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WFA: independents step up programmatic challenge to agency trading desks

Agency trading desks continue to be the dominant model for programmatic ad buying, used as the principal approach for nearly 40 per cent of the world’s biggest brands, according to new research by the World Federation of Advertisers (WFA).

However advertisers are demanding a new kind of relationship that provides significantly improved control and transparency, with nearly 90 per cent reviewing and resetting contracts and business models.

The results are based on a survey of 59 WFA member companies representing 18 industry sectors with a total global ad spend in excess of $70bn. All are spending increasing amounts of money through this channel with an average of 16 per cent of digital ad spend now programmatic, compared to ten per cent in 2014.

Programmatic is most developed in North America where it represents 23 per cent of respondents’ digital spend, followed by Europe at 17 per cent. Investment in China is lower, with programmatic responsible for just 12 per cent of digital spend, although this is expected to grow, principally via private exchanges.

Combining shares of respondents who use agency trading desks (ATDs) as their principal model with those who use them in select markets, makes a sizeable total of more than 70 per cent. But the report reveals that these approaches are not mutually exclusive and independent trading desks (ITDs) represent an equivalent total of almost half of respondents (46 per cent).

The most striking finding from this research is that alternatives to ATDs are growing rapidly. ITDs have seen usage increase by 12 percentage points compared to the previous wave of WFA’s programmatic research. In-house or ‘hybrid’ models, while less likely to the principal global model, are used by more than a fifth of respondents in total. These models were being conducted just at the fringes of WFA’s membership two years ago.

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Underpinning the evolution of digital ad trading models has been a drive to secure additional transparency. The second-generation of programmatic models has seen some improvement in transparency, with 29 per cent of respondents now satisfied with the level of transparency provided by their ATD, up from 21 per cent in 2014. Transparency at ITDs now satisfies nearly half of users, up from 36 per cent in 2014.

The last two years have also seen the agency trading desks pushed down from holding company Level with 42 per cent of respondents now working with agency level trading desks, although 51 per cent still work with the legacy holding company operation such as Xaxis, Accuen and Cadreon. The shift has been driven by client demand to ensure closer working relationships between their day-to-day agency team and the programmatic buying team, to ensure consistency and simpler reporting.

WFA global media and digital marketing lead Matt Green says: “Programmatic has expanded rapidly and it’s no surprise that the market and mechanisms that big brands use to spend through this channel are evolving. The rise of in-house, hybrid models and independent trading desks demonstrates that the original trading model left much to be desired.

“The second generation of trading models is now being built and while agency trading desks still take the greatest share of digital spend there are now real alternatives being developed that give brands more control over data and technology alongside the wider push to ensure greater transparency. Ultimately, there are advantages and disadvantages for each approach and brands should identify the strategic principles which matter to their businesses, as these will govern partner choices.”

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