Four Reasons Why Agencies Are Working With Fewer DSPs

“Consolidation on the SSP side removes the argument that we have to operate all DSPs to get the best reach,” said Oscar Garza, head of media activation at Essence.

Master of one

As holding companies disbanded their trading desks and agencies started to take on self-serve programmatic buying, they began consolidating around fewer platforms.

Now that agencies are running programmatic themselves, they’re realizing the benefits of consolidating.

“We can make longer-term commitments with and co-develop software or data products,” said Justin Scarborough, programmatic media director at PMG. “We can focus resources in areas we know are going to have long-term outcomes.”

For PMG, which has custom data products but limited engineering resources, integrating with a bunch of DSPs isn’t scalable, Scarborough said. “But if we can do it with three, and those three are 90% of our activity, that’s a benefit for our clients and us,” he said.

Despite being a bigger agency backed by GroupM, Essence usually uses just two DSPs per client, depending on their needs, Garza said.

“Access to proprietary data and inventory are primarily why you pick the DSPs, in addition to connection to a data management platform and a first-party data set,” he said.

Most clients need Google’s DoubleClick Bid Manager for access to YouTube inventory, while retailers want to use Amazon’s DSP to access the retail giant’s data. Meanwhile, MediaMath and AppNexus allow buyers to bring their own algorithms and The Trade Desk has unique access to inventory.

While most agencies think consolidation has been positive, a downside is being beholden to fewer platforms for service and stability, Scarborough said. Going all-in on one platform can turn out for the worse.

“If one platform goes down or there are bugs, which at this stage in the game still happens across every DSP, you’re in a bad spot if you don’t have options,” he said. “If you’re overly reliant on the infrastructure of one partner, and they decide to change something, that could have implications for your business.”

The marketer push

Marketers are also influencing DSP consolidation. As they take a more active role in deciding which DSPs they want to use, they’re winnowing down their list of partners, Greitzer said.

“Four or five years ago, the agency or trading desk was driving the DSP buy/no buy decision,” he said. “Today, half of our marketers take a very active stance in that process, and the other half are happy to be involved.”

As both agencies and marketers have gained programmatic experience, they’ve realized some of the dangers of buying on a handful of DSPs, like bidding against oneself and driving up prices.

“Brands are definitely taking a more proactive view of how they manage and interact with their audience,” Greitzer said. “They don’t want to compete against themselves. Consolidation on a handful of platforms allows you to manage that effectively.”

Sell-side consolidation

Consolidation of sell-side tech has also pushed agencies toward fewer buy-side partners.

Before publishers started implementing header bidding, they would stack their inventory across multiple SSPs and buyers would maximize their ability to bid across those SSPs by using numerous DSPs. But as header bidding removed that waterfall structure and exchanges began moving to a first-price auction, the need for multiple DSPs started to wane.

“With multiple SSPs, you want to give each impression the maximum opportunity to be sold,” Garza said. “Now, we’re seeing consolidation of those auctions and on the SSP side, which removes the argument that we have to operate all of the DSPs to get the best reach.”

According to Scarborough, however, trends on the sell side haven’t so much consolidated DSP use as they have freed up more inventory for other DSPs to access – and created a more level playing field with Google.

“Header bidding has leveled the playing field a little bit, but I don’t know if I’d say that has led to consolidation,” he said. “If anything, it makes us feel better about buying inventory through a non-Google DSP.”

Margin grab?

As agencies are squeezed by cost-cutting clients and slow growth, they’re finding efficiencies in working with fewer platforms by cutting down on the ad tech tax.

“The more you consolidate on a single platform, you can use it to lower fees and gain certain efficiencies,” Garza said.

When programmatic was run as a managed service, DSPs were taking huge margin from agencies for operating their spend. Agencies can avoid that now by pushing for more transparent and closer working relationships with preferred partners.

“It’s hard to police the margins managed-service providers are taking,” Scarborough said. “Consolidating with one or two partners and forcing them to disclose their fees is something we’ve been pushing for a while.”

But for the larger holding companies, consolidating with DSPs shouldn’t be seen as a margin grab, Greitzer said.

“There is no play in the margin game on the agency tech side of the world.” Greitzer said. “Consolidating dollars might get you a lower rate with a DSP, but you’re going to pass that rate through to the client. That’s table stakes today.”

This post was syndicated from Ad Exchanger.