How DSPs Navigate Agency ‘Preferred Partnerships’

preferred-partnersAgencies often select a few “preferred partners” instead of dealing with numerous demand-side platforms (DSPs).

While agencies, barring a client preference, should choose a DSP that can access the best inventory at the best rates for a given campaign, many buying platforms offer volume-based discounts. And because agencies feel the squeeze on margins, they might spend media through a DSP that benefits their own cost incentives more than a client’s media plan.

And choosing a preferred partner cuts agency costs on deployment and training.

“Most trading desks can’t afford to learn 25 different platforms,” said Tim Jenkins, CEO of mobile ad platform 4INFO. “They’re limiting it to a few, and those few may not be the best bet given the objective of the advertiser.”

Some holding companies – like WPP, with its investments in AppNexus and the build-out of GroupM’s platform solutions division – take ownership stakes in their preferred partners.

For non-preferred vendors, these partnerships and investments make it difficult to sell their products to agencies.

“[Agencies are] more likely to buy an inferior solution from someone they know than a superior solution from someone they don’t,” Jenkins said. “It’s very difficult to penetrate where there is a preferred vendor in place.”

Go-To-Market

The preferred partner trend has changed the way some DSPs go to market.

When Rocket Fuel acquired [x+1] in 2014, it began to pivot its ad network to become a software platform. That transformation has involved re-pitching to the major holding companies. Rocket Fuel consistently struggled to win agency business since 2015, though it now has three prospective holding company contracts in the works.

To get there, Rocket Fuel has invested in software solutions (sometimes custom) for agencies that drive better performance, price and usability and more differentiation than an agency’s preferred DSP, said CEO Randy Wootton.

“If you have enough unique, differentiating capabilities, and you’re able to drive better performance, the traders will want to work with you,” he said. DSPs can differentiate by helping agencies navigate new sell-side tech and cross-device identity, Wootton added.

At Rocket Fuel, pitching to agencies required staffing up on support services to help buyers understand and want to use its technology. That’s a shift from its legacy as an ad net.

“It’s a very different go-to-market in terms of marketing, sales and service,” Wootton said. “You go to some of these holding companies and their teams are already trained on another set of solutions. They're like, ‘Do I really want to learn Rocket Fuel?’ The challenge is you have to really demonstrate your distinct capability.”

In a crowded space, preferred partnerships are a good way for DSPs to gain steady, reliable revenue streams. Wootton points to The Trade Desk’s successful agency-first sales strategy.

“It’s one of the things we're really focusing on as well: profitable, sustained, predictable growth,” Wootton said. “We have a significant number of engineers building capabilities for agencies and marketers.”

Despite touting agency relationships, Rocket Fuel still sells its platform to brands who want to take programmatic in-house.

Performance Matters

While good service is crucial for successful agency relationships, vendors will be in trouble if they don’t focus on performance as well, said Michael Collins, CEO of mobile DSP Adelphic.

“DSPs live or die on performance,” he said. “If we don’t have the technology to deliver solid performance, we may win the account, but we won’t stick around for too long.”

Agencies usually won’t pass on a DSP if it’s performing better on a particular campaign, even if it’s not their preferred vendor, he added.

“Our business is growing with all of the holding companies,” he said. “I can’t think of a case where we know we’re driving better performance and not getting the business.”

As advertisers push their agencies to embrace performance pay, it will be more difficult to justify partners that don’t deliver.

“It’s in their best interest to deliver best results back to clients,” Collins said. “That’s the mitigating check and balance to this.”

But pure performance might not be the golden ticket to agency land. Jenkins has not seen the same due diligence from agencies. 4INFO sells its platform directly to brands because it became too difficult to penetrate agency preferred partnerships.

“Before, we were focused on superior technology,” Jenkins said. “[We thought] the ability to drive results would drive relationships with agencies, but it will not trump a preferred relationship even with an inferior solution.”

Preferred Partners: Here To Stay?

Agencies are caught between filtering out the noise in a crowded space and vetting every possible option that could drive the best results for their clients.

“You don’t ever want to be just a one-stop shop completely dependent upon the capabilities in a provider’s contract,” Wootton said. “At the same time, [agencies] don’t want too many providers because they have limited ability to operate.”

To select the right partners, Mike Baker, CEO of DSP DataXu, says agencies should rely on outside expertise like the Forrester Wave report. (DataXu, of course, has consistently scored well on the Forrester DSP Wave.)

“Unbiased research is essential to making the kind of informed decision that the Association of National Advertisers is now advocating as a best practice for advertisers,” he said. “It might be off-putting to the client if the agency resorts to a generic ‘preferred partner’ platform approach. It’s like being at an expensive restaurant and being offered only the house wine.”

Collins argues that there’s value in agencies investing in tech and receiving volume-based discounts. With better margins, agencies can re-funnel investments into superior technology and performance.

“As more spend shifts back to the transparent side, it could be more difficult for agencies to invest, innovate and deliver that higher value back,” he said.  “It would be great for the whole industry to recognizes that agencies do have a role to play in innovation, [and] to see more fee structures set around innovation.”

Whatever platform an agency decides to use, it must make the selection process transparent to its clients, or risk that client taking media buying in-house, Wootton said.

“I don’t think there's anything wrong with volume-based discounts,” he said.  “The degree to which those are visible to the clients is absolutely something the agency needs to decide.”

1 Comment

  1. It's really easy to build a straw man out of the agency here, but coming from the buy side, I would argue that the preferred deals are not the main reason why many vendors/DSPs/we're-not-a-network networks/etc aren't getting budgets. The really issue is that we (agencies/ATDs/Brands) are no longer looking for me-too, bells & whistles, and/or "just trust me we have better performance" tools. What we're looking for (and what companies like The Trade Desk did well) are platforms that bring transparency to a complex market, allow buyers to pull the levers, and are adoptable to our client's needs (i.e. our ideas/requests make it to their next few releases of the platform). When we get "just try it" sales pitches that promise performance with little attention to our pain points, then yes we start to think about how expensive it ultimately becomes for us (and our clients) to train and manage numerous platforms, that preferential rates ultimately drive lower costs and that outweigh a few small features of a new platform partner.

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