The ACA dives in to what programmatic really costs

Advertisers want to know how much programmatic ad spend is going to actual ads and how much is too much to spend on data.
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When you purchase online advertising programmatically, how much money goes to buying the actual inventory?

The findings of a recent study found that it may be around 58 cents for every dollar, while 42 cents of the investment is consumed by the supply chain.

The Association of Canadian Advertisers (ACA) paired with the U.S.-based Association of National Advertisers (ANA), Ebiquity and Ad/Fin to conduct the joint study, “Programmatic: Seeing Through the Financial Fog.” The two-year study included 16.4 billion programmatic ad transactions (and impressions) in North America.

The goal, said ACA VP of digital Chris Williams, was to look at the details of what the industry calls the “tech tax.”

“We want to be able to show how much money comes from an advertiser, where it goes, how much goes to a publisher,” he told MiC.

While Williams emphasized that the results could end up being very different for other advertisers and campaigns, he said the breakdown will help to show advertisers how many different factors and costs go into the programmatic supply chain.

For each dollar spent on programmatic in the study, about six cents went to agencies, 12 cents to execution fees, one cent to “other fees” and nine cents to targeting data. The remaining 72 cents on the sell side was split between exchange/SSP costs and publishers, with an average of 15 cents for SSP and 57 cents for the publisher.

The average cost of programmatic display ads in the study was $4.80 CPM. The average cost of programmatic video ads in the study was $12.64 CPM.

The goal of the study, said Williams, was to provide a number of solutions to help advertisers plan programmatic investments better, demystify the process and learn what questions to ask.

Of the 16.4 billion impressions studied, 6.6 billion were analyzed more closely at the campaign level (where transaction and data fees were also examined). The impressions included 445 completed campaigns, all with a variety of KPIs including CPM, CPC, CPA and awareness. Of the $36.4 million spent on those campaigns, $26 million was considered “working media/inventory” spend, while $10.4 million went toward execution and data fees.

Andrew Altersohn, CEO of Ad/Fin, told MiC that that when breaking down the fees at a granular level, the parties found that there were clear points where the advertiser’s ROI was affected.

Using data fees as an example, he said advertisers need to become more aware of how much spend is too much. “For every dollar you’re putting into data, you’re not putting that into media,” he said. “And when you make that trade-off, there’s clearly got to be a point of diminishing returns.”

In the case of the study, Altersohn said when more than 5% of the budget goes into third-party data, that tended to be the point where returns were diminished, however he said this could vary depend on a campaign’s KPIs. The vast majority of campaigns studied (84%) used third-party targeting data, with some spending as high as 35% of their budget on data.

Still, he said, “There is a point where you can calculate where you shouldn’t be putting any more money into different parts of the supply chain.”

Williams added that the goal of the study is not to characterize programmatic as a practice where money goes toward useless things. “There’s an idea that if [money] is spent elsewhere, then it’s not really working, but that’s not necessarily true,” he said. “Investing a lot in technology and data is a really good move. But we need the added layer of transparency to know which levers to pull.”