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Increasingly, brands are working to forge direct contracts with their ad-tech partners—a relationship traditionally managed by their agency.
While brands in-housing programmatic capabilities has been going on for years, owning the direct contract is an increasingly in vogue tactic to gain oversight of the programmatic supply chain and more control of campaign data. But it’s easier said than done.
Momentum is growing around direct contracts. A recent Association of National Advertisers survey found that more than 70% of brand marketers plan to own direct contracts with demand-side platforms and ad verification providers, respectively, over the next year, if they do not already have such arrangements.
Media consultancy MediaSense has seen an increase of approximately 20% in clients owning ad-tech contracts in the past two to three years, said managing partner of strategy Ryan Kangisser.
“By having that direct seat with the DSPs, there can’t be any markups or bid shading,” said Rick Corteville, executive lead at Lenovo’s Global Media Strategy Center of Excellence. The company in-housed its contract with ad server AdForm earlier this year, and it is finalizing direct contracts with multiple DSPs and a clean room provider as part of a broader strategy to manage more programmatic buying directly.
“With AdForm, if we have the direct contract … we own the data,” Corteville added.
But not all practitioners agree that direct contracts are the best way to avoid waste in the programmatic supply chain, where only 36 cents of every ad dollar reaches the end user, the ANA report found. Owning direct contracts can be too complex for many brands, resulting in a lag in in-housing and many brands letting their agencies manage programmatic media buying.
The ANA study found that 52% of the 67 brand respondents owned direct DSP data access via their contracts. Advertisers without these contracts had more trouble participating in the study’s audit of programmatic inefficiency because it was harder to access their campaign data.
The trade body recommends that more brands own the contracts with their ad-tech providers, especially DSPs, to gain access to crucial data and to hold ad-tech partners accountable. One consumer packaged goods company saw a 47% improvement in CPM (cost per thousand impressions) efficiencies and a 37% boost in reach after in-housing its DSP contracts, per the report.
Direct contracts avoid markup fees
Agencies’ control of the ad-tech relationship stems from the days of linear TV and print media buying, when partnerships were much simpler and more ephemeral than those with tech partners, said John Donahue, partner at programmatic consultancy Up and to the Right. Now, giving the agency so much control would be like a food manufacturer not having deals with any of its suppliers or factories, he added.
“If you are allowing a third party to manage the totality of your raw materials, you are negligent as a client,” Donahue said.
One risk of agency-managed deals centers on the arrangements that some smaller ad-tech providers forge with agencies, whereby some agencies receive kickbacks that they don’t pass on to the client, said Mo Allibhai, senior analyst of advertising technology at Forrester.
“Agencies have relationships with DSPs. They’re able to non-transparently mark up these fees,” he said. “How much of that million [in ad spend] is going not to the media provider?”
A benefit of in-housing ad-tech contracts is owning the data processed in advertising campaigns, said Kangisser, adding that his clients signing direct deals want access to more signals upon cookie deprecation next year.
“When you own the contract, you have a direct relationship with the vendor, you can switch agency services without dissolution,” said Ana Milicevic, principal at programmatic consultancy Sparrow Advisers.
Agency partners avoid echo chambers
However, not all brands can manage the complexity of multiple ad-tech contracts, especially as tech providers often require quicker payment terms that are easier for agencies than brands to keep up with.
In a time of chaos, people want the expertise.
Mo Allibhai, senior analyst of advertising technology at Forrester
“Logistically, I can see it cause so much swirl in the system and delays,” Kangisser said, adding, “90% of what you want can be achieved by restructuring contract terms” within agency-owned contracts to give brands more transparency.
Brands can also lack the expertise in choosing the right ad-tech vendor—a particularly important decision at a time when cookie deprecation could scramble existing ad-tech stacks.
“In a time of chaos, people want the expertise,” said Allibhai.
While Lenovo is still on its in-housing journey, it’s also not ready to give up agency partners.
“I really enjoy working with our agency partners because they work across other clients,” Corteville said. “You don’t end up in the echo chamber of your own people.”
