The biggest problem in programmatic OOH that no one is talking about is transparency, and specifically transparency around economics. Perhaps that’s because programmatic is still a relatively small fraction of the total OOH market or because programmatic OOH is growing so rapidly that the focus is mainly on top-line growth rather than the details underneath it. Or perhaps it’s because programmatic is still relatively new to OOH and media owners simply aren’t asking the right questions.
Either way, the fact remains that many OOH media owners are not getting their fair share of existing programmatic OOH spend, due to non-transparent practices within some of the technology platforms they use.
I’ve written about this problem before. It comes about because some platforms, especially those that play both sides of a transaction as both a DSP and an SSP, engage in non-transparent arbitrage. The example I previously illustrated was of a buyer making a $10 CPM bid for inventory, but the two-sided platform communicating a $3 CPM bid to the media owner, pocketing the $7 difference. The media owner doesn’t know what the buyer actually bid, and the buyer doesn’t know what the media owner actually received. The media owner may be happy to realize a $3 CPM for inventory that would otherwise be unsold, but this scenario clearly destroys potential value for both the buyer and seller.
Often referred to as arbitrage, bid manipulation, or hidden fees, such “non-disclosed” practices, as labeled by the ANA, were common in the early days of programmatic in other channels like online and mobile. Unfortunately, they are still common in OOH today. This is especially true when a platform controls both sides of the auction as a DSP and SSP, and often occurs in the context of so-called “open exchange” or “open auction” transactions (which is ironic, since open auctions, when actually conducted openly and fairly, should not entail any such practices).
A more sophisticated version of the scheme involves a two-sided platform spreading a campaign budget across different media owners in a manner designed to maximize the arbitrage, while maintaining the appearance of offering “premium media.”
For example, let’s say a two-sided platform works with premium media owners A and B who both charge $8 CPM for their inventory, and one low-cost media owner C who is happy to realize $1 CPM for their inventory. If the platform is controlling both the buy and sell sides of the transaction, then for a given campaign it might allocate only 15% of the budget to each of the two premium media owners at $8 CPM (realizing a $2 CPM arbitrage, plus fees on the $8 CPM), but allocate the remaining 70% of the budget to the low-cost media owner at $1 CPM (realizing a $9 CPM arbitrage, plus fees on the $1 CPM).
In that example, most of the budget ends up as profit for the two-sided platform and most of the impressions run on the low-cost media owner C. Yet, the platform can tell the ultimate advertiser with a straight face “you spent your budget in full, on a plan that included premium media owners A and B.”
What are the telltale signs a media owner can look for to discern if these non-disclosed practices are happening? There are three:
1. Are you seeing year-over-year programmatic spend that is flat or down? You shouldn’t be. eMarketer says programmatic OOH spend in 2022 roughly doubled vs. 2021, and our data is line with that, or better. If you’re not seeing significant year-over-year growth, it could be because of platform partners engaging in non-disclosed practices.
2. Are you seeing materially lower CPMs in “open exchange” or “open auction” transactions as compared to your direct deals? You shouldn’t be. Our data shows that buyers are willing to pay similar prices regardless of the transaction type, so a lower CPM could mean that arbitrage is happening behind the scenes.
3. Are you seeing a smaller share of budgets from certain advertisers and campaigns than you think you should be getting? That could result from platform partners engaging in the allocation scheme described above. It could be that your premium brand is being used to justify spend ending up in someone else’s pocket.
The solution to these non-disclosed practices is simple: daylight. Force your partners to disclose full transparency around economics for all transactions, including private deals and open auctions, all the way up to and including the ultimate price that is seen by the entity doing the buying.
If they do that, you can rest assured that you are not missing out on any spend. If not, it’s possible that non-disclosed practices are going on behind the scenes, at the expense of your bottom line.