Time For A Trading Desk? Consider These Factors

GurbakshChahal“Data Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Gurbaksh Chahal, CEO & Founder of RadiumOne.

Marketers are accustomed to investing quite a lot of capital to build their core audiences. Until now, that’s mostly meant collecting mounds of data from multiple sources such as agencies, in-house metrics, marketing analytics companies and the social web, analyzing this data for trends and relevant insights before extracting the actionable information and deciding where to invest future marketing dollars.

But these old-school tactics are quickly being replaced (or at least augmented) by more nimble methods – agency trading desks, and technology such as advertising platforms that can combine marketers’ first-party data with additional social data sets to help hone and streamline audience-targeting strategies. Agencies are increasingly turning to platforms to help them effectively manage and parse through piles of mismatched and incomplete data sets, so they can help marketers better reach their audience in a programmatic landscape.

If you’re considering the trading desk model, you’re certainly not alone. According to recent research from OpenX, 71% of publishers and buyers trade ads programmatically, and many predict double-digit revenue growth this coming year.

And it’s no wonder; manually culling through multiple data sets is tedious, time-consuming and ultimately unscalable as the mounds of advertising-specific data grow into mountains. Meanwhile, picking the right ad tech partner can turn data gleaned from social conversations, predictive algorithms and aggregated display-performance metrics into a holistic view of consumer ad behavior across both desktop and mobile platforms. This new information, combined with a brand’s existing data, can uncover new audiences, optimize future campaigns and pinpoint customer intent across the entire Internet.

But with so much at stake, marketers have plenty of pros and cons to weigh when picking their partners. Regardless of where you are in the process of evaluating the trading desk model, here are some thoughts to consider before moving forward with this integrated approach.

Agency Trading Desk Pros:

  • Better Targeting. Agency trading desks can target people, matching certain criteria on a one-to-one basis, rather than taking the traditional approach of packaged impressions. Agencies create a list of attributes that define the desired audience behavior and then partner with a DSP that has algorithmic bidding capabilities to match inventory with audience attributes.
  • Better Insights. Trading desks can provide deeper data analysis to reveal more insights that can contribute to the effectiveness and efficiency of the ad buy, combining online and offline marketing initiatives.
  • Better Integration. Working with agency trading desks at one’s digital media agency offers more avenues for collaboration and seamless integration of services.

Agency Trading Desk Cons:

  • Conflict of Interest. Agency trading desks act simultaneously as both agent and vendor, which may cause issues that would otherwise be resolved with two-party involvement.
  • Lack of Transparency. Clients have little insight into the actual process of buying and selling and place extreme trust in agency trading desks. In many cases, clients may not even be aware that their digital ad buys are being executed via trading desks.
  • Double Charges. Skeptics of the trading desk model have voiced concern that they are paying their agencies to manage media and then paying them again for the agency-relating services offered by trading desks.
  • Media Mark-Ups. An agency trading desk may buy media at their own risk and then resell that media to clients at a premium. Due to the conflict of interest, there are concerns about the trading desk also functioning as the client’s agent.
  • Internal Mandates. Some agencies and holding companies mandate that all network-based transactions can only be executed through their internal agency trading desks. That raises the question: Are media agencies selecting the trading desk option because it represents the best option for a client, or because it is owned by their parent companies?

In order to avoid the conflict-of-interest issue and the lack of transparency of working with a trading desk, consider working with directly with programmatic ad partners to manage your next campaign. You might be surprised at the insights and data you are able to uncover, which can be looped back into future campaigns. Alternatively, imagine what an agency trading desk can do with this combined powerful data set to help make smarter paid-media decisions. Whatever you decide, the important thing is to find a way to activate the pile of data you already have at your fingertips.

Follow Gurbaksh Chahal (@gchahal) and AdExchanger (@adexchanger) on Twitter.

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  1. The other Con of Trading desks is that ads are served trough DSP’s on trading desks. in which bids are entered by humans rather than a computer algorithm. The human element doesn’t allow for the true advantage of RTB/Programmatic platforms – Bidding/Optimizing in real time like some of the top players in the Online display space can (Quantcast, Rocket Fuel, Tribal Fusion, Etc.)

    Trading desks don’t allow for cookie based bids and optimizations based upon an individuals likelihood to perform the goal action, they only allow for grouped bids based upon somewhat stale 3rd party data or 1st party retargeting data. that 1st party data is only so helpful and generally available to any other RTB partner you could work with as well AND retargeting is much more a symptom of poor last click attribution model rather than intelligently bidded display advertising.

  2. Gurbaksh asks some pertinent questions about potential conflicts.

    It’s worth also pointing out under ‘cons’ that to capitalise fully on their holistic consumer view, marketers need their agencies to offer a similarly holistic view of platforms. This isn’t typically achievable.

    DSPs and exchanges have strengths and weaknesses and that no two are the same. Agency trading desks typically work across 1 platform or in some cases 3 platforms (if you are lucky) but it’s not enough to allow every ad tactic to be leveraged within a designated platform. All too often it’s ‘one campaign, one platform’ which as an approach has performance limitations. It’s important to acknowledge that the technical and operational logistics of cross platform are cumbersome but when looking at performance the upside is most definitely worth it.