Agency trading desks: OK to be opaque?
Caspar Schlickum, CEO, Xaxis EMEA
Deliberately mysterious, or just good business sense: are agency trading desks right to hide the costs behind what they do so long as they generate high performance levels for clients?
That was the issue behind a lively dispute on Monday (6 Oct) when the CEO of Xaxis EMEA, Caspar Schlickum, defended the way his business operates, making it clear that if clients are unhappy about the service they are buying, then they would simply not work with the agency.
Against comments that Xaxis was only “transparent about its opacity” and responding to a 2013 report from the World Federation of Advertisers (WFA) that revealed that 87% of its members were unhappy with the levels of transparency offered by agency trading desks, Schlickum was very clear: advertisers should get smarter about the ad tech space, but his business reserves the right not to disclose every cost.
“We consider ourselves to be an audience business – we use data, technology, inventory and our people to create audiences that we sell to our clients for a price which they agree. We are extremely transparent about how our model works and we spend a lot of time explaining that to clients.”
Schlickum, who was speaking at MediaTel’s Automated Trading Debate, added that his clients sign contracts that allow them to work with Xaxis and that the majority scrutinise them “extremely closely”.
“But what we’re very clear about,” he added, “is that we don’t disclose the cost of all of our materials.”
The WFA report states that 54% of advertisers said they had been asked to sign separate agreements with their agencies limiting the right to audit performance, while 57% were aware that the practice of arbitrage exists, with 82% of that group believing the practice negatively affects the agency’s ability to act impartially.
“The central concern is that agency trading desks offer a new way to charge more for the same product, that the price that is paid for an impression can bear no relation to the price the media owner charged for it,” the report states.
“Advertisers also fear that the ability of agency trading desks to provide a new profit centre makes them vulnerable to making choices that are determined by the agency’s business interests rather than their client’s marketing goals.”
In response, Schlickum said: “I think the WFA report raised some legitimate concerns and I agree with almost all of them…but advertisers should educate themselves about this space.”
Schlickum said clients need to add to their skill-sets, arguing that “marketing technologists” should be employed to “not just understand the data, but also the entire technology” driving the programmatic revolution.
On the other side of the debate, Paul Longhurst, founder of Longhurst Communications, said that trust was dwindling because new revenue models, as adopted by the likes of Xaxis, make objective decision making for clients impossible as well as distorting the idea of a neutral media planner.
“If you are in a situation where you are actively marking up inventory, you should say so,” Longhurst said.
“Clients should have access to the costs of everything so they can make an informed decision about whether money is getting to the media owner or whether it is being spent in the middle. Clients should know if they’re spending more on the technology and data.”
Longhurst added that there is a “lack of objectivity” because media planners, who would traditionally tell a client where to spend their money to make it most effective, are unable to do so.
“The decision on where the media is placed is being made by the same company who then makes money out of it,” Longhurst said.
“Transparency needs to be exactly what it is, and that’s a clear view on where the money that you spend through the agency goes, who gets what and what the net price of a media product at the end of the day is.
“I think clients feel safe; I just don’t think they’re getting the best value for money.”
Deliberately mysterious, or just good business sense? The debate goes on.
Video: Caspar Schlickum on advertiser trust
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Update: This article was corrected at 4:30pm on Wednesday 8 October. The original incorrectly quoted Caspar as saying “we use data, technology and inventory about people”. This has been corrected to say: “we use data, technology, inventory and our people…”