The Trouble with Trading Desks is that..

They threaten a nice and cosy Ad network world where the networks manage to co exist by all buying the same inventory in exchanges, using client data and passing it back to agencies at a nice margin. Let me ask a few questions:

1. Does the average client / buyer realise the Ad networks that all have nice individual sounding names are all down shopping at the same auction, forcing up the prices for our clients and making delectable margins.
2. Why is it so bad that the agencies are bringing transparency back out of the black boxes of the performance networks, so we all learn?
3.. When did an Ad network last tell you how they achieved their results? They wont as they have to expose their exchange buying techniques. Agencies can now show the workings not just the answer.
4. Why would a client be happy to spray their data around like its going out of fashion – it’s a valuable commodity that is being used by networks to power the individual client results as well as who knows what else?
5. Is the client absolutely sure that their data is not being used by an ad network to power one of the clients competitors?
6. Why are the publishers fighting tooth and nail to protect their data whilst advertisers are giving it away?

Lets balance off this debate a little and ask who the main protagonists are in the debate, perhaps there are people out to protect their business models. I will say that our clients are getting better results, more transparency and better control of their data. Does not sound too bad to me.

Finally can we stop building cases on the back of a couple of media buyers who we don’t know the identity of, who have probably not got a pay rise this year. If this was a court of law it would all be thrown out. If I were a client, I would trust the agency as we have a lot more to lose, the networks win some lose some.

In case this annoys anyone, these are my views, not the views of my organisation.

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8 thoughts on “The Trouble with Trading Desks is that..

  1. I just wrote on this topic in my own blog. Your arguments are very passionate and well spoken, but they break down over the fundamental issues of transparency and conflict of interest. Let’s use the metaphor of the Military. If the Pentagon believed that contractors were charging too much for airplanes, or somehow dealing from the bottom of the deck, would it go to its “client” — the taxpayers — and say “the only solution is for us to go into the business of building airplanes. But you can trust us that we’ll only buy airplanes from ourselves when ours is absolutely the best choice for you.” Really? I think if I was the taxpayer I’d probably want you to do a better job of vetting them….not become one of them.

    As I said in my blog, you guys are clearly well-intentioned, but the stink of corporate nepotism will remain in the air until you divest and spin these ATDs off completely. My other comment is your description of the “cozy/cosy” world of ad networks. There are like 300 of them. I’d probably swap in the word “Darwinian.” If you really want to be int that business, then compete on the open market. Don’t use your insider advantage to build your own capabilities and bottom line.

    @upstreamdw

  2. This seems like a highly inflammatory, emotional response to what I read as an objective view of what is happening in the world of agency trading desks. Are networks trying to protect their busienss model? Of course. That said, no respectable network engages in the kinds of practices outlined above. Comscore top 20 networks provide significant technology and expertise to help marketers execute effective campaigns. I don’t know of a top network that won’t discuss how they do it. I also see the “margin” comment continuously. Doesn’t anyone study the financials fo the public ad networks? There is a difference between GROSS margins and NET margins. Networks aggregate all the technologies and services needed to make a campaign work. With that, gross margins appear high, and net margins are totally appropriate. And by appropriate I mean so in terms of the marketer, the publishers, the data provider, and the network. Agencies are outsourcing techologies— and someone is paying for that. Because the costs are broken out separately, it may not look the same…. Let’s be objective folks. This rabble rousing is just causing more confusion in the market.

    • If you want to make the argument about gross and net margins we’ll have to factor in the salaries Comscore top 20 networks are paying to many reps which cut into those net margins and make them look more reasonable. There is certainly a compensation bubble and that’s indicative of both a highly competitive and lucrative business.

      We would also have to address the fact that many top networks are not public companies sharing their financials.

      I agree that someone has to invest in and build the technology, but the Exchanges and DSP’s seem to me doing so in a more cost efficient and transparent manner than ad networks have traditionally done. They’ve made the job easier, cheaper, more transparent. Transparency in both pricing and distribution seem like the greater financial threat to Comscore Top 20 ad networks than whoever is actually executing the campaigns be it agency, network, or DSP.

      And to all the ad networks out there, how many sales reps do we need in a meeting at one time anyways? It doesn’t help anyone when you bring nearly $1MM in salaries in the room with my assistant planners who probably top out around $30k each. If we want to have a frank discussion about where the savings is going to come from….the trading desk eliminates $200k+ sales people and fills them with $20k+ traders. That’s not a particularly good for anyone who works in the industry. It would be nice if there was a middle ground between the overpaid sales side and underpaid agency side.

  3. Totally nailed it Marco. I am so glad that someone has come out and proudly challenged this.

    I agree with every word you’ve said.

    Some of the practices being defended are murky and plain wrong.

  4. Our experience with the trading desks is that they are competing for dollars just like everyone else, and that often they are held to a higher standard than ad networks.
    Isn’t it exciting that we are taking the “remnant” display space into a more valuable and better performing option? ad-network premiums were egregious and mysterious, and trading desks are organizing and optimizing the chaos with greater transparency. Makes sense to me. It may not be a “Fait a Complet” but Rome wasn’t built in a year.

  5. Good points. Completely agree.

    Also worth noting that Agencies take on much more risk in running trading desks. This is because agencies are now directly responsible for choosing where the ads appear and much more directly responsible for performance.
    Whereas bad placements or bad performance could easily be blamed on a network (and then rectified by using different networks), running activity on trading desks exposes agencies in a way they previously weren’t.

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