A recent article in AdWeek regarding Interpublic and how the agency plans to move 50% of its media buying to its own Agency Trading Desk is interesting in its own right. However when viewed through the broader lens of agency trading desks as a whole, the subject definitely is intriguing.
Agency Trading Desks (lets call them ATDs) by design are where the “best and brightest” media minds within an agency – those who are focused on digital media buying – go to add value to the agency’s media buying operation while helping the agency, through consolidation and scale, secure the best inventory through programmatic media buying thatdelivers the results that clients demand. Forrester Research has defined ATDs as “A centralized, service-based organization that serves as a managed service layer, typically on top of a licensed demand-side platform (DSP) and other audience buying technologies;manages programmatic, bid-based media and audience buying.”
ATDs are powerful not only because of the scale and size of their media buying efforts on behalf of their clients, but also because of the analytics they employ. In the past, much of the analytical work these ATDs did involved merely looking at the content and the context where the ads should/would be seen and choosing the appropriate buys using this top-level insight.
Now, ADTs not only plan and buy media but they also measure results and report audience insights (where/if possible) to their clients. Though deep analytical insights are not their raison d’être, smart ATDs can augment their knowledge by engaging an ad tech provider (raising our hand vigorously) to help increase their audience targeting efficiency and campaign response through continual optimization.
Yet, in spite of the success of ATDs, some clients are wondering what exactly they’re getting for their money. Some even within the agency’s themselves see ATDs as a threat to the money that they could earn through placing the media buys on their own.
According to the AdWeek story on Interpublic’s thoughts around their Trading Desk “as more dollars are spent programmatically, more clients are starting to ask questions. And individual agencies are pushing to take more control of their own digital ad buying. Plus, many insiders report that despite the high profit margins generated by trading desks (think 40 percent to 50 percent), not enough clients were using them.”
“Most agencies want the great profit margins,” said an insider interviewed for the AdWeek story, “But they’re afraid that clients will call BS. The money essentially goes over the wall, and they don’t know what happens to it.”
Perhaps even more worrisome for ATDs are the results of a recent study by Advertiser Perceptions. The study of 345 ad execs and ad tech investors and providers found that nearly a third had little or no awareness of Agency Trading Desks and the value they provide.
In fact, what may really be missing from the ATD equation is something as simple as transparency, clarity and a real understanding of the ROI being generated by the work being done.
Sell-Side Platform Rubicon Project held an interesting session earlier this month in Europe where they asked a number of ATD luminaries their thoughts on the subject. One of the execs on the panel was Xaxis Managing Director for EMEA Caspar Schlickum (WPP’s trading desk). Schlickum said that those within ATDs must be extremely transparent, with costs dependent on whether it was using proprietary or partner tech, data costs etc. He noted, ‘as long as we’re honest and clear, and the same rigour is applied to other parts of business, fine.’
With such high margins and the ability to buy at scale, it seems ATDs aren’t going anywhere anytime soon. The agencies would be foolish to stable such a cash cow. However, with the added pressure on ATDs from inside the agency as well as from clients and Ad Tech players (who’ve invented a better mouse-trap or come up with deeper analytics or audience insights), it seems only a matter of time before transparency, actionable analytics and real ROI will be part of each IO through those same trading desks.