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Agency survival in a post-trade desk world

Agency survival in a post-trade desk world Dustin Engel

Let me preface: This is not a missive on the eventual extinction of the modern agency trading desk. In fact, it is a call for a retreat. It is a battle cry to return to the original intent -- and to expand upon that original intent -- as the trading desk operating as a centralized practice area of agency organizations. Only then will agencies be able to address the increasing fragmentation and programmatic nature of digital media to drive the most powerful results for their clients.

The agency trading desk model has taken some due and undue criticism over the past couple of years. There have been misguided statements that a specialized media practice is not warranted. Fragmentation across digital media, in terms of publishers, buying platforms and supporting technologies, is at an all-time high. Even before the excellence that can be achieved in media planning and optimization, there is value in simply understanding the mechanics, costs and nuances associated with the myriad of additional layers. There is also power in recognizing the costs required to deploy successful digital media programs such as audience targeting, fraud management and media verification along with viewability management.

There has been more due criticism aimed at the trading desk model as well. Most notably, the pervasive lack of transparency and accountability by agency trading desks has caused unease in the minds of advertisers. Some continue to argue that if goals are achieved, then the advertiser should not care how much of their budget is actually being applied to media and how much is being applied to the trading desk bottom line. My argument is quite counter. If goals are achieved, and the trading desk has the ability to grow margin on the media on a reoccurring basis, then the goals are wrong. Plain and simple. Advertisers simply don't have the ability to know what the right goals should be, if they are essentially shielded from the mechanics of the marketplace.

The due and undue criticism has been a factor to some minor and major resets in the industry. Vivaki's AOD has decentralized. Accuen has reduced the number of technologies it utilizes. WPP continues to try to win the consolidation war to hedge its bets on the potential endgame. Traditional consulting companies like Accenture and Deloitte look to beef up their "agency-esque" services.

The original intent of a trading desk is not going away. If the trading desk is evolving, what are the key steps for an agency to not only protect itself, but make itself a player in the next evolution of the media trading desk?

Step 1: Walk transparency, don't just talk transparency
This first step is the most challenging. For one, creating transparency is hard work. So much time and effort is required just to automate data and bring it to light across different platforms. The reality though is that this is becoming table stakes and a mandatory step to win business. If for no other reason, consider that every agency is "claiming transparency," and you don't want to be the last one to the party to actually provide it. Where this gets more complicated is if you have a trading desk model that manages to margin that you suspect clients would be shocked and dismayed to see. This transparency could have serious business ramifications, especially if that margin is paying for growth or losses across other areas of a holding company network of agencies and business. This segues into step two.

Step 2: Rethink compensation
If you spend enough time in the industry, talking to traders and planners at conferences and interviewing candidates with time at the trading desks, you start to hear crazy things. Specifically, you hear about variable margins going into the mid to high double digits. You hear about or are offered rebates (e.g., spend a certain amount of money on my platform, and I'll give you money back at the end of the year). All of these aspects translate into an incentive to think less about the integrity of the work and the benefit to the client and more about the economics.

As advertisers become more aware of the mechanics and costs to execute digital, especially in programmatic media, they will expect a different approach than hidden margins and unknown technology mark-up costs. The answer lies in fair compensation for personnel, third-party technology and proprietary technology, and workflow efficiencies. Now obviously, the definition of "fair" is in the eyes of the beholder. However, fair compensation becomes more of a dialogue than a demand with clarity on the expertise of the personnel and the availability of proprietary technology. This fair pricing should be agreed upon and should be unwavering.

Step 3: Less is more
It is easy in today's digital technology ecosystem to become a jack of all trades, master of none. You hear stories of media operations and trading personnel utilizing anywhere from 15-35 different platforms. The reality is that each platform has unique depth and breadth of capabilities, nuanced workflow and ecosystem benefits which require time, context and trial and error. In terms of defining your technology stack, don't try to work with everyone. Try to land on 1-3 core technologies in key areas (e.g., DSP, DMP, measurement) that can carry the lion's share of media buying and optimization activities and thereby enhance your ability to create depth of expertise in fewer platforms. Then look for areas that those core platforms are weak and round out those weaknesses with complementary, specialized technologies. This keeps focus, mitigates weaknesses in your value proposition, and also hedges your bets, should a key technology fall behind or become victim to industry consolidation and the like.

While all the three steps noted above are applicable to any agency, it is also important to have something that is unique, different and core to your value proposition. As an example, PMG prides itself as a "gap technology" agency. Meaning, we develop a great deal of proprietary technology. That technology specifically fills in gaps that exist between unique client needs and third party ad technology and marketing technologies that are built to appeal to the widest audience possible. For example, PMG's smart data platform enables the agency to leverage an average of 33 blended data sources per client to feed data-hungry channels like programmatic media.

In summary, agencies can address the increasing fragmentation and programmatic nature of digital media when they are ultimately focused on real transparency, fair compensation, and creating deep expertise on fewer pieces of technology. When these fundamentals are in place, the post-trading desk reality begins to look a lot less bleak and a lot more like an exciting, industry-impacting and downright fun space to work in. This is the reality that I see -- and have the great benefit of creating -- every day.

Dustin Engel leads the data activation group at PMG, which is comprised of the analytics & decision sciences team and the programmatic buying team. Engel has over 17 years of experience ranging from ad technology to agency and client-side...

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