Transparency issues are always a top concern in the advertising industry, and rightly so with some of the methods being used. As Chris Rooke (pictured below), SVP strategy and operations, Nativo, explains, there are quite a few practices in play today that need to be addressed, but follow-through will be key to addressing these transparency concerns to give buyers and sellers the visibility they deserve going forward.

ExchangeWire: How is transparency (or lack thereof) affecting the health of the industry across the ecosystem?

Chris Rooke: Transparency allows buyers and sellers to engage with eyes open, aware of how money flows through each step of a transaction. Lack thereof enables blind spots that middlemen can exploit to bleed value out of the supply chain. Imposing waste or theft on any ecosystem poisons the water supply. Everyone’s health is affected and a shadow of distrust is cast over all third parties.

Publishers and marketers are navigating increasingly competitive waters. To have their pockets picked along the way by opportunists is a costly distraction from what the primary focus should be: bringing technology, creativity, and content together to innovate and create value.

What are some non-transparent practices you see today that the industry should address?

There are a handful of blind spots buyers and sellers should press on to ensure middlemen don’t take advantage of their trusted roles:

Arbitrary ‘buy-side fees’ from SSP/exchange providers

Second-price auctions can fall victim to undisclosed fees.

Non-transparent practice: Once tech provider receives all bids submitted for a given auction, it takes the spread between first price (ex: $10) and second price (ex: $5.01) and adds an arbitrary ‘buy-side fee’ (ex: $3) to the second price. Tech provider keeps that hidden fee.

Tech providers preference their own demand in the auction

When tech providers also sell media direct to buyers, it can be tempting to exploit auction insights to their own benefit.

Non-transparent practices: Tech provider receives all submitted bids and gives itself a 'last-look' to decide whether to beat the highest bid and win the impression for its own demand, and/or can monitor trends in competing bid logic or strategies and fill their direct campaigns opportunistically based on better competitive insights. Tech provider’s own demand maintains an advantage over other bidders, and can cherry pick impressions to arbitrage hidden profit.

DSPs buy inventory that has been pre-purchased from suppliers

DSPs access inventory across multiple sources and help buyers allocate spend objectively and efficiently. Buyers assume DSPs are free of commercial bias, and solely focused on campaign performance and spend efficiency.

Non-transparent practice: DSP pre-purchases publisher inventory, adds a markup and resells it to their clients at a profit. DSP is now financially incentivised to push its 'own' inventory on clients, and generates undisclosed profit on each transaction, in addition to charging tech and management fees (% of spend) for its services.

Video ad networks loop ads, sell bogus traffic on exchanges

Advertiser demand for premium video far outstrips available publisher supply. Premium publishers often sell-out and use tech providers for offsite reach extension.

The opposite is true with native in-feed inventory. The market is flooded with supply, and publishers increasingly rely on third parties to monetise unsold inventory.

Video ad networks have popped up to fill the gap, offering to fill 100% of publisher unsold native inventory. Much of their demand comes from publishers in need of reach extension, the rest from ad exchanges and programmatic buyers.

Non-transparent practice: Ad network inserts video player that loops ads (sometimes every 8-10 seconds), player initiates on page load and hides behaviour making it hard for fraud prevention vendors to track. Media buyers are charged for bogus views, which puts publishers at risk of audit, crediting revenue back to clients, and harming their reputation and client relationship. These networks also pass publisher URLs in their ad requests, so monetising unsold inventory with them can result in the recipient publisher also being blacklisted by advertisers.

What transparency practices do you see in the industry currently that are working?

Enough senior executives have spoken out where the key infractions should stay at the forefront as our industry moves forward. The most important practices for operators are vigilance and education. Ensure the right questions are asked and answered, understand the money flow, and remove ambiguity from contracts.

One can look to blockchain technology or the ads.txt initiative as potential solutions, but our business is still about people working together, anchored in trust, creativity, and results. You don’t need a chaperone if you understand what you’re doing and have good governance.

What do you think needs to happen, and what are the steps to finding balance in offering transparency at a fair price that satisfies both the advertisers’ ROI goals and makes it possible for tech companies to invest in innovation?

Buyers and sellers deserve complete visibility, and must do the work to ensure they get it. Remain curious, ask how middlemen make money, where do they take fees, how are they calculated, what percent of their business does each represent, etc. In the end, you will have a greater understanding of the supply chain, context, and a clear picture to evaluate options.

Chris Rooke, SVP Strategy & Operations, Nativo

Diligence will help our industry advance and preserve trust among participants. It will help the ecosystem remain well-lit and preserve good business practice across all parties.

What can advertisers, publishers, and tech companies do to better foster transparency?

A general code of conduct would be interesting, and is something we’re currently focused on, that we think will add unique value to the ecosystem. It would serve as a loose framework to certify vendors, and quickly bring issues to light. It can also serve as a building block for parties to establish their own rules of engagement. We see this happening in other areas of our industry and are excited to be on the right side of this movement. Look for upcoming announcements along these lines.

How do you think transparency will change over the next few years?

Like ad viewability, fraud-free guarantees, and now brand safety, transparency is table stakes. If you don’t already approach it this way, you’re on the wrong side of the issue. As our industry rewards honest, value-driven partners, companies with undisclosed business practices will fold or self-correct. The latter is already happening now that the lights are on. The key is to remain engaged on this matter which, in turn, will keep all market participants honest and on the straight and narrow.