The advertising stack is bloated because there are too many hands reaching for a piece of the pie. But as we add systemic measurement into the mix, the economics of programmatic begin to collapse. Call it the straw that breaks the camel's back.
But the problem isn't any single piece of the stack, it's the model itself.
Think of it this way: our industry has always prided itself on reaching the right audience, with the right message, at the right time, but what's missing in this equation is a sustainable price-performance ratio.
As the industry leans into more robust measurement, we're going to need to focus on price, and as we do, a new model will have to emerge. Here's how.
Why is the current programmatic model faltering?
The economics of programmatic have always been complicated, but the return of the walled gardens and new privacy laws have added additional complexity.
A typical media buy can easily have 15 or more vendors involved. As a recent Adalytics report made clear, vendor fees are highly variable and they really add up—in some cases reaching 98% of the ad spend. That puts the squeeze on data providers and publishers who were already squeezed. It also enables bullying behavior on the demand side.
And, sadly, it undermines quality because opaque audience lookalikes and high-volume, low-cost, made-for-advertising sites tend to do a better job of filling a greater share of ad buys. None of that is healthy for their premium competitors (not to mention for programmatic as a model) who need to invest heavily to produce quality content.
The obvious check to such behavior is transparent measurement. But adding what is arguably a higher core value capability into the mix means that the number of vendors grows even larger, pushing more buying into lower quality inventory.
The inevitable performance failure of campaigns, combined with bloated cost structure, could eventually break the economics of the current model.
We need to focus on programmatic's value
Digital advertising has struggled to support a sustainable media ecosystem. On the sell side, data and media publishers face existential threats to their business. On the demand side, advertisers still struggle to attain the one-to-one messaging that was at the heart of digital's promise from the beginning.
Stuffed into demand side platforms (DSPs), is an entire sub-industry of lookalikes, bid-optimization, cross-device, brand safety, anti-fraud, etc. Going tactic by tactic, there's plenty of value offered within those sub-tactics. But because each tactic comes at a price, the costs pile up, putting negative pressure on data and media investments to the point where quality and costs are working against one another.
