Reed Smith formed part of the core team drafting the seminal ANA Programmatic Media Supply Chain Study. Our RS Ad Bite breaks down each of the findings and delivers a key consideration when thinking about a marketer’s contractual relationship with its agency or vendor partner in respect of programmatic buying to protect your bottom line.  

Below is the sixth in our series. The full report can be found at ana.net.

Misaligned incentives: Advertisers prioritize cost over value

#6 – Marketers must balance their pursuit of low-cost inventory in programmatic media with ad quality and transparency by seeking viewable, fraud-free and brand-safe inventory – even if this means higher cost per thousand (CPMs) – to help reduce waste and improve efficiency and value of media investments.

 One of the major reasons for the lack of transparency in the programmatic ecosystem is “misaligned incentives” – with advertisers prioritizing low-cost inventory over value to their detriment. While getting the most impressions for every dollar may, on its face, seem to be a sensible incentive, chasing cheap CPMs can lead to a cascade of downstream ad quality issues that might not be detectable initially, such as inventory that’s not viewable, has fraud, and is not brand safe.

While common sense should tell buyers that not all “cheap” inventory is “quality” inventory, most advertisers lack the incentive to buck the status quo of prioritizing cost over effectiveness due to the difficulty of measuring the effectiveness of a campaign and true ROI in the programmatic space. Therefore, as long as buyers are staying within budget and meeting their KPIs, they are perceived as being successful and there is simply no reason for them to do more.

The study found that the lowest-paying advertiser participant had an average media cost CPM of just $0.57 and the highest had an average of $2.75. Some 17% of the impressions were bought for less than $1 CPMs, 34% of the impressions were bought for less than $2 CPMs, and 50% of the impressions were bought for less than $3 CPMs – clearly demonstrating advertisers’ attention on driving costs down. The study also found that while the top-rated metrics important for programmatic advertising campaigns include brand safety, viewability, and human traffic (not invalid traffic) (i.e., ad quality), the study findings illustrate that marketers are chasing cheap CPMs and prioritizing cheap reach over quality. 

The recommended playbook is:

1. Consider contracting directly with all primary supply chain partners, such as demand side platforms, supply side platforms, and content verification partners, and build in contractual protections to ensure transparency and data access, including access to log-level data. Match the data to accurately measure and assess the balance between the price you’re paying and the quality of inventory you’re receiving. If owning your supply chain contracts does not make sense for your organization, ensure your agency agreement requires the agency to obtain and provide these data access rights to you. 
2. Prioritize the creation of inclusion lists (rather than exclusion lists) for your programmatic advertising to streamline the number of websites on which your ads appear, including potentially removing MFA sites from your spend, to help eliminate wasteful and unproductive spending that does not translate into value. 
3. Only work with media partners and vendors where quality metrics (i.e., viewability, fraud, and brand safety) are available.