Programmatic Spend: Only 36% Reaches Targeted Consumers Due to Cost Waterfall
Marketers are missing out on $22 billion in efficiency gains, as only 36% of programmatic spend actually reaches consumers due to the 'cost waterfall' This represents a significant opportunity for improvement in the open web market
Article Brief:
The Association of National Advertisers’ (ANA) updated assessment of the channel reveals that a substantial portion of the funds allocated by marketers for programmatic advertising is wasted on expenses such as fees and questionable or nonviewable web traffic.
The trade group’s latest report, a follow-up to the June release, illustrates that only 36% of every dollar that goes into a demand-side platform (DSP) actually reaches the end consumer. The remaining amount is lost in what is referred to as a "cost waterfall." Ad-tech transaction costs consume 29% of that spending, while 35% is wasted on unmeasurable or low-value environments such as made for advertising (MFA) sites.
According to the ANA's comprehensive findings, marketers could potentially save $22 billion in efficiency gains by implementing more hygienic programmatic strategies. This amount represents a quarter of the estimated $88 billion value of the open web market.
Article Insight:
The ANA recently released an "enhanced" report on programmatic advertising, spanning 120 pages. The report highlights ongoing transparency issues and introduces updated statistics on wasted resources within the channel, as well as the potential benefits of industry-wide improvements. Brand marketers are also provided with more detailed guidance on utilizing inclusion lists, optimizing supply-side partners, and engaging in private programmatic marketplace deals.
The ANA has made progress in its efforts against MFA sites, which use sensationalism and clickbait to generate traffic and earn advertising revenue. Surveys conducted in September and October revealed that 21% of marketers currently monitor MFA activity in their programmatic campaigns, with 33% planning to do so in the future. Additionally, agencies have increased their focus in this area, as seen with WPP’s GroupM media investment arm partnering with Jounce Media to provide increased protection against MFAs. Despite these efforts, MFA ad supply accounted for nearly 30% of all web auctions around the middle of the year, up from just 5% in 2020, as reported by the ANA. On average, advertisers in the research allocated about 15% of their programmatic budget to MFAs, and some directed up to 42% of their budget to junk domains.
The ANA has also emphasized the need for marketers to streamline their programmatic spending by working with fewer partners and reducing the number of websites used for ad placements. This is due in part to a lack of industry knowledge, with only 46% of marketers tracking the number of websites used for programmatic campaigns.
According to the ANA, the average campaign currently runs on 44,000 websites, resulting in diminishing returns. The report suggests that working with 75-100 reputable sellers that reach quality websites would achieve better outcomes and reduce fraudulent or non-viewable traffic. The ANA's previous report had suggested that a few hundred websites would be sufficient.
ANA leadership emphasized that marketers should be more proactive in managing and understanding the data used in programmatic advertising.
"Marketers need to improve their data management skills," stated ANA President and CEO Bob Liodice. "It is crucial for them to also enhance their ability to secure log-level data, which is crucial for effective decision-making and driving growth through programmatic activities."
The ANA partnered with 21 marketers across different industries to reveal these findings. Participants included Mondelez International, Molson Coors, Walgreens, State Farm, Shell, and Nissan. The project also involved collaboration with Lemonade Projects, TAG TrustNet, Reed Smith, Kroll, and various ad-tech and supply chain companies.
