IAB Builds a Programmatic Fee Calculator to Help Marketers See Where Digital Dollars Go

Less Than Half of Programmatic Spending Reaches Publishers

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Credit: IAB.

The Interactive Advertising Bureau is introducing a programmatic fee calculator amid concerns that advertisers don't know where their digital media dollars actually go while sellers get less than half of those outlays.

The IAB Programmatic Fee Transparency Working Group, a subgroup within its Programmatic Council, created the calculator as part of a larger IAB effort and document called "Deconstructing the Anatomy of a Programmatic CPM."

"Given the number of ad tech services commonly applied to programmatic buys, it has become difficult for advertisers and marketers to keep track of a) what specific service types are being used and b) their relative value compared to other buy components," the IAB wrote in the document, which aims to deconstruct the many ad tech layers, their cost and their value in media transactions.

"There is a lack of communication between buyers and sellers about the ad technologies being used by each side, as well as the fees that are removed in the bidding process before publishers' net CPMs are realized," it added. "This creates a discrepancy between buy and sell side inventory valuations, which has the potential to erode trust in the marketplace and reduce inventory liquidity."

The calculator prompts the user to enter a budget for display, video or native ad formats. From there, users are prompted to select technology layers that might apply, be it demand-side platform technology, a supply-side platform for a publisher or other vendors and third parties. Ultimately the calculator is supposed to show the user how much of a budget, on average, is allocated to those many players involved in a programmatic transaction, and how much is left over.

The calculator incorporates "cost model nuances, specific channel selections and associated planning rates to provide a directional view of the overall cost of each actor in the programmatic supply chain as a percentage of the effective planning CPM," the IAB said.

Most people who only associate programmatic buying with automation also assume that automating a process means less manual labor, and therefore lower costs. Ad Age last year reported that programmatic is actually much more costly than some expect. And at the end of most transactions, publishers get less than half of the original media outlay.

This has been an ongoing issue, especially for publishers. Programmatic ad revenue totaled $10.1 billion in 2014, accounting for a healthy chunk of the $49.5 billion in total internet advertising during that time, according to an IAB report. Ad-tech interventions comprised about 55% of programmatic revenue, the report found, with only 45% reaching publishers.

"There is a plethora of technology services available to support programmatic buying and selling," said Jason White, general manager and VP-programmatic revenue at CBS Interactive and co-chair of the IAB Programmatic Council, in a statement. "Some refer to the misunderstood fees associated with services as the 'ad tech tax.' It's time we cut through the confusion, dispel the misnomer of 'ad tech tax,' and help practitioners on both sides of the fence manage and appreciate these valuable assets."

Christopher Murphy, global chief strategy officer at Accuen, complimented the IAB effort. "We believe initiatives like the IAB Programmatic Fee Transparency Calculator help clients the take first steps to calibrate ROI from technology, services, data, and media costs," he said in the statement.

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