Transparency & Performance: You Can Have it All

Written by Tim Edmundson

The digital advertising industry has a transparency problem. But that term can mean a lot of different things to different people – are we talking about transparency when it comes to viewability? Brand safety? How about the big one in black-box marketing – media buys and margins? The fact that the term covers such a wide swathe of topics should tell you that it’s a beast of an issue for the industry.

But why are marketers so concerned about transparency? It can be argued that as long as digital media agencies are delivering results, advertisers don’t need to know what’s happening with their budgets behind the black box. And some marketers buy into that argument; the Association of National Advertisers (ANA) recently reported that the amount of marketers using strong-performing automated ad buying systems has more than doubled in the past two years, despite concerns over transparency. An earlier ANA survey found that the level of concern over transparency increased by 42% from a year prior. Marketers appear to be caught between a rock and a hard place – they want to know more about how their budgets are being spent, but also want strong performance.

But does it have to be one or the other? We don’t think so, and neither should you. It’s a false dichotomy to say that you must choose between one or the other. Strong performance and insight into budgets can and should be coupled with transparency.

Know Your True Cost

Marketers are often left in the dark on how their media budgets are spent, and often lose money to miscellaneous costs that are never fully outlined. Without knowing the true cost of their digital marketing efforts, advertisers can never be expected to know the true ROI of their media buys.

The opaque nature of media pricing is a whole ball of wax. The ANA reports there is a major concern among advertisers regarding the actual cost of media, and the “dearth of information about whether an agency reaps financial gains from the media seller by using the client’s funds.” It’s clear that the issue is causing some mistrust within the industry, and that’s bad for business. On top of that, the lack of insight into actual costs carries its own set of problems.

Nebulous ROI: Let’s say you bid a $2.50 CPM – in a perfect world, the full $2.50 would go into the bid, right? Well, unfortunately that just isn’t the case. Thanks to hidden margins, the full $2.50 never gets used for the bid. Since you can’t be sure how much of your money was actually spent on the buy, you can’t really get a true sense of your ROI. Your campaigns instead carry a nebulous, somewhat-true-but-not-quite ROI that doesn’t really enable you to make fully informed decisions.

High Margins: It’s considered a cost of doing business as usual, but should it be? Digital media companies typically mark up media buys between 40% and 60%. When you take into account the immense amount of money (over $170 billion) spent on digital advertising in 2015, that’s an enormous amount of cash that never actually buys any media at all. What’s more, when a high margin is taken out of a bid price, it limits the amount of inventory that can be bid on. For example, this means if you bid a $3.50 CPM and margin comes into play, as little as $1.18 could actually go toward media. And if less money is being spent on actual media, the amount of available inventory shrinks and that could be costing you valuable customers that are more likely to convert.

Lack of Data: This one isn’t tied specifically into pricing, but it has a pretty big effect on how budgets are spent. Knowing how campaigns are performing helps in the decision of how to utilize your budget. Having access to data down to the publisher-level on clicks, actions and impression counts allows for more informed decisions. Unfortunately, this isn’t always the case.

The IAB has gone on record in regard to the need for transparency, stating, “To scale the market and create value for all, the digital advertising industry must ensure increased transparency in the programmatic auction ecosystem – over fees, net CPMs, and the bidding process itself.” The need is recognized, but what is being done about it? So far not enough, but advertisers are starting to force change.

The Market Demands Transparency

The ANA reports that the tide is beginning to turn – marketers are beginning to demand more transparency, and the numbers back it up.

62%: Percent of marketers who requested detailed campaign guidelines and reporting from agencies in the past year
51%: Spent time updating blacklists for sites they refuse to advertise on
45%: Utilized whitelists to ensure they are getting their ads on the sites they want
40%: Requested transparency when submitting insertion orders

We here at SteelHouse are pretty pleased to see the demand for transparency – the SteelHouse Advertising Suite was designed to be transparent in every way. As it optimizes your campaign in real-time, its robust reporting and analytics gives insight into anything and everything going on with your campaign, giving you peace of mind that your brand is generating performance from sites that are brand-safe.

Our largest leap into full transparency is in our pricing. We’ve introduced Transparent Pricing to bring clarity to how advertisers spend their budgets. Instead of paying a hidden margin on media buys, marketers can see exactly how much of their budget is being spent on media.

Transparency and performance can and should co-exist. Marketers deserve to know how their budget is being spent – after all, it’s their money.