The road to trust and transparency in programmatic

Japan has long been a world leader in automation. Back in the 1970s, when US car manufacturers were merely toying with the idea of robots replacing humans on production lines, industry leaders in Japan such as Honda were already sourcing them by the hundreds. Not only did machines increase productivity, but they also raised quality standards, offering a new level of precision. A similar story is now underway in advertising.

Driven by algorithms and machine learning, programmatic buying and selling is growing the digital ad market, responsible for 37% of its revenue last year. In fact, by 2020 it is estimated the programmatic market will be worth $2.54 billion annually in Japan alone. But while automation is driving market growth, is it following the automotive industry’s path and also improving quality along the way?

A troubled state of affairs

Programmatic technology is inherently complex. As the LUMAscape demonstrates, the marketplace is crowded with a variety of technology companies, from ad exchanges to data management platforms (DMPs), supply side platforms (SSPs), and demand side platforms (DSPs). In addition to a crowded market, the intricacies of the technology and how each partner fits into the supply chain means that it can be difficult to know exactly where advertising money is spent. As a result, of the $63.4 billion invested in programmatic last year only $17.8 billion—just over a quarter—made it to the working media level, according to Warc.

Yet while media buying was undoubtedly easier to get to grips with before programmatic was adopted in the early 2000s, it was not as productive. Programmatic has delivered almost unimaginable growth in the sector, and is here to stay. It is therefore vital the industry preserves growth by finding a way of bringing clarity and transparency into the exchanges where these transactions are taking place.

Marketers around the world are beginning to come to this sharp realisation too, with 41% saying that finding a way to increase transparency with programmatic partners is a major priority for this year.

What needs to be done?

With so many players in the ecosystem, and each having a unique stake in the future of programmatic, delivering transparency and elevating quality standards across the industry must be a group effort. Every stakeholder throughout the supply chain must do their part to grow trust in the ecosystem.

One of the most critical ways this can be done is by leaning on emerging industry initiatives and quality standards. Last year, the Japan Interactive Advertising Association (JIAA) took a game-changing step towards making this a reality by becoming part of the worldwide Interactive Advertising Bureau (IAB). A few months later, the bureau released details of its ads.txt project, a global initiative created to eliminate the threat of domain spoofing. Approximately 20% of publishers in Japan are now using ads.txt and there is a clear indication for which technology companies are listed as trusted sellers across the majority of publisher domains. With the IAB taking root in the region, we expect adoption to continue to grow.

Beyond leaning on industry standards, here’s a closer look at how buyers and sellers can do their part to ensure a trusted and transparent programmatic marketplace:

• Publishers, app developers and media companies
  With the investment into programmatic by brands and agencies playing such an integral role in the programmatic equation, the onus is on other players to continue to form closer relationships with them and keep lines of communication open. In particular, publishers can help deliver greater transparency by sharing the information buyers need to demonstrate their return on ad spend. This may include information about preferred partners, like insight about the exchanges they work with so agencies and brands can be confident they have the best provider for inventory, details about the types of third party viewability tools they leverage and also important information about their inventory, such as ad view data.
  
  By sharing this knowledge with buyers, publishers can expect an enhanced level of trust and can help move the industry-wide debate from price to value, enabling marketers to understand why they should invest in quality inventory rather than focusing on cost alone.

• Buyers, brands and agencies
  
  Brands and agencies can use their buying power to make a real difference to the level of transparency in programmatic today. They should thoroughly vet all technology partners, learn about and understand their business models before agreeing to partner, and then hold those technology partners to basic contractual obligations around fair market and transparency.
  
  Part of these discussions should include outlining explicit fee arrangements with no hidden costs, a fully auditable programmatic supply chain, and upfront disclosure of any business arrangements such as rebates that could influence spend. Finally, they should require clear rules around auction mechanics—with partners disclosing whether the types of auctions being run—and forbid biased mechanics such as non-transparent bid-caching or container preferencing. If buyers refuse to invest in programmatic unless these conditions are met, technology partners will have no choice but to step up to the mark.  

The future of transparency

Transparency is perhaps the biggest issue the industry is facing. No single partner will be able to rectify the problem alone, rather the solution depends on a collaborative effort across the ecosystem to agree more open practices and create a new operating standard. Industry organisations, such as the IAB, will be vital in creating agreement around this process, but agencies, publishers and technology partners must all play their part.

In fact, progress is already being made in some areas as evidenced by the development and introduction of the so-called programmatic principles through an open letter from six of the leading ad exchanges. The principles outline clear business practices for technology companies and programmatic transactions, and will eventually be refined and standardised to serve as a guide for advertisers and publishers looking to make smarter decisions about their partners. Action like this will continue to move the programmatic advertising sector closer to a fully trusted and transparent marketplace.

And while programmatic is already making headway in digital, if these changes continue to be made to improve overall transparency, it is only just the beginning stages of how this technology will transform the rest of advertising. Ultimately programmatic will open up new opportunities for consumer engagement across TV, out-of-home, and even in-car advertising, but this is only possible if trust and total transparency can become the norm, ensuring the long-term sustainability of the industry.

Satoru Yamauchi is director of partner services at OpenX in Tokyo.