'Trading places: Why Agencies Need to Look Further Than Their Own Desk', by Dominic Trigg, MD Europe, Rocket Fuel

Agency trading desks emerged to cope with the ever-increasing amounts of customer data and ad inventory presented by the advertising network environment. The ad trading ‘arms race’ had begun in earnest, but nobody knew quite how complicated it was going to become.
Five years on and the nascent ad exchange model has taken this complexity to an entirely new level. Such is the magnitude of available data and breadth of choice involved in making an informed purchase decision, that technology is increasingly taking the baton from the once human-dominated world.
Manual bidding is becoming an anathema to this environment. The industry is starting to wake-up to this fact, and its technology-led future, but this is a difficult transitional phase.
Open ad exchanges are undergoing a meteoric ascent and are now snapping at the heels of the declining ad network model. With more and more inventory owners throwing their hats into the exchange world, we are well on the way towards gaining an agnostic view of all available online ad inventory – advertising Shangri-La.
The breadth of inventory available via the exchange model grows by the day, creating a significant opportunity for agencies that are brave enough to seek out innovation in this fast-evolving market.
The rise of the geeks
Online advertising is increasingly becoming a technology-driven industry, led by artificial intelligence and data-driven scientific modelling. These technologies are continually developing in order to keep up with the fast-moving digital world.
Real-time bidding is allowing advertisers to target audiences live, based on numerous demographic and behavioural indicators, and at all stages of the buying process. In comparison, some agencies are still buying ad inventory in neat multiples using out-dated and imprecise manual bidding tactics.
Via most exchanges, ad planners have a selection of 12 attributes, with a total of 145,710 segments of data available, on which they can base their decisions. The number of different possible combinations comes to 504,216,244,224,000,000,000,000,000. If it took a planner 10 seconds to review each option, it would take 119,764,735,724,180,000,000 lifetimes to make the best decision.
Without intelligent technology, many are incapable of scientifically deciding how much an impression is really worth and which ads will reach the best audiences at the point at which they are most likely to be receptive or convert.
As a result, clients end up paying too much for some space and missing out on other opportunities. Open ad exchanges lead to realistic inventory costs and more efficient spend, offering agencies a huge competitive advantage.
The writing on the wall
To offer their clients the best return, agencies need to use programmatic tools that allow inventory to be traded by the millisecond, so that the right online audiences see the right ad at precisely the right time. They will soon have no choice other than to use this powerful technology: as marketing budgets contract, and brands are becoming increasingly savvy about the best tools for the job.
The increased transparency of ad exchanges is also making poor-performing technology and buying strategies difficult to hide. In this environment, there is nothing to stop brands testing out an open RTB platform, and realising the difference it makes to their ROI.
Agile agencies that are willing to work with expert partners, rather than sticking exclusively to their own platforms, will offer a significantly more attractive overall package to clients — keeping up with changing expectations and offering better value.
The challenge
Brands and marketers are increasingly interrogating their advertising agencies about the complex buying process and ensuring that they know exactly how and where their money is being spent.
They are asking questions like, how much money is being made by the agency through their trading desk? What mark-ups are being included in costs? What are the costs for service, data and technology? How can advance buying really deliver the best results when RTB is offering scientific, real-time analysis of the online buying environment? As their knowledge grows, so too do their expectations.
At the same time, the online journey is increasingly complex with the addition of a seemingly endless stream of channels and options to engage with brands. As a consequence, agencies need to focus on unlocking the value of the advertising ecosystem, or risk clients looking elsewhere for better results.
The future
Advertisers must ready themselves to answer their clients’ tough questions and be transparent about when and where they are using their own trading desk and why. They must be prepared to embrace the alternatives where they offer a better solution. Open ad exchanges are the model of the future for all digital advertising; agencies that fail to adopt progressive solutions will find themselves struggling to keep pace with the industry and client demands.