The Thumb on the Scale.

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I’ve had the pieces of this blog post written on scraps of paper over the past month.  But Mike Shields’ post in Digiday this week (“The Trouble With Trading Desks”) inspired me to pull them all together.  In 2,400 words, Mike did a service for the entire ecosystem by giving very public voice to what had heretofore only been whispered. For those who haven’t taken the time to read it, a quick synopsis:

(1) While logical in theory, the so-called Agency Trading Desks (ATDs) are subject to serious conflicts of interest; (2) clients are getting concerned that they are being asked to pay twice — once to planning, once to the ATD — for the same plan; (3) it’s being said that some holding companies are mandating that planning teams funnel business through ATDs (and away from ad networks — a point validated by agency buyers in comments posted to the article); (4) all leading to the conclusion that ATDs are in practice using client dollars to fix the agency’s own margin problem.

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I don’t doubt that the architects of Agency Trading Desks are both smart and well-intentioned.  And I’ll even go so far as to say that their ultimate development may end up being a positive for the industry.  But right now their implementation appears pretty ham-handed and their ethical GPS seems to be at least temporarily unable to find the satellite.  I’ve heard versions of the same troubling stories many times in recent months:
  • Ad Networks are being told by planners that they are not allowed to do business with one another;  they are then sent into the cattle chute to the ATD, where baseline prices are dictated.
  • Sellers go through a lengthy period of planning and negotiating a program with the planning team, only to have their deal cut by 50% or more by some unseen higher up at the agency or holding company, with the difference being funneled to the ATD or some vendor designated with preferred status.
The inherent charge in these scenarios is that the choice is being made to do what’s good for the agency bottom line and not necessarily what’s in the best interest of the client.  That may or may not be.  But even giving holding companies  the benefit of the doubt, here is what’s beyond question:
  • The agency can not truly be an agent for the client’s brand if it has its own separate profit center — the ATD — on the field as a competitor.
  • If the acumen and technologies are real — and if they do indeed generate better results for the brands — then ATDs should be competing on the open market.  The impression of corporate nepotism will remain until they are completely sold off and spun out.
In the financial world, role definition used to mean something.   The analyst, banker and broker all played distinct roles which were enforced by securities law.  Once those strictures were relaxed and the roles morphed, we ended up in a hell of a mess. It seems that it would be better for the holding companies and agencies to fix this problem early by laying down some ground rules today.
Nobody sets out to create a flawed system:  More often impropriety creeps in quietly on little cat feet.

Think I’m wrong?  Have a story of your own?  That’s what comment boxes are for.

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