencies, rather than operating entirely from a remote corporate hub. Speaking at the Association of National Advertisers' financial management conference today in Boca Raton, Florida, the heads of WPP's Xaxis and Interpublic Group's Mediabrands Audience Platform acknowledged client fears about mandates and double dipping and said they're ready to disperse programmatic media execution throughout their sister agencies.

In the case of IPG's trading desk at least, the transition is well underway. Talking with AdExchanger after the panel, Media Audience Platform CEO Brendan Moorcroft said 20-plus staff now work directly with agency teams at Initiative and Universal McCann, and most of those are embedded at agency offices. Additionally it has staff at Deutsch offering media execution. Other IPG agencies that may already be running programmatic buying in-house may soon be approached by MAP, if they haven't been already.

WPP's Xaxis is a somewhat harder case, being known for a more fixed and centralized structure to begin with. But CEO Brian Lesser did leave the door open to embedding people with agencies. "The reason it started in the center is there's a tremendous amount of technology investment that you need to build what is now generally known as a data management platform. It would be very difficult for each individual agency to make that investment."

"When Brian says we're going to see this get more embedded at the agency level, that's where I agree," said Forrester senior analyst Joanna O'Connell, also on the panel. "It starts to fall down when the execution is so far removed from the client, and people at the agency level have no idea what's going on with the money."

Reasons for the shift include operating agency resistance and better campaign performance when teams work in close tandem, but above both those rationales is simple pressure from clients. O'Connell said she still encounters clients who flatly refuse to work with trading desks, owing to a host of concerns that can be summed up broadly as "lack of transparency." Among them are allegations of "double dipping," publisher kickbacks, and holding company mandates.  

"I've had clients who walked away. They will not sign the contract," O'Connell said.

Also putting pressure on the trading desks is operating agencies seeking direct licensing arrangements with demand side platforms and other display ad vendors. "I know there are agencies who are not comfortable with trading desks, and they're going out and finding partners," said O'Connell.

The overarching theme of the panel, if there was one, is that clients should demand more accountability directly from their agencies. For instance, both Lesser and Moorcroft said their trading desks don't accept rebates either from publishers or tech vendors. But they admitted it does happen at the operating agency level, and they encouraged clients in the room to pressure their agency partners or specifics on whether they accept such kickbacks.

"There may also be cases where technology companies are giving rebates. We do not accept those rebates. But ask the question," said Lesser.

That said, O'Connell said she still encounters clients who feel pressure from agencies to work with trading desks.

None of which should detract clients from the programmatic opportunity. "The people inside agency trading desks are the smartest people [in the business]… The biggest mistake holding companies made was not shouting to the high heavens what a big deal this was."

The discussion played out before an audience largely made up of marketing procurement agents, many of them admittedly ignorant of the nuances of programmatic media and therefore perhaps susceptible to fears about "black box" buying and trading desk arbitrage. It was on this question of transparency that the differences between the trading desks was most on display. Whereas Xaxis does mark up media through direct deals with premium publishers, Mediabrands Audience Platform doesn't, according to Moorcroft.

"From the beginning we cleared inventory at the price we got it," Moorcroft said. "We get compensated for the services, for the intelligence, for the analytics."

But Lesser nimbly addressed those concerns, explaining the reasons Xaxis sees value in a blind markup. "I understand where this comes from, and I don't think it's necessarily fair. With every single advertiser we work with, we've had an open conversation about Xaxis. We also have a contract in place stating this is how Xaxis does business."

"Advertisers hold their agencies accountable for benchmarking any source of media," he continued. "You want your agency to hold us accountable for what we buy on your behalf. And there may be that the agency needs fewer people to manage if that audience buying becomes the entire plan."

Moderator Bill Duggan, group EVP at the ANA, noted some have characterized Xaxis' practices as selling media back to clients. Lesser described the origin of this particular fear, noting his trading desk does buy directly from premium publishers – in the case of GroupM, the top 10 comScore publishers. "We say instead of putting inventory into an ad exchange, sell it to us, and we'll give you a fair price for that inventory." Xaxis then audience-targets from that inventory.

He claimed disclosing media price to advertisers would be a deal-breaker for the sell side. "Publishers wouldn't sell it to us if they knew we were going to disclose the price to advertisers. Instead we ask the agencies to benchmark for us. If I can buy from you for cheaper than through an ad network or buying direct, I'm comfortable."

But are clients comfortable? A handful of ANA attendees polled by AdExchanger suggested the lack of transparency might be deal breaker, but most also confessed a novice's knowledge of programmatic media. (In a "raise your hands" audience poll by Duggan, about 10 people in the room described their knowledge of trading desks as "very good," 20 or so described theirs as "moderate," and dozens more characterized themselves as "beginner.)

In the end, it may not matter if Xaxis is completely upfront about the reasons for its blind arbitrage, or if those reasons are in the interest of both client and publisher. To a procurement agent, a black box is a thing to be hated. Bob Silverman, director of finance at Cramer-Krasselt Co. put it more bluntly to AdExchanger. "Sometimes perception is reality," he said.

If the ANA crowd is a gauge, procurement people working for major marketers may need some education on programmatic buying – and not only on its cost saving potential. On the question of price, Moorcroft had a message for cost minimizers who might view audience buying as simply a means to lower price.

"There's an inherent waste associated with premium content, but we've also seen that you'll pay more for better audiences," he said. "You're able to maximize yield on things that work. You're getting a more quality audience, a more valuable audience. You're not doing a pray and spray to lowest common denominator."

Returning to Xaxis' private deals with publishers, Lesser said the media mark-ups arrangement appeals to the publishers because "they know we have some of the world's largest advertisers. We're GroupM." But for advertisers it only works well if they're data management is robust. "If you don't have a very good handle on your data, you have about as much leverage as a guy running a dry cleaning business."

Finally, he pointed out agencies and clients can opt out of the private marketplace option entirely, while still leveraging its audience buying through exchanges. "That's not the only way to do business with Xaxis."

He added, "There's no mandate at GroupM, no heavy hand from the top telling agencies they must buy from Xaxis."

By Zach Rodgers

3 Comments

  1. Wow, I am absolutely flabbergasted. People are actually finally questioning how "agents" can also be margin taking vendors at the same time? Who would have thought it...

    Reply
  2. The ability of an agency to act as a neutral buying AGENT is bankrupted by having a product that they profit off of regardless of its success for the client. No amount of transparency can resolve this conflict - it's inherently flawed. They've been profiting off of taking sole control of the media for simple concepts - consolidation of remarketing, for example - without doing what is supposed to be their real work of testing the field of alternative players to determine who can provide the best results for their clients.

    Reply
  3. Andy Monfried

    Zach,

    The good news is at least now it is being addressed, and not simply brushed off, and rudely ignored.

    For many of us (you and I) the simple act of questioning this business model that agencies have been building, has been met with ridicule and scorn.

    At least now, the tough questions are being asked, and although not fully answered -- they are starting to rise up to a level that requires a response.

    Ad Networks evolved into Trading Desks. Period. A shift.

    My question has always been the following:

    "if it is generally known business practice that an ad network optimizes yield and results for itself first, and its clients second -- can the Agency Trading Desk says the exact same thing about their business practice?" A little clarity goes a long way.

    Andy

    Reply

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