Dive Brief:

• The programmatic advertising supply chain between marketers and online publishers sees about half the money spent by brands going to digital middlemen. About 51% of ad spend reaches publishers after various intermediaries collect their fees, while 15% disappears into the unknown, according to a study by the Incorporated Society of British Advertisers (ISBA), a U.K. trade group representing 3,000 brands.
• ISBA's transparency study found that 7% of programmatic media spend goes to media agencies, 8% to a demand-side platform (DSP), 10% to a demand-side technology fee, 8% to a sell-side platform (SSP) and 1% to a supply-side technology fee. More investigation is needed to determine how 15% disappears, per its report. ISBA pledged to convene a cross-industry task force to tackle the problem, per an announcement.
• Unilever, PepsiCo, Nestlé, Disney, GlaxoSmithKline and Tesco were among the 15 advertisers that participated in the study, while the 12 digital publishers included Bauer Media Group, Dennis Publishing, News UK, Haymarket, Guardian Media Group and Telegraph Media Group, per the report. ISBA collaborated with the Association of Online Publishers (AOP) on the study, which was conducted by management consulting firm PwC.

Dive Insight:

Unraveling the programmatic supply chain is a daunting task, but a necessary step in promoting greater transparency that will help marketers to better understand where their ad dollars are spent. It's discouraging that 15% of programmatic ad spend disappears somewhere in the supply chain, while only 51% actually reaches digital publishers that are on the front lines of audience development and engagement. The ISBA's report is likely to support efforts to improve transparency in the programmatic ad market, which was forecast to make up an estimated 69% of digital media spending worldwide and total $127 billion this year, per Publicis Groupe's media agency Zenith (whose December forecast was before the coronavirus pandemic dampened spending growth).

Unfortunately, ISBA's report may be underestimating how much ad spend disappears into the supply chain. The organization gave its 3,000 members a chance to participate in the study, and only 15 decided to share information about their ad spend. From there, PwC worked to unravel how much of the money reached digital publishers. The firm identified more than 1,000 supply chains, and matched 290 of them between the advertisers and publishers that delivered 31 million ad impressions.

Making the supply chain more transparent will require the advertising and media industries to develop consistent standards for data sharing between marketers and publishers. PwC found that relevant buy-side data from agencies and DSPs wasn't always readily available to advertisers, and that their use of verification tools for ad serving, fraud, viewability and brand safety was inconsistent. The firm recommended that advertisers and agencies work to better understand the supply chain, and participate in industry initiatives such as Sellers.json and OpenRTB SupplyChain object, both supported by the Interactive Advertising Bureau (IAB), to limit unauthorized reselling, among other steps.

The ISBA's call for reform echoes the demands of major advertisers like Procter & Gamble that for years have wanted to clean up the digital media supply chain. Marc Pritchard, the chief brand officer at the packaged goods giant, in 2017 spoke about the need to improve transparency, and last year called for an entire reinvention of the supply chain after the effectiveness of clean-up efforts proved limited amid rapid growth. He recommended the industry adopt five core principles that included steps to improve data sharing while also respecting consumer privacy. As the ISBA's study indicates, there's still a lot of work to do in cleaning up the programmatic supply chain.