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Why We're No Longer Working With Ad Networks

Why We're No Longer Working With Ad Networks Tom Hespos
This morning, my agency announced that it would no longer consider ad networks for client business.  That’s not a stance I’ve seen many agencies take, so I thought I would take a few minutes to discuss our decision, why we made it, and what it means to anyone wanting to work with us to design ad programs.

First off, it’s very important that people understand what we’re actually doing.  There are numerous digital ad networks that want to fulfill our client ad buys with ad inventory sourced from the ad exchanges.  Most of the time, they want to do that without giving us the utmost visibility into the quality of the ads, how they’re targeted and how much they cost.

Naturally, this is not okay.

As an agency, we went to great pains to ensure that our trading desk solution gave us full visibility into the media, data and technology cost of the ad impressions that make up our programmatic campaigns.  Since the dawn of the programmatic boom, we’ve had to evaluate a number of potential media partners that are almost identical in their approach to developing their ad offering:

  1. They source their inventory from the ad exchanges.

  2. They want to handle the buying and optimization of the campaign with less-than-optimal visibility into cost.

  3. They claim they’re different from competitors through their method of data-driven ad targeting or optimization.

What many of these companies fail to understand is that the vast majority of what they offer us is easily replicated with more visibility and more transparency through our trading desk.  We end up drilling into the details of how they get their data, how they execute their buys and how much visibility they give the agency into costs, and the answer is almost always the same: It’s a waste of time.

Here’s the TL;DR version of why it’s a waste of time:

  1. The offering is redundant.

  2. If the potential partner can’t offer the same level of cost transparency as our trading desk, there is no opportunity to do business.

  3. The ad targeting doesn’t meet our privacy standards.

Redundant Offering

Ad Networks that execute on the exchanges want to handle the buy soup to nuts.  Yet, as we’ve been saying for years, campaign execution and optimization belongs with your agency.  Here’s why.  In a situation where a third party is bidding for you on the exchanges to meet a specific goal, the bidder will encounter impressions that, if bought, make a higher margin for the bidder.  It will also encounter impressions that are more efficient at achieving the advertiser’s campaign goal.  When those two bidding goals are at odds, which do you think is going to win in the end?  The advertiser’s objective or the bidder’s profit motive?  Exactly.  Now you understand why whoever is optimizing your ad buy needs to have goals that are closely aligned with that of the advertiser.  In other words, your agency needs to be doing this.

Put another way, as an advertiser, how would you feel if you hired an agency to buy $10MM worth of magazine ads and they charged you to evaluate a number of buying services?  You’d say “Hey!  That’s what I’m paying you for!” and you’d refuse to pay their bill.

No Cost Transparency, No Business

If the potential partner represents a black box that won’t give us visibility into costs on an impression-by-impression basis, we can’t have productive conversations about the efficiency and effectiveness of ad programs they execute.

Once again, let me offer up an offline media analogy: In the magazine world, we can have conversations with publishers and their ad reps about the quality of their circulation, their production costs, what percentage of the circulation is subscription versus newsstand and a number of other factors that give us an understanding of what an advertiser ought to be charged to run an ad in that magazine.

But what if the magazine publisher wasn’t incentivized to make his production process more efficient?  What if he didn’t share details about paper stock, whether the magazine was saddle stitched or perfect bound, or even details about circulation such that a media planner couldn’t even calculate a CPM?

An advertiser wouldn’t buy it.

The simple answer is that if we use our trading desk, we know what things cost.  If we leave it up to someone else who wants to manage to an average CPM or otherwise won’t give us information on what our impressions cost, we lose the data we need to make the program more efficient.  Not to mention we have no idea how much the impressions really cost and how much the media vendor was making.

The Ad Targeting Doesn’t Meet Our Privacy Standards

I don’t want to spend too much time on this, but it should be obvious to advertisers and ad networks that ad targeting data collection methods need to be vetted to ensure that consumer privacy is protected.  Suffice it to say, if consumers don’t know a vendor is collecting data, or they haven’t expressly opted in, there’s a risk for the advertiser.  That risk is going to be managed differently from company to company and from category to category.  As an agency, we’ve taken great strides to keep our clients in the clear.  So, suffice it to say, there’s no way we’re giving an ad network carte blanche to reach into whichever DMP strikes their fancy and target our ads however they deem appropriate.  Control over ad targeting methodology belongs with the agency.

Who We Will Work With

Recall that at the beginning of this piece, I described the type of ad network that we want to avoid discussions with.  Clearly, we’re not talking about all ad networks.  We’re still interested in talking if:

  1. Your ad network has unique and compliant ad targeting methods and would explore the notion of a data deal.

  2. We get to keep the ad campaign maintenance and optimization with the agency, where it belongs.

  3. We can get transparency that meets or exceeds what we would get if we ran the buy with our trading desk.

  4. Your ad network has access to inventory that we can’t access through our trading desk.

  5. You're willing to explore performance-based pricing models for DR campaigns.

Our Decision, Illuminated

I think anyone can see that we’re being quite reasonable in making this decision, and that it will help us be more efficient in bringing effective and cost-efficient programs to our clients.  I also think we’re being quite clear with what is motivating this decision.

For the ad networks that still believe they have something to offer us, know that we’re going to continue to ask challenging media- and tech-related questions to see if you meet the criteria we’ve outlined above.

Tom Hespos is President of New York agency Underscore Marketing. He is a frequent contributor to industry trade publications and has been writing a regular column about online marketing and advertising since March of 1998. His clients include Wyeth...

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