Media Buying Practices Brands Must Fix in 2018 to Prevent Another Hyphbot

In speaking recently to several top brand marketers about the problems they are dealing with on digital media...

In speaking recently to several top brand marketers about the problems they are dealing with on digital media, it became clear that many of them are like new homeowners that realize they just bought a “money pit.” As soon as you take out a wall, you realize you need new plumbing and electric.

Like an old home, there are fundamental issues that are important to fix. Not everything can be tackled at once, but here are six that can shore up a “money pit” media buying plan.

Spoofed Inventory
Before Hyphbot was found, the Financial Times ran a test across a wide cross section of programmatic companies from DSPs to SSPs and exchanges and found their name in many places where they did no business. To the naked eye, and even to whitelist and some quality measurement companies, spoofed domains look like they are ok. Brands must verify the channels a publisher uses to sell their inventory before they buy from that publisher using deal id, ads.txt and other more secure forms of verification.

Shell Auctions
Technology companies operate under the vague terms of their contracts, which rarely prohibit charging based on any auction that occurs, rather than the one that counts. Companies including many demand side platforms, are able to increase their margin by billing on the “internal auction” that occurs before a DSP actually bids on the open exchange on behalf of the advertiser. Advertisers need to ask to see the entire bidding process to identify internal mark-ups.

Data Markup
Advertisers buy data segments through their trading desk or DSP, but the initial value of that data segment is obscured. The flat rate of the segment is often much lower than what the advertiser gets charged. Even accounting for integration and management costs, advertisers often overpay. What’s more, there can be huge overlap across data provider segments and massive discrepancies that advertisers never get to understand and amend, paying for all of it anyway. Advertisers and their agency teams are better off working directly with fewer data partners so that they can see and improve their segmentation over time at a lower cost.

Second Price Auctions
Buyers and sellers can take advantage of the common second price-type auction used on programmatic advertising. Rather than charge a standard one cent higher than the second highest bid, middlemen will layer in hidden fees, or alter floor prices to pad their own margins. Many SSPs have already gotten heat for these practices, but buy side companies should also be required to be transparent about second price practices. A move to transparent first price auctions could solve the problem. Since second price auctions are so mismanaged, first price would cost only marginally more for advertisers while creating stability and transparency for all.

Arbitrage Trading
Arbitrage is like ticket scalping. Middlemen hoard supply and increase prices with no gain for buyers or sellers. The worst arbitrage companies also fake URLs to command those same inflated prices for spoofed inventory. Advertisers can minimize hops between buyers and sellers by cutting out small aggregators and networks. Advertisers should demand fully transparent margin reports from their technology partners or require fixed margins.

Last year’s bombshell ANA report about widespread agency kickbacks has already caused brands to re-evaluate their agency agreements, but revelations of kickbacks and similar actions continue. Recently the ANA produced an additional report detailing agency anti-competitive behavior where agencies favor partners from the same holding companies without revealing the relationship to advertisers. Brands must also watch for “technical” kickbacks – where brands have favorable agreement or integration with particular technology or data partners and recommend the partner to advertisers even if it does not provide the best solution for their needs.

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