The Future of Agency Trading Desks Begs Frank Discussion

joannaoconnelrevised“Marketer’s Note” is a weekly column informing marketers about the rapidly evolving, digital marketing technology ecosystem. It is written by Joanna O’Connell, Director of Research, AdExchanger Research.  

In an AdExchanger interview with Brian O’Kelley, AppNexus founder and CEO, late last week, Mr. O’Kelley made a bold proclamation (well, he made many, but today I’ll just focus on one): Agency trading desks must effectively function like “ad networks” in order to survive long term. I wanted to lend my perspective on this statement by asking some critical underlying questions:

  • What does it mean to be an ad network? Mr. O’Kelley defined an “ad network” as, “A media company that makes money by selling media to agencies and buying media from publishers.”  While we could easily argue semantics until the cows come home, on balance, I’d say it’s a fair definition. The problem for ad networks these days is that “ad network” has become a dirty word associated with giant margins, with lack of transparency, with underhanded back-office dealings.  This is probably both fair and not: ad network stalwart ValueClick, in the face of sliding numbers, finally seems to be publicly jumping on the DSP bandwagon, while current IPO darling RocketFuel functions like an ad network, in as much as it’s managing the media buying and optimization on behalf of its clients. But I suspect those clients, for the most part, feel good about placing their money with RocketFuel because, presumably, it drives strong results.
  • What does it mean to be an agency? This is a question I asked myself with great frequency when we were building the Razorfish trading desk, ATOM Systems, back in 2008. The formal definition of “agency”, according to Merriam Webster, is “the office or function of an agent.” OK, well what does it mean to be an “agent”? Back to Merriam Webster: “a person who does business for another person – a person who acts on behalf of another.” Call me naïve, fine, but the early trading desk model was about acting on behalf of clients to buy and manage media in smarter, more innovative and more directly controllable ways. I wanted the agency to benefit, yes, but believed it could be done in a way that was based on shared trust and mutual benefit (i.e. listen Ms. Client, we really and truly do need to charge more for this because it’s really and truly more difficult and complicated. But if we invest in doing it right, you will reap the benefits in better efficiency and performance.)
  • Is there room for something in between? “Don’t call us a trading desk. We’re a programmatic media company.” So exclaimed Brian Lesser, CEO of massive agency holding company WPP Group’s Xaxis, on stage during AppNexus’ event.  (In fairness, he was responding to a question.) When I heard this I immediately thought – wait, what’s a programmatic media company??? That sounds neither like an ad network, nor an agency.  While the easy criticism is that it’s simply a semantics game designed to distance Xaxis from the increasingly scrutinized holding company “agency trading desk” moniker, my sense is that Xaxis has always been a little, well, different in its thinking,  messaging and approach relative to the other holding company desks like Publicis’ VivaKi Audience on Demand (AOD) or IPG’s Cadreon. But describing Xaxis as a “programmatic media company” feels materially different, almost like it’s creating a new category in between the traditional ad network and the traditional agency where buying massive quantities of inventory from publishers (through both RTB and traditional modes) and overlaying it with a mix of client and licensed data is the explicit strategy rather than a dirty little secret.

So, what is the future of agency trading desks? I’ve long believed that the agency trading desk model of centralized service – with agency teams as “clients” – has no long-term legs. It keeps the agencies themselves from really understanding the fundamentals of next gen media management (think audience buying, programmatic) and creates far too much separation between clients and the ones actually managing their dollars. But at the end of the day, it’s up to clients to decide the future of trading desks.  And no, this is not a cop out answer – it’s actually a call to arms. The goal should be for BOTH marketers and agencies to win, to have mutually beneficial, financially successful relationships. Perhaps the question then, should be – how to bring the benefits of an ad network business model to clients without undermining one’s role as “agent”? The answer may be, you can’t, at least not while inside the walls of a holding company. But, right now, we’re in an awkward in-between stage where the rules of client/agency relationships have the potential to evolve, but no one is steering the ship.

As always, I share my perspective in an attempt to drive meaningful dialogue and keep moving us forward. I invite all you marketers out there to do the same – lend your perspective! Remember, it’s your money!


Follow Joanna O’Connell (@joannaoconnell ) and AdExchanger (@adexchanger) on Twitter. 

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  1. JIm Spanfeller

    I very much agree with where Joanna ends up here. Clients do indeed need to get more informed and more involved in the programmatic space in general. Historically, the two players most hurt by the “underhanded back-office dealings”, to quote Joanna, were the publisher…but also…the marketer. The huge percentage of spend syphoned off by the middle of the ad tech stack has had a very debilitating effect on our business. It has given rise to publishers producing less optimal ad placements, down right fraud and the opt discussed, appropriately, bot networks.

    Some have suggested that sellers need to fix this while other have suggested that buyers are responsible. The reality is that both publishers AND marketers need to get into this and the sooner the better.

  2. Joanna,

    As always a thoughtful look at a key industry question. Like you, my POV is informed by having been inside the agency and trading desk business (having launched and initially leading Accuen for Omnicom). My POV is also informed by having been in the search (the first programmatic marketplace) business and having to deal with these exact same questions.

    What I’ve learned from those days is that the right answer is a “yes and” solution. There is immense value in a central organization that ensures the company at-large has industry thought leaders, is current on the latest trends and evolutions, has strong capabilities in vetting technology and partners, and generally speaking maintains a team of experts in a newly formed and fast moving segment of the industry.

    So yes, a centralized model provides value. And, its very important that the central structure continues to do a better and better job of being truly integrated into their sister companies. It makes complete sense for each agency account team to want programmatic experts at their disposal and to have that expertise as “part of the team”. This is a win for the sister agencies and to the key point a win for the client that gets direct access to those experts as well.

    We did this all the time in my search days. In many cases, our search account leads sat with the rest of the client account team that was comprised of multiple agencies. Day to day it was clearly helpful that these experts were with the rest of the account group. And, it was also critical that these experts were part of the centralized team to ensure they were kept up to speed on the latest and greatest evolutions in their area of specialty.

    I’m confident that the evolution of programatic expertise will generally follow this same trend. The exact future of the business model of the trading desks (which will definitely evolve) shouldn’t blind us from the important point the people that make up these teams are truly at the forefront of the industry and that the mission of these buy side solutions has been to provide the end marketer more control and better performance from their media investments.