Commentary
When Did We Become A Rev-Share-First, Not Client-First, Industry?
- by Dave Morgan , Featured Contributor, June 27, 2024
In a recent column, I wrote, “The past decade has seen the rise of ‘strategic’ partner deals with opaque revenue shares, push-button 'black box' trading with murky inventory pools, and a tendency for many in the business not to ask too many questions, since willful ignorance tends to be the favored state of many.”
That sentence got quite a bit of response, both in comments and on the several social media platforms where I shared it. For media purists that want to always make clients and their needs the center of the universe, a noble and worthy goal for all of us, the idea of “strategic partner deals" as a key driver in media selection is anathema. The issue surfaced significantly a decade ago and has only grown in industry impact with the growth of programmatic media.
Four words define the current world of digital advertising revenue-sharing: ubiquitous, promiscuous, obfuscating and debasing.
Ubiquitous. The vast majority of programmatic media, data, technology, and verification transacted today is subject to defined revenue sharing between sellers, buyers, suppliers, and platforms -- generally on undisclosed terms. It’s a fact.
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Promiscuous. It’s not like each company only has one strategic partner that they rev-share with. If anything, most rev-share with as many as they possibly can -- certainly, any that are willing not only to provide a significant percentage, but guarantee it as well.
Obfuscating. Virtually all the “strategic partner deals” are done under non-disclosure agreements. For some reason, folks doing the deals don’t want the funders of the campaigns to know how the money is moving. But then again, as we know, in mystery there is margin.
Debasing. For many of the campaign elements and participants, the revenue-share drives more profit than base client fees. Yep, “the tail wags the dog.” All too often the media chosen, data used for targeting and verification vendor are selected to optimize platform profits and deliver just enough client value -- but notclient results.
It doesn’t have to be this way. Shouldn’t deals be done for the benefit of the client, done selectively, disclosed transparently and aligned first and foremost for client results, not platform profits?
What do you think?
This post was previously published in an earlier edition of Media Insider.
And Dave, as you and I have discussed over the last decade or so, it also makes the advertising less effective or not work.
The fact that people run around in a panic that the advertising doesn't work like it should and point fingers at everything else is, at best, sad.
And, it also begs the question of Boards and CEO's are living up to their fiuciary responsiblities to their stockholders. Simply, by doing these rev share deals they do as they are delivering short term profits.
But, as advertising works less and less well due to those deals then longer term clients will move money from advertising into other investments that work better and/ or leave agencies and go in house. Thus, the BOD's and CEO's have violated the responsiblity to have an ongoing firm on a longer term basis.
Also, there are perverse incentives where agencies/ platforms then have to juggle around numbers to "prove" that what they did was good/ best / worked covering up for the opaque sheet held over the black box. Which is, at best, dishonest and more likely fraudulent. And this is still happening.
Mandel still has the smarts and hits to call it as he sees it. Thanks Jon and Dave.
Mandel still has the smarts and guts to call it as he sees it. Thanks Jon and Dave. Sorry about previous typo.
I agree, as well. But while we are clamoring for open dealing and being square with advertisers one has to wonder what would happen if those advertisers who are ---or may be--shortchanged by these "new" ways of buying media could trouble themselves to pay more attention to the media function and stop treating it as an accounting--by the numbers --operation to be supervised by bean counters. Bean counters, these days, are easily marks for false or misleading stats---especially when computers---not people --are making the buys---so do we really expect the sellers and their "partners"--the buyers not to know this and work things to their advantage?
Dave Morgan, your title summarises the fundamental damage to advertising caused by the financial model of the holding companies, the separation of creative and media, and the handover of media to big technology. Twice in my career I gave up 'managing' a large international network (roles which I disliked and in which I struggled) to focusing only on clients, with a tiny direct team, mobilizing ideas and resources on behalf of clients.
Jon Mandel, as you say, advertising no longer works as well as it used to. The industry, starting in the UK, has discovered effectiveness (really), yet no-one will admit the truths you say. I have tracked, with no special insight, the decline in brands and their valuations over the last 20 years. The platforms extract rent from consumers and advertisers. Outside the industry, economists like Yanis Varoufakis, philosophers like James Williams, writers like Cory Doctorow and anthropolists like Daren Acemoglu have all identified and written about the devastating damage wrought by targeted, programmatic advertising. The industry is silent.
Jon, so true. This irises to a CEO/Board level issue ... too much willful ignorance out there.
Jack, for sure. Jon Mandel always brings his best, and makes us smarter!
Stewart, absolutely. The core issues are the financial model drivers that move the eye off the ball of advertising effectivess and the retuls has been a significant loss of value for marketers and their shareholders.
Ed, totally agree that one of the ways to help solve this is for comapnies to pay more attention to the media fucntion, both in resoursing and in accountability, something that the ANA has been pushing for years.