Last week’s very public dispute between Publicis and The Trade Desk (TTD) highlighted just how ridiculously obscure online advertising supply-chains are.
If a big holding company can’t come to terms with the main independent supplier of ad tech to the open web, what hope do advertisers have of getting their arms around the Byzantine workings of how ads get shown to people?
One natural reaction to two intermediaries arguing over transparency is to point out that both are supposed to be servants of advertisers, channelling advertisers’ money to publishers and not getting in the way. Maybe even make it easier.
Yes, they should earn their fair share for the process of serving up the right audiences in effective ways, but it would be helpful if they were prepared to show how effective they are at doing their job and why they deserve to be paid.
Especially when the margins for the agencies and the ad tech companies, funded by advertisers, are so high.
Instead, there is plenty of proof that advertisers’ budgets get whittled right down as the combination of high transaction fees and poor exposure harm effectiveness but still enrich the intermediaries. It is a scandal that still hasn’t been properly addressed.
Perhaps this spat might finally persuade advertisers to dig much deeper into the data and money flows. Publicis tried to do this but found that TTD wasn’t playing ball, and advertisers don’t exactly find agencies easy to audit, either, so the jungle is likely to remain impenetrable.
It’s easy for cynics to conclude that the publicly listed TTD doesn’t want anyone to know how it ‘earns’ a take-rate of 20%. Presumably the people it least wants to explain this to are analysts and shareholders.
This farcical situation shows that advertisers shouldn’t rely on navigators who profit from making the journey more complex than necessary.
This applies to all parties in the chain, and the inevitable mutual accusations of opaqueness would be funny if some of us hadn’t spent the last 15 years trying to expose the egregious profits being made in the supply-chain at the expense of advertisers and publishers.
However, this dispute isn’t even the most extraordinary story in the world of advertising right now.
Of much greater significance is the emergence of fresh evidence that proprietary (or principal) media (PM) are a goldmine for agencies that tout it, and of very little benefit to the advertisers who enable and pay for it.
The latest ANA report on PM landed last week and showed that the number of advertisers that elect to buy PM has increased since 2024 to more than half.
However, the report also shows that few advertisers use PM a lot, with the majority (75%) investing under 25% of their budget in PM.
So just over half of them are putting under a quarter of their money into it. This is about 10% of the total market.
Unsurprisingly only 23% of the ANA survey respondents consider it important. With so little budget going into it, why would they think anything else?
In the UK, the recent ISBA study into PM showed that the majority of respondents were either neutral or negative towards it.
And yet PM is promoted to analysts and shareholders as the key to the future by the holding companies.
What is going to change to make PM a majority investment item for the majority of advertisers any time soon?
One point often missed in this conversation, although covered by the recent ISBA report, is that it is virtually impossible to judge the effect of PM when it is only part of the whole budget. How could anyone isolate the effects of 25% of the money when it’s mixed up with the other 75%? And it’s often 10%.
Another oft-overlooked aspect is the amount of governance required to manage PM, including contractual and audit terms. The ANA and ISBA reports contain extensive governance guidelines for the roughly half of advertisers who are spending roughly 20% of their budget on PM.
Even the advertisers who don’t use PM have to jump through these hoops in case they change their minds.
If the average advertiser gets an extra 10% discount on 20% of their spend, they are 2% better off overall but can’t tell if it’s worthwhile for the loss of transparency, extra time and effort and additional audit fees.
Then, of course, there is the question as to whether PM changes media planning. The vast majority (90%) of the ANA members surveyed worry about this, as well they might, given that it does.
Clearly many advertisers have concluded that the juice is not worth the squeeze.
And thanks to the publicly available court documents arising from the New York court case between Richard Foster and WPP, his former employer, we now have more evidence that PM is highly lucrative for one agency group but lightly used by its clients.
Richard Foster is alleging that he was dismissed for blowing the whistle on GroupM’s use of non-transparent trading practices, especially PM, and the extraordinary profits thus being made for WPP as a whole.
WPP claims that he was let go after a restructure that closed down his part of the company, the Motion Picture Group (formerly GroupM Entertainment).
[Disclosure: I am working with Richard’s legal advisors as a subject matter expert so I can only make observations on the court documents and what they tell us objectively about WPP’s exploitation of Proprietary Media. This information is freely available.]
The public papers show that WPP recognised some $1 billion of revenue from ‘non-product’ PM during the year in question and most of this was the profit from the reselling of media inventory derived from client budgets. The ‘non-product’ element is separate from data-led revenues derived from programmatic and other sources, so it is not the only source of trading-related profits.
The ‘non-product’ PM inventory was allegedly almost entirely sold at full value to clients, even though much of it was free-of-charge or heavily discounted to WPP’s agencies.
At face value, PM accounted for 54% of that year’s profit for WPP.
But only one third of GroupM’s largest clients ‘opted in’ to the facility for PM, strongly suggesting that the rest did not like the concept and, or see its apparent benefits.
The majority of those who opted in to use PM hardly used it.
This implies that WPP will have a mountain to climb to persuade its largest clients to buy into PM at all, let alone at higher budget levels.
The failure to persuade the largest clients to use PM also places pressure on the smaller ones to invest more in it, in order to compensate. This is a challenge for WPP Media’s client-facing personnel.
Another challenge coming down the road concerns TV. The big agency groups command a high share of the spend on TV and can dictate terms. This is less true online, and especially among the platforms and biddable media.
As TV declines in market-share terms, the agencies’ power to leverage spend will fall, potentially reducing their PM revenues.
As the big platforms generally do not offer PM to agencies, the more vulnerable media vendors have to offer more.
WPP and other groups do put together more sophisticated packages of data and services in many channels and present them as a bundled ‘product’ on a PM basis, but this is a more elaborate process than simply increasing the ‘extraction rate’ from existing clients through a ‘non-product’ approach. It’s much harder.
There is more to this story that can be explored elsewhere, including the ‘Make Advertising Great Again’ podcast, and there is plenty more public evidence of how pernicious PM has become in the business model of one agency group.
There is a narrative in the market that PM is a ‘win win’ for advertisers and agencies and it is becoming normalised, or ‘table stakes’ as recently described. It is trumpeted in analysts calls as the future, but is not referred to publicly in any agency collateral, and the court papers explain why.
The Foster versus WPP papers show how misleading the normalisation point-of-view can be when the benefits of PM are so heavily weighted in favour of the agencies, with so little advantage for clients.
It is hard to see how the big holding companies will succeed in converting their clients at scale when the advantages are unclear, especially when commingled with non-PM inventory, and where the evidence of a big imbalance in winners and losers raises serious doubts.
The current industry trend towards outcomes-based remuneration is predicated on the ability to both achieve, measure and isolate the many influences on performance.
This takes transparency of data and money, and current evidence suggests the industry is becoming even more reluctant to open its books.
This is a subject that will be discussed in depth at this week’s Marketing Procurement IQ conference in London and at the ANA Media Conference in Nashville.
It’s certainly still a live topic ten years on from the landmark ANA media transparency study and it remains a factor that harms trust within the industry, as amply evidenced by Publicis and The Trade Desk last week.
In the era of ‘outcomes’, trust in the data and money trails is vital, and Proprietary Media does nothing to help.