Understanding the Programmatic Value Chain

The Programmatic Supply Chain

Do you use pre-bid or post-bid blocking? What cost model is being applied by your third party data providers? Are you paying more for your DMP or your viewability measurement? Is your agency handling your campaign on a self-service or managed-service basis?

If you can’t answer these questions about your programmatic activity, you likely don’t have a complete view of how much of your buy is allocated to executional technologies and services vs. inventory.

And you’re not alone. In the rush to take advantage of the unprecedented level of control and efficiency that programmatic tools afford, many things have conspired to make it more difficult than ever for advertisers and publishers to deconstruct their programmatic supply chain: an exploding number of ad technology products and services, new cost models, and an evolving patchwork of bundled buy-side offerings and solutions.

The problem? These executional costs aren’t exactly peripheral nickels and dimes – they’re estimated to represent over half of advertisers’ programmatic expenditures (according to the 2014 IAB and PwC Programmatic Revenue Report issued last summer). This equates to millions of dollars of media expenditure on services that are not always well understood by the folks paying the bills. Moreover, this complexity has also created confusion between buyers and sellers about the ad technologies being used by each side (and thus the cumulative fees before publishers’ net CPMs are realized). This creates a discrepancy between buy-side and sell-side inventory valuations, which has the potential to erode trust and liquidity in the marketplace.

Ad technology and their associated costs play an important and necessary role in driving infrastructure, research, and technology developments within the digital supply chain. But, as with any large investment, a degree of transparency is needed to ensure proper cost management, and evaluation systems are in place to ensure investment decisions are being made wisely.

It’s with this in mind that the IAB Programmatic Council built an online fee transparency calculator to help the marketplace understand the relative value of their programmatic tools. Given a user’s basic media plan parameters (channels, budgets, CPMs, and cost models), the tool cleanly breaks out the costs of each of their ad tech layers as both a hard cost and as percentage of the user’s eCPM, and helps users to easily identify the overall budgetary impact of adding, removing, or changing technology solutions.

We hope this calculator and companion report describing programmatic intermediaries will be a helpful resource for individuals seeking to better understand and control their programmatic investments.

If you have any questions or suggestions about how this tool could be improved, please feel free to reach out to me directly at [email protected].

View the Programmatic Fee Transparency Calculator