• [Editor’s note: Joe Apprendi, Founder & Executive Chairman at Collective, was a speaker at #RampUp17. We invited him to share his thoughts on data and marketing trends.]

    Having celebrated two decades in digital ad technology, I continue to be befuddled by the lack of interest and/or understanding among Fortune 1000 brands on how wisely their digital media dollar is being spent. No matter the number of published studies or independent reports informing marketers of the inefficiency and deficiencies of online advertising, marketers continue to accelerate their digital investment overall and its shift to programmatic.

    Why is this?

    My general hypothesis is that whether the ad technology industry is talking to the investment community or advertisers, we do a lousy job of simplifying the conversation for marketers to pay attention, really “get it,” and take action to improve their digital advertising ROI.

    We already know billions of ad dollars are being lost to ‘robots’ and ‘nonviewable inventory.’ The ANA reported that $7.2 billion was expected to be wasted globally as a result of nonhuman traffic in 2016. It could also be argued that billions in media investments are being misdirected due to skewed measurement or flawed attribution methodologies.

    At the IAB Annual Leadership Meeting last month, P&G’s Chief Marketing Officer, Marc Pritchard, spoke up for brand advertisers by stating, “better advertising and media transparency are closely related.

    Why? Because better advertising requires time and money, yet we’re all wasting way too much time and money on a media supply chain with poor standards adoption, too many players grading their own homework, too many hidden touches, and too many holes to allow criminals to rip us off.”

    Keeping that in mind, I would like to call out one component of the supply chain to quantify the growing cost to transact programmatically vs. nonprogrammatically. Specifically, I’d like to compare the corresponding ‘ad serving cost’ in 2017 to 2007, when programmatic represented approximately 0% of digital spend, and was almost entirely being spent via ad servers alone, like Doubleclick and Atlas.

    Prior to RTB and exchanges, ads were trafficked directly to publishers and ad networks without layers of ad technology intermediation as we now see done programmatically.

    The chart below illustrates the effective ad technology cost of ad delivery today when choosing the programmatic path (Advertiser-Ad Server-DSP-Exchange-SSP-Publisher) to the impression vs. direct to the publisher (Advertiser-Ad Server-Publisher) for display and video advertising.

    Programmatic Ad Serving*
     Transaction Fee    Video CPM    Display CPM  
    DSP 15% $20.00 $5.00
    Exchange 12% $17.39 $4.35
    SSP 12% $15.53 $3.88
    Publisher 0% $13.86 $3.47
    Effective Ad Serving Cost $6.14 $1.53
    Ad Server Only Cost $0.25 $0.05
    INCREASE IN COST 26x 32x

    While it’s clear that programmatic ad technology has enabled marketers to make ad decisions on a real-time impression basis, what is less obvious is the incremental return in exchange for this higher transaction cost.

    My point is not to judge whether this increase in ‘nonworking’ media cost is worth it or not, but I do want to encourage marketers to spend the time required to make this determination as they evolve their digital media buying practices and apply programmatic technology to other media channels (TV, DOOH, radio, etc.).

    There is, in fact, an optimal path to an impression that performs best by objective, channel, screen, or format. The key is to identify and activate this on every ad impression opportunity.

    Joe Apprendi was a speaker at RampUp 2017. Watch him in the panel, A Decade of Programmatic and What It Means for Ad Buying, below.

    Subscribe to RampUp