Letting Go of the Tiger’s Ears.
A couple of years back I was having drinks with a top executive from one of the ad tech companies formerly known as DSPs (which as we all know now is SO 2012!) He explained to me many of the intricacies of both the technology and the complex relationship they had with agency trading desks. There was no exclusivity in the ATD arrangement and the profit margins could be fairly thin. So I asked what seemed like the next obvious questions: If your technology can effectively bid for anyone then why not trade directly for the clients? What’s the upside of the trading desk relationship?
He just smiled and held up two fingers. “Just a couple more years and we will.” Which leads me to this week’s Advertising Age coverage of the “battle royale” between ad technology companies and agencies. The narrative here is that the tech companies, ever more desperate for dollars and margin, are (rather ungratefully) turning on their erstwhile masters. And while we all love a good conflict drama, there’s more going on here.
This week’s Drift is proudly underwritten by PubMatic. With PubMatic’s platform, publishers have the ability to offer their inventory to over 400 global Demand Partners – ad networks, demand side platforms, ad exchanges, and agency trading desks – and have on demand access to all the software, tools and services they need to realize the full potential of their digital assets.
It’s possible that no matter how the agency holding companies (creators and sustainers of the main trading desks) handled themselves, the current dynamic would have played out anyway: digital technology always ends up disempowering the middlemen. But I believe the agencies also did themselves a huge disservice by playing out of position over the last 4-5 years in the run up to “the programmatic age.”
- First, there was the decision to create standalone business units in the first place. Might it not have been better to let a thousand flowers of automated trading bloom within the daughter agencies rather than concentrate it all at the holding company level? Perhaps they missed the chance to strengthen ALL the pillars of their business rather than devoting so much time and effort to explain yet another corporate brand and operating model to increasingly skeptical clients?
- While I’m second guessing, the decision to commit to no single trading technology (the aforementioned DSPs) probably seemed like a safe bet at the time. But in hindsight, the practice of constantly sampling results and pitting one provider against another probably just fed a sense of disconnection and independence in the DSPs.
I’ve heard people stand up at conferences and say that the holding company level trading desks will go away within a couple of years; that they’ll be replaced by client side operations (like P&G’s Hawkeye) and by a migration of programmatic bidding to the individual media agency level. Such a monolithic assessment is almost surely going to be right and wrong at the same time. These are wildly different businesses who are making different decisions. For one thing, there’s a lot of work ahead helping clients manage the nuanced business and buying decisions within private marketplaces.
Besides, agencies are always at their best when they’re doing the creative right brain work of problem solving and organization. . VivaKi’s Kurt Unkel said it best: “If you want to just add more and more partners to the table as a client, at some point someone starts saying, ‘There’s a lot of complexity here; who’s in charge?'”