Trading Desks: Are Independents The Answer To Client Concerns?
Independent trading desks claim to be more saintly than agency trading desks. Are they right? Tom Denford, co-founder of ID Comms, explores.
Digital trading is a hot topic. In particular, the questions of how brands should take advantage of the effective targeting and efficient trading offered by programmatic buying is occupying a lot of time in advertiser circles.
Most brands that have dipped a toe or a leg into the waters of trading desks have opted for agency trading desks (which take around 80% by billings). But a significant minority has opted to test the independent sector.
An independent trading desk is generally defined by the fact that their ownership/affiliation lies outside the media agency or communication group, and includes companies such as Media IQ, Infectious or Exchange Lab.
Most independents make a big noise about the transparency that this gives them, but clients are equally suspicious about just how true these claims are.
That's because while independents might make a lot of claims, frankly – sometimes due to circumstances beyond their control – they are not that different in this respect.
All of which leaves advertisers in a quandary – whom should they work with?
The case for independent trading desks
- They have client-facing expert resource. Too many agency trading desks keep this expertise hidden away, despite the fact that these experts make decisions that dramatically affect the placement and pricing of advertising (as well as the margins earned by the agency).
- Independents have invested in building their own technology rather than licensing a third-party development, in theory giving them more control over what they can and cannot do and passing that flexibility onto clients.
- The contract is held directly between the client and the provider. Whilst this is no guarantee of transparency, it does give the advertiser greater control and visibility on areas such as price and data.
- They are independent and live and die by their ability to successfully service advertisers. They are still focused on profit and margins can approach 60%. However, they don’t have to report into a large holding group and in theory, at least, the client’s interest should be more top of mind.
- They have a focused resource and are completely dedicated on real-time bidding and programmatic buying.
- Independent trading desks have to win each client on merit, whereas most agency trading desks are largely "gifted" their client billings by their sibling media agencies, especially where the client doesn’t exert their right to shop around.
The case against independent trading desks
- They are much less likely to have access to large global deals with media owners, thus the cost of media could be higher. This may not be a serious issue if you simply looking to access inventory via exchanges rather than premium spaces.
- They are not integrated with all other digital and offline communications making it harder to co-ordinate messages (although this is a criticism that can also be directed at agency trading desks as well). The truth is that most media agencies also fail to integrate with their sister trading desks.
- It’s just another contact point for a busy marketing director and media manager to manage.
The ID Comms Perspective:
Our opinion is that while transparency has become the buzz word that defines the trading desk space and dominates the decision-making process, perhaps too much attention has been focused on who's making what margin and what deals are being done behind closed doors.
It would certainly help if both agency and independent trading desks opened up the way that information is reported. It’s not the technology that’s at fault but rather how access to the technology is provided and the data is interpreted.
In order to achieve full transparency, it requires that all parties involved be completely transparent otherwise clients will never get the full visibility on how their investments are being traded and who is making money up and down the chain.
Right now that’s not going to happen but the positive step that advertisers can take is to assess their own situations and needs before deciding on their direction of travel.
As a priority, all advertisers will benefit by having a greater level of understanding of what is going on. This will allow them to have more productive conversations with their agencies or independent partners around the issues of transparency and access to data.
Clients need to be aware that they probably have the freedom to use whatever trading desk solution they want. The bottom line is that very few clients are obliged to use the trading desk affiliated with their media or digital agency.
If brands start shopping around more, this will generate more competitive pressure in the market, resulting eventually in better transparency and pricing being offered to future clients.
This article was originally published on MediaWeek on 2-May-2014