With the advent of the TLA (Three Letter Acronym), I have seen usage of TLA’s in the online media space continue to accelerate (to all of our detriments, RMX, WMI, MNI, etc. excluded). So it is with great reservation that I point you to the following article which discusses the successes (or lack thereof) of Agency Trading Desks, otherwise known as ATD’s. Read it here.
Agency Trading Desks, for those not in the know, are corporate entities that have been created primarily at the agency Holding Company level – see the map above. They have been designed to be a clearinghouse for all (or most) of a holding companies’ media needs (this is also referred to as demand). Basically (and this was quite a prescient move), the holding companies took a look at where their dollars were being allocated, and saw that most players further down the ecosystem were taking a significant portion of it.
For example, 1 media buy COULD be allocated per the below:
- Agency & Client set a $5 CPM for a Jaguar campaign
- $.25 CPM ad serving fee for agency ad server ($4.75 left)
- $3 CPM to ad network – media cost ($1.75 left)
- $.25 CPM to pub-side ad server ($1.5 left)
- $1.50 CPM paid to publisher ($0 left).
From a holding company lens, the split of where that $5 CPM goes is obviously not optimal. Remember – the agency business has historically been built on razor thin 10-20% margins (estimate). Did someone say Gross Margin lift?
Secondly – lots of dollars flow through a holding companies’ vast network of agencies. And just like other business, network effects apply. Meaning – there are positive consequences to aggregating dollars through a single platform, including the buying power, data, etc. that comes as a result of aggregating all that spend through a single platform. ATD’s can now throw their weight around with publishers and intermediaries based on their spending power alone (although I think the ecosystem has yet to see that take place en masse).
What does it all mean?
From what I understand, (and please correct in the comments where appropriate) the messaging around why these ATDs were created has been, up to this point, ‘spend with us because we think we can do it better than what is out there’. Which may be true. I am sure there are examples out there where an ATD-run campaign has vastly outperformed one run in the traditional way (which if anyone can share that data, even if anonymized, email me).
Here’s the thing – the support for that model (supply/demand scale, lots of buying power, etc.) comes on some level, funnily enough, from the ad networks. Scale, both in supply and demand, leads to better decisions (which we in the ad network side of the business have lived through, many times over). More specifically – the data that comes from a critical mass of supply and demand allows one (read: an ATD) to make better decisions on targeting, media mix, etc. And I agree wholeheartedly. And some ATD’s have seen success with that model – and I hope that more can do it.
The ATDs should be taking back some of that margin, pending they can spend a marketers dollars more efficiently (read: ROI or ROAS) than another vendor. Reward good performance. But I have found it helpful to consider that fact in evaluating this new TLA’d RTB’d Agency Trading Desk world.
And ATD/DSP/RTB folks: let’s chat if you’d like.
I, and my company, Undertone support all of the constituencies mentioned above – and we take great pride in that. Further, the rise of the RTB ecosystem, and more specifically DSPs, has, on some level, torn down the old inefficient scaffolding of yore and is replacing it with a real valuation of a user, impression, a site, or an overall buy. And in that world, we all win.
Tune in next week for a deeper dive into the mechanics of RTB, or real-time bidding.
Disclosure: I am Director, Business Development for Undertone (mentioned above).
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