TrustX, P&G and the ANA move to reduce so-called 'ad-tech tax'

As an olive branch, a trade body representing publishers such as Hearst, Meredith, give 12.5 percent more buying power to marketers

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TrustX is eliminating its 12.5 percent supply-side fee from within its platform following a three-month trial with Meredith, NBCUniversal, CBS Interactive and Magna Global, a move it hopes will have broader implications for the digital advertising ecosystem.

The trade body, which represents 35 publishers, including ESPN, Hearst, News Corp. and Condé Nast, argues that for every digital ad dollar spent, only 40 percent goes toward working media. The rest, it says, finds its way into the pockets of agencies, trading desks, ad exchanges, data, measurement and anti-fraud companies, as well as demand side platforms, which are used by marketers to make programmatic ad buys.

"The supply and bidding economics have gotten so complicated and opaque that nobody knew what was happening behind the scenes," says Joanna O'Connell, VP and principal analyst at Forrester. "The difference now is marketers are starting to peel back the onion to gain a better understanding of who they're paying and who's actually worth paying. It's a huge area of focus and some are moving heaven and earth to uncover where all the pennies are going."

TrustX, which guarantees that all ads are viewed by both humans and in an ad safe environment, says publishers—and not marketers—will instead by charged a month-end 12.5 percent technology fee. TrustX hopes the change will become permanent for itself, but it is leaving the door open if it needs to reverse course and return to its previous model should marketers not buy in.

Removing the fee and placing the onus on the publishers serves as something of an olive branch to advertisers, though some industry-watchers caution it's a risky bet.

"Publishers can see where all the bids are coming from," says Chris Kane, founder of consultancy Jounce Media. "Any time they see a dollar bid come in from TrustX, they won't view it as a dollar and the more rational choice will be to accept money from another sell-side platform."

Big picture

The move is part of a broader shift happening within the ad industry. Marketers, who previously worked with scores of supply side platforms, now want to work with as few as possible, all in an effort to gain better efficiency, transparency and more bang for their buck.

As a result, many supply side platforms are trying to innovate or, in TrustX's case, become more transparent with what fees are being charged. Exchanges that do not adapt are likely to wither and die.

"Our approach is simple," says Vin Paolozzi, exec VP of innovation at Magna Global. "We're going to be supportive to anyone who helps us manage what is happening in the technology-fee space to help us clean up the ecosystem."

Paolozzi says Magna is testing "multiple" solutions to help it achieve its goal. In regards to TrustX reducing the so-called ad tech tax, Magna did some initial testing and "saw a better return," Paolozzi says. "But no numbers yet — it's too early to tell."

TrustX's move in eliminating its sell-side fee comes after private discussions led by P&G's Marc Pritchard and other members of the Association of National Advertisers, who argued that paying a "sell-side fee" reduces working media value for the buyer, and, ultimately, is another added cost to the advertiser.

"None of our publisher members we asked previously did this," says David Kohl, president and CEO of TrustX. "We're advocating for this change across the supply-chain because it's the right thing in the name of transparency and fee accountability. In the short-term, I think we're all looking at this as a test — marketers and agencies have asked for it."

Although Kohl hopes TrustX's move will prompt other sell-side platforms to follow suit, its latest effort may put it at odds with the very publishers it represents.

"This entire initiative is a bit of a gamble for TrustX publisher-members," Kohl says, who acknowledges that publishers simply managing the logistics of setting 12.5 percent aside from buyers using TrustX's platform from revenue generated through other sell-side platformswill likely place strain for a publisher's ad-ops team.

"However, our publishers agreed to it because of the very vocal call from their clients this additional explicit layer of transparency, and a promise—from agencies, in particular—that they would prioritize supply-paths that maximize working media value," he says.

Meanwhile, TrustX publishers watch and wait.

"This was a request by advertisers at an ANA meeting toward last year and it was TrustX's response to build a great relationship between advertisers," says Nicole Lesko, senior VP of digital ad product and revenue operations at Meredith. "In terms of tangible data, we don't have any at this stage."

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