12 September 2024

Time to own your ad tech stack

In summary

• Increasing privacy reforms mean you need to have a firm handle on your customer data and how it is being used.
• With current supply chain market in a mess, if you want transparency over where your money is going, it’s time to take control.
• Learn how you can work with your current partners to shift your business towards a more transparent and privacy centric framework, one that’s ready for the future.

Ownership of data

When we talk about tech ownership and control of customer data there isn’t much debate over how a company should operate and manage the data in their CRM. The same is true for a Marketing Cloud and the personally identifiable data (PII) that identifies users to communicate across 1-to-1 marketing channels, such as email and SMS.

However, in the ad tech world it has gone without question that our customer’s data is expendable, something that companies can trade across multiple platforms, and use (without too many scruples) to drive profit and sales.

The demise of the third-party cookie

The reason for this was the anonymous third-party cookie, a small piece of script that is generated and placed on a user’s device by a company or website as the user browses the internet and visits different domains. It is essentially a piece of code that contains extremely valuable information that advertisers and third-party providers collect to monitor users’ online behaviour and activities.

As we are all aware the third-party cookie is crumbling. In 2017, Apple started its war against the cookie with the release of its Intelligent Tracking Prevention (ITP) to strengthen user privacy for Safari users. They continued down this path, releasing ITP 2.2 in 2019 which further reduced the attribution data that marketers could collect from third-party advertising platforms.

Firefox and other browsers followed the same route as Apple, leaving only Google with a third-party cookie ecosystem in play. After years of pledging to scrap third-party cookies across its Chrome browser, Google announced last month that they would “not be deprecating” third-party cookies any more. Instead Google will enable the user to make an informed choice about their web-browsing, falling in line with the incoming privacy regulations which focus on user consent and the use of their data.

At the end of the day, the result will be much the same. Apple’s opt-in/out policies have seen anywhere from 60-80% of users opt-out of having their data used by a company (depending on location), here in Australia it was 72%. We can expect the same trend to follow with Chrome users when the time comes.

As cookies disappear, marketers have had to shift their focus to their first-party data, but this comes with a huge amount of added responsibility. No longer is the data anonymous, it is often the same PII data that software companies and their clients are hyper focussed on keeping secure and where data governance and security teams lead the platform initiatives. ^[1]

Data control and governance within ad tech platforms

Why hasn’t there been more conversation around data control and governance within ad tech platforms? Let’s be honest, it’s not a convenient conversation. The amount of money that has been made arbitraging data and inventory in the advertising ecosystem is mind boggling. On the client’s side there’s complexity that they either don’t want to think about or don’t believe they have the capacity to consider and change. 

However, there are a number of options, and with the impending privacy changes a lot of questions are being raised. These conversations have also cast an eye on what has been going on across the openweb over the last decade-plus, with a particular focus on data brokerage and the current supply chain, that is murky at best.

The ultimate gravy train

Most recently the Association of National Advertising (ANA), conducted a number of investigations into what it calls the ‘ultimate gravy chain’, where advertisers are lucky to get $0.36c back from every dollar they pump in. Nick Manning, ex-founder of media agency Manning Gottlieb, which sold to OMG in 1997, has turned his attention to what he describes as a “wasteland that would not be tolerated in other industries or sectors”.

After delving more into their investigation, the big surprise is that not one of the big Holdco groups nor tech companies wanted to be involved. Whilst 65 large advertisers originally agreed to participate, only 21 actually went through with the investigation, which looked at log level analysis across a combined spend of $123m. As Nick quotes on the podcast that accompanies the Mi3 article detailing the investigation:

“Everyone is a supporter of transparency until they are asked to be transparent”.

Nick Manning - ex-founder of media agency Manning Gottlieb

But this is not a new problem. 2015-2019 were the heyday of the agency programmatic trading desk, which is a central hub within an agency that buys inventory and audiences using ad-tech for their customers. They began to fall out of favour towards the end of the decade when advertisers became more programmatic savvy and questions were raised around the margins these desks were making. The first call for more transparency was made.

Marketers advised to wisen up

Along with its current four year review of the Consumer Privacy Act, in 2020-21 the ACCC was tasked with conducting an inquiry into the supply of digital advertising technology services. The 202-page report ^[2] covers the ad-tech industry including; tech providers, with a separate focus on Google, and the role that advertising agencies play. The report acknowledges the value that media agencies contribute regarding skills, expertise and buying power (scale). However, it raises concerns around how rebates are managed and how these may impact decisions across campaign executions.

Advertising agencies add an additional layer of complexity into the supply path, in particular the large holding companies that own a number of subsidiaries and perform a range of functions under different names. Contracts are often only with one part of the group and do not offer visibility into the spend from end to end. The biggest risks to advertisers here being arbitrage on inventory through rebate models and cheap low quality inventory packaged into campaigns to inflate the value.

The role of procurement

One of the problems that advertising agencies face, and that clients are complicit in fuelling, is the constant demand to drive down costs. Client side procurement teams are doing what is being asked of them in driving down the perceived cost of marketing, without considering the impact on the agency.

“Clients are complicit in demanding unrealistic rates, agencies have to turn a profit, and publishers or media owners are willing to pay to secure additional share.”

Ian Perrin, Managing partner at Speed, via Mi3 ^[3]

At Louder, we are frequently presented with competitive headline GMP tech rates that equate to a 0% margin and we ask ourselves, how can they offer this? Our transparent services model does not include media buying services and we have to be clear about what expert technical services cost a business on an hourly basis. It’s a hard sell to clients who are used to this being perceived as free or added value.

A competitive market place

The result of the ACCC advertising services report concluded that there was no need for any regulatory action as the landscape in Australia remains robust and competitive, despite some conflicts of interest. Most advertising agencies confirm that they use an itemised commission based model that offers their clients full transparency on campaign costs, data fees, inventory, third-party platforms and staffing. These submissions are all listed on the ACCC submissions site.

Despite this, many senior leaders still agree that an inherent strain persists between client expectations and agency revenue models within the programmatic space. Earlier this year Campaign Asia spoke to a number of leaders across the industry that agreed that more transparency is needed and that clients must be the ones to drive it.

There is so much information now available to help businesses become more transparent. With the emergence of the forensic ad-tech suite of tools, clients have the ability to look under the hood in greater detail. Auditing tools are readily available and clients can request granular level analysis on their programmatic campaigns, similar to the investigation conducted by the ANA. It is this kind of scrutiny that will help build trust and accountability in ad-tech practices and elevate the reputation of digital marketing.

Simplifying a complex relationship in a privacy centric future

It’s a jungle out there and navigating the complexities around programmatic advertising is not for the faint hearted. However, with the incoming privacy regulations, expected to be similar to GDPR, marketers are having to expand their knowledge across other areas and work more closely with IT teams. Indeed there is much said about the new CIO / CMO partnership in organisations.

They are being forced to ensure they have the right governance and compliance across their customer data, while also retaining the services and expertise of their media agencies. The Google Marketing Platforms (GMP) offer a number of different options that clients can consider:

• Outsourced model (co-managed, agency led)
  • Agency owns tech contract and data
  • Agency controls most of the strategy and manages all of the media buying
  • Customer unable to transfer their data if they move agencies / providers.
• Hybrid model (co-managed, marketer led)
  • Marketer / client owns the technology contracts and data
  • Develop strategy together with the media agency, who executes the media buys using their expertise
  • Marketer / client has full visibility into the buys and the supply chain due to platform ownership
• In-house model (marketer in-house)
  • As above, the marketer / client owns the technology contracts and data.
  • Have a fully skilled in-house team that builds the strategy and executes the buys
  • Retain full ownership and transparency of the platform(s)

The hybrid model is gaining popularity as essentially you’re targeting two birds with one stone. As a company you have the ability to comply with data governance laws, while also retaining the expertise of your media agency to navigate the complexities around the programmatic eco-systems.

First-party data management and execution

As first-party data continues to dominate a marketer’s strategy, analytics, and optimisation abilities, the way in which this data will be held, received and shared is still a cause for debate and concern in the industry. The introduction and presumed methodology of using de-identified data (otherwise known as #Hashed Data) is intrinsically flawed.

The ACCC has made it clear that de-identified data is not secure, so we have to wonder how long this solution will be around without additional frameworks added. Some of these frameworks are suggested by Louders CTO Ian Kenney, when he experimented in reversing hashed data last year.

As far back as 2021, large publishers were not hanging their hats on hashed data being a long term solution:

“In particular, the sharing of hashed personal information, like emails and phone numbers, to enable matching appeared to be a highly emotive topic. On average, it is fair to say that most people we spoke to questioned whether such a practice was in line with the spirit of recent privacy changes.” ^[4]

Louder’s recommendation

• As data sovereignty and privacy regulations increase it is imperative that companies have a good grasp on where their data sits and who is using it.
• With so many variables at play it is inevitable that marketing and IT will continue to merge, and conversations will become more technical.
• All sides of the industry need to work together to help advertisers accurately assess their media investments and understand where their budgets are going whilst adhering to a privacy-centric framework.

Louder are helping our customers and agency partners navigate these changes. We encourage marketers to consider their options and reach out for a conversation to learn more.

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References

[1] Mi3 podcast, ‘The whole supply chain is locked into a sense of omerta’: Why marketers, procurement, agencies, ad techs and publishers fear derailing programmatic ‘gravy chain’ – where 36 cents on the dollar is ‘optimistic’, 24 January 2024

[2] Digital advertising services inquiry, final report August 2021

[3] ACCC’s media agency findings: we may need to industrialise due diligence, February 2021

[4] Deloitte and Google: Thriving in a privacy centric ad-tech ecosystem case study