Big ad agencies are shoving ad-tech companies under the bus

The advertising agency giant Dentsu says it plans to work with fewer ad-tech middlemen when executing digital ad buys.
It plans on negotiating directly for ad space with major publishers as it looks to eliminate costly fees.
That's most likely bad news for a slew of ad-tech firms that are already trying to survive in a pressured, cluttered marketplace.

Advertising agencies are under intense pressure to make sure their marketing clients' budgets are being spent safely, efficiently, and effectively. So they're cutting out the middleman.

The ad agency holding company Dentsu Aegis Network, through its digital subsidiary Accordant Media, is looking to buy more ads directly from web publishers, cutting out several layers of ad-tech companies that have traditionally acted as a go-between in digital ad deals.

Kenneth Brinkmann, the executive vice president for marketing and business development at Accordant, told Business Insider that the company was pushing for a level of preferred access to ad space on several top media companies' websites. The company is promising its clients that these arrangements will reduce fees paid out to ad-tech middlemen, particularly a collection of companies known as SSPs, or supply-side platforms.

These ad-tech firms typically bundle together ad inventory from multiple websites and make that inventory — often coupled together with data — accessible to buy via powerful software.

kenbrink But according to Brinkmann, these SSPs and other ad-tech firms have for years charged advertisers exorbitant, often hidden charges. So his agencies are starting to offer their own digital buying tools for minimal cost.

"We are taking out pretty massive fees and reducing them by staggering amounts," he said. Marketers, he added, will "know exactly what you are getting and why."

Brinkmann predicts that most of the other major global ad agency holding companies will follow a similar path this year, embracing what industry insiders are calling supply-path optimization.

This is one of several major trends identified in Accordant's new Pulse report, which also breaks down the potential for blockchain in advertising and the regulatory climate in Europe when it comes to using data to target people with web ads.

"2018 will be the year where we will see a lot of new products in the market, which leverages direct publisher relationships and the power of scaled buying," the Pulse report says. This will effectively cut out the traditional sales-side platforms. Brinkmann predicted there would be a lot of consolidation in the ad-tech sector as a result.

Driving down hidden ad-tech fees has been a big topic of late. For example, recently Adobe announced it would provide more disclosure of what individual ad-tech companies were charging advertisers. AppNexus has made a similar pledge, while Rubicon Project has announced several public reductions in the fees it takes per transaction.

Essentially, Accordant is cutting these types of companies out of the equation and going directly to publishers. Brinkmann predicted that over time programmatic ad buying would become less fragmented and instead operate a bit more like TV, where a handful of giant ad agencies purchase ads for larger clients collectively from top networks, and negotiating clout really matters.

"This will be like going back in time a bit," he said.

While Accordant is promising to fight for its clients to not pay an "ad-tech tax," the agency's efforts are not purely noble. Pressure has been rising on ad agencies to better disclose how they spend their clients' budgets following a bombshell report a few years ago from the Association of National Advertisers that identified an overall glaring lack of transparency in the ad-buying business.

The report even contained allegations of agencies receiving kickbacks for ad deals, though no specific culprits were named.

More recently, top marketing executives such as Procter & Gamble's Marc Pritchard have made cleaning up the digital ad supply chain something of a crusade.

That transparency-first climate, coupled with advertisers' increased wariness of their ads ending up in digital environments that are not deemed safe, has ratcheted up the pressure on ad agencies to clear up how they execute buys.

"You just can't have any more black-box offerings," Brinkmann said.

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