What’s surprisingly missing at Dmexco this year?
Hint - the rise of SaaS-based models in digital advertising
Cedato’s “Road to Dmexco Series” reviews program highlights, trends and topics leading up to digital advertising’s main event. See below our second post in the series.
In our last article in ‘The Road to Dmexco Series’ we focused on the breadth of topics and debates featured at this digital advertising ‘Super Bowl’. Video in particular is taking center stage at Dmexco 2016, and is dominating the conversation. The focus on video is validating a ‘Video-first’ future, except that one essential piece of the puzzle is missing!
A case against hiding media arbitrage in technology fees
Despite the abundance of advertising technology topics, there is an elephant in the room. Not one conversation at Dmexco 2016 is willing to challenge the standard revenue share model, the weaknesses of soft metrics, and the looming need to transform to a digital economy.
Digital advertising business models are stuck in the Don Draper time warp. The absence of this discussion is odd, considering the prediction that by 2021, marketing leaders will spend 75% of their budget in digital channels (Salesforce report on ‘The State of Marketing’). With the digital media evolution, the fragmentation of technologies and the inevitable rise in ad fraud and ad bot traffic, a percentage-based fee is starting to lose its relevance.
A SaaS-based, media agnostic model offers more transparency, more control and less risk in applying programmatic technology. Simply put, it offers a better alternative, yet most of the industry would rather continue to take advantage of the inventory arbitrage and programmatic margin opportunities, often hidden in technology fees. Just as marketing technology players took a brave step forward, its time the ad technology space adopted Software-as-a-Service for extracting technology fees.
Revenue share is particularly damaging in video technology. In the video technology sphere, and in particular in programmatic video, transparency and ad fraud issues are even more severe, as conveyed in the comScore 2016 report. In this marketplace transparency is complicated by the amount of intermediaries, the fragmentation of different video ad technologies across separate silos, and the adaptation demands resulting from an ever growing range of mobile devices and operating systems.
Time to disrupt a redundant model, let the industry scale and reach its full potential. Overall, ad-tech vendors aren’t always clear to marketers about costs, placements and data. Many prefer a policy of ‘what you don’t know, you don’t know’, despite growing objections voiced by marketers. The mounting frustration was recently indicated in a Forrester – ANA survey this year. Here the significance of transparency on ad-tech trading effectiveness grew from 37% in 2014 to 64% in 2016, sparking a debate on financial transparency in the US, according to an Accenture report based on the ANA results.
There is no denying that despite the lack of transparency, the lags in loading times and compromised viewability, the video ad-tech space is growing fast, but it is far from reaching its full potential. The industry needs to explore every opportunity for eliminating technology barriers, boosting brand safety and replacing poor practices.
A SaaS-based model, aligned both on the supply and demand side, that offers a simple and consistent monthly fee, can provide a media agnostic service with complete transparency. By choosing a media agnostic service, customers can better control their inventory and campaigns.
The decision to implement a SaaS-based model frees ad technology companies from trading diversions and enables them to focus on technology innovation, customer service and support. The shift also makes it possible for technology companies to steer away from potential conflicts of interest with partners and avoid the ‘coopetition’ trap.
Video technology leader Cedato (www.cedato.com) enables the delivery of new native video while significantly lifting viewer engagement and business results. Despite the temptation, the company chose to implement an open flat-fee SaaS-based model instead of the standard revenue share route. The decision has delighted partners, disrupted the market and expedited the company’s traction.
Looking ahead, advertising technology players will need to evolve and consider a SaaS model. The choice will serve them well to restore faith, increase value to marketers and publishers and gain long-term traction. A clear win-win for everybody.