Business Model Transparency Shouldn’t Be A Unique Selling Point

“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Sebastiaan Moesman, CEO at Improve Digital.

A lot has happened in the last year, and the programmatic industry is at a turning point: It must educate, control, check and adapt, or it faces serious consequences.

Procter & Gamble’s decision this year to pull out $140 million in digital advertising spend should be a serious wake-up call. It’s lamentable to someone who has been in this industry for so long that advertisers need to confirm that their ads aren’t just being clicked by massive server farms.

Digital advertising, being the most important form of advertising today, comes with according responsibilities, Marc Pritchard said last week at Dmexco.

I agree with Pritchard, and I see the discussion around transparency about people needing to take responsibility. To me, apart from viewability and combating fraud, the issue of business model transparency is one of the key areas in which this needs to happen.

Programmatic has its roots in the long tail and was created for advertising that no one wanted to buy. However, after almost 10 years, the time of “cowboy margins,” where companies can take what they want without many questions asked, if any, is over.

But revealing how their business models work is something that for many players in the industry means a substantial loss of income. Their investment and profit is based on seeing returns of what have become unsustainable margins.

For these companies to transform into transparent businesses, it will take time. We are already seeing a gradual adjustment in margins but no one expects swift turnarounds. Refusing to change their business models will cause for them to be left behind, if not now, then definitely in the long run.

Meanwhile, on the other side, advertisers have profited from very low fees and now, calling for improved and optimal inventory, they will probably have to pay more for it. And that’s something they’re not going to like. Advertisers will need to pay to be in a premium environment that is brand-safe with high-quality inventory. For this, the ad tech industry must step up and show that it can provide such an environment before advertisers will be willing to pay for it.

In the end, it all comes down to reliability and accountability. Even though our industry is built on tech, it’s the people who make a connection, who we do business with and ultimately who we need to trust to build healthy, long-term partnerships.

Fortunately, the pressure to do business in a transparent way is growing. Look at initiatives such as Ads.txt and the looming GDPR. What we need now is a tipping point where companies will make more profit by doing business transparently, instead of it being more lucrative for some to keep their partners in the dark with complicated contracts and business structures.

Transparency is a unique selling point right now, and it shouldn’t be. Having said that, with pressure from advertisers such as P&G, legislation and initiatives like Ads.txt, I’m confident that a transparent programmatic ecosystem is within reach in a not-so-distant future.

Follow Improve Digital (@ImproveDigital) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.