The Great Exploitation from Large Marketing Service Companies
Purchasing and selling advertising space has developed into a profitable business for large marketing service companies; such as Publicis, Omnicom, and WPP, and others. Nonetheless, many advertisers are concerned about the online media buying, and the exploitations being made by impervious business methods; causing the agency groups many imminent complications.
Countless advertisers are now questioning the money-making methods used by these agency holding by the sale of digital ads -- the rapidest growth factor in the $500bn international advertisement market. They are particularly beginning to question the method by which the giant agency groups operate supposed trading desks. A primer to trading desks is available on the Kaizen Digital blog.
World Federation of Advertisers conducted a survey recently that suggests that much confidence that once these agencies once held by clients is diminishing and clients are not clear on the business models of their media trading desk.
The survey was based on responses of over 40 brands with yearly marketing expenditures of $35bn, moreover discovered agency trading desks usage had weakened by 15 percent throughout the past year. In the interim, independent trading desks not held by agency groups, the usage had surged.
The biggest media trading desk are Accuen of Omnicom, Xaxis of WPP, and Audience on Demand of Publicis.
Xaxis, the largest of the three listed, has gained the greatest amount of disapproval as the developer of a debated practice – arbitrage --. Which purchases ad space in large quantities or bulk, on its specific account, and then sells it to their client at a greater price. This is done so devoid of revealing the extent of the mark-up in price. Instead of just performing as an agent, this model transforms Xaxis into a merchant of what is thought to be highly-profitable for this advertising group. Technology is also constructed to set advertising to target at specific audiences by means of a massive trove of its proprietary data. (see how data is used in this post) The practice is being compared to an agency on steroids. As an apparent lack of transparency regarding programmatic media buying, and the margin used when reselling ad space has many advertisers peeved.
In the history, agency's standard practice was to offer clients a precise analysis of expenses paid for the ad space, as well as any fees associated for services provided. However, many other advertisers say that their members are more and more concerned with the methods used by WPP and others, and they are concerned that the traditional transparency agency model is disappearing.
Earlier this summer, Omnicom showed that Accuen was also trading as a principal instead of an agent. Omnicom also shared that the division has developed into one of the greatest-performing units within the group.
The third major ad group, Publicis, is currently marketing as that its of a more transparent practice, as opposed to its competitors. Audience On Demand states that it does not, and will not participate in media arbitrage. But, Publicis's competitors assume that it profits from its relations with media owners as well as technology organizations in methods not fully comprehended by its clients.
The agencies recently have gone on-record to say that they are always clear and completely upfront with all clients in regards to how the trading desk works, and that they will continue to provide clear details of the methods they have and will use.