15% of programmatic ad spend is ‘unknowable’: UK report

by David Brown

It may seem like the world has radically changed, but at least programmatic advertising is as complicated and mysterious as ever.

While many in digital marketing have spent years calling for more transparency around the programmatic supply chain to better understand how budgets are divided, a new study released in the U.K. on Wednesday found that as much as 15% of  programmatic ad spend is “unknowable.”

Roughly 51% of each programmatic ad dollar makes it to publishers, with the rest absorbed by the programmatic supply chain—agencies, DSPs, SSPs and other technology based intermediaries. The researchers were unable to account for about one-third of the money taken up by the supply chain.

The research, conducted by PwC for the Incorporated Society of British Advertisers and Association of Online Publishers, is considered ground-breaking for being the first time researchers have been able to map the programmatic supply chain from end-to-end.

The intent was to identify each element of the supply chain—often criticized for being overly complex and opaque—to understand the services and costs at each stage.

The so-called “tech tax” of about 49% isn’t that different from the conclusions of similar attempts to quantify the programmatic supply chain—by the World Federation of Advertisers in 2014, and the U.S. Association of National Advertisers and the Association of Canadian Advertisers in 2017.

The 15% “unknowable delta,” however, is new and “really shocking,” ISBA director general Phil Smith told the Financial Times.  After conducting one of the most rigorous studies of the programmatic ad system ever, PwC, one of the most respected auditing firms in the world, could not figure out where 15 cents of every dollar in the programmatic supply chain goes. (See chart.)

“While digital display is an effective sales driver for us, the findings of the study are stark: there is a big hole in the value chain,” said Graeme Adams, head of media for BT Group, which was one of the marketers that took part in the study.

“We desperately need to see a common set of standards adopted and more openness in this market, so that every penny spent is accounted for. If this happens, we’ll invest more in the channel; if not, we will cut back and reshape our trading approaches.”

For the study, PwC collected data from 15 big advertisers (Unilever, BT, Vodafone, Nestle and GSK among them), eight agencies, five demand side platforms, six supply side platforms and 12 publishers. It identified more than 1,000 distinct supply chains, and was able to trace 31 million impressions across 290 of those supply chains, from advertiser to publisher.

“The publication of this study marks an important moment in our understanding of online advertising supply chains,” said Smith. “It is the first time anywhere in the world that an attempt has been made to map a system which is not capable of being audited.”

Estimates of programmatic ad spend in Canada vary, but according to the ACA, total programmatic display advertising likely reached about $1.54 billion in Canada. Using ISBA’s 15% conclusion, roughly $232 million of Canadian media spend would be unaccounted for last year.

Based on the findings, ISBA is making two key recommendations:

  • Standardization across a range of contractural and technology areas to facilitate data sharing and drive transparency;
  • Industry collaboration to “further investigate the unknown delta.”

The issue of programmatic advertising is a polarizing one. Highly targeted digital advertising is considered essential for marketers looking to reach consumers in a highly fragmented media landscape. But the inherent complexity of a technology-driven system, with multiple intermediaries each claiming to add value and taking a percentage of the buy, makes it difficult for advertisers to know what they are getting from their digital ad spend.

The complexity and lack of transparency is also often cited as a reason why digital advertising is so susceptible to ad fraud, which further erodes the value of marketers’ programmatic buys.

Defenders agree the system needs more transparency, but say the tech tax is exaggerated, and is net positive because it allows advertisers to efficiently reach consumers who spend most of their media time online. “Transparency in digital advertising’s supply chain is critical for its sustainable future,” said IAB chief executive Jon Mew. “Programmatic advertising is complex, but it is not a dark art and we shouldn’t lose sight of the valuable role it plays in supporting our open, ad-funded web.”

“The promise of programmatic is the ability to target the right audiences, in the right context, at the right time,” said Sam Tomlinson, partner at PwC. “All participants need confidence that the supply chain is acting to fulfil that promise, which, in turn, requires industry-wide collaboration to drive the standardization of data access and formatting. We hope this study can be a positive catalyst for change.”

But on Twitter Wednesday afternoon, Jason Kint, CEO of Digital Content Next and a vocal critic of the programmatic system, called the report “paradise” for those who’ve been asking for more transparency in the system. “Ad tech lobby will say that it’s what pays for the open web but goodness the web can do a lot better than this,” he said in a thread analyzing the study (read it below).

David Brown