How Not to Get Scammed By Agency Trading Desks
One of our industry's most heated and contentious debates of the past year focused on the ethics of holding company trading desks. Independent trading desks and advertising networks have accused the holding companies of creating inherent conflicts-of -interest for their media agencies.
Many agencies appeared to be compelled or even forced to use their in-house trading desks over the indies or advertising networks (even ones with proprietary inventory or unique technology/data sets). The holding companies fired back by saying that they would maintain objectivity and do what's best as fiduciary agents for their advertisers.
Hmmm, well the jury has been out on this for a while now, and its coming back guilty.
While, I don't mean to paint all holding companies with the same brush, there is a level of shadiness in how many are conducting their businesses. It stems from the fact that these trading desks are significantly more profitable than the traditional agency model due to double dipping occurring in many instances. This sleight-of -hand is done by marking up in-house trading desk inventory (calling it a technology fee or something innocuous like implementation fee) and then charging clients a percentage of ad spend on top. This encourages agencies to move towards exclusively using their own trading desks and not being open to other unique inventory, proprietary data or other technologies.
This exclusivity is a real disservice to clients. Here's why:
- There's no proof that solution a marketer is getting is better than 3rd party technologies
- Buying through proprietary systems doesn't always mean a marketer is getting unique media offerings
- Because not all inventory is equal, the marketer may not be getting the best data or targeting, either
- Moreover, while media inventory might be a commodity -- unique technology, offerings and service are not
So, let's say you're a marketer working with a big holding company and using their trading desk technology--or, maybe you're a holding company and would like to provide better, more transparent service to marketers--here's an easy way to maintain neutrality and make sure everyone wins:
- First, quit the shenanigans
- Leave 25-30% of budget for testing third-party offerings
- Try different sources of ad inventory, technology and data so you don't all your eggs in one basket
- Be transparent about billing practices and don't double dip
Clients first. Agencies need to remember to put their client goals and objectives first while putting their own wallets second. If you want to make more money, then change or break the model. Take some risk, align your clients' goals with yours and create a performance deal on a revenue share or cost per model. If you want to be successful you should always offer the best, most innovative options that will create the greatest results for the clients, not just great margins for you.