In an interesting earnings call on Friday, 2/13, IPG stated their intention to stop the practice of selling programmatic media on a non-disclosed basis. While they didn’t use the words “conflict of interest”, IPG did share the belief that it’s not in their clients’ best interests to operate with a business model that includes re-selling programmatic media.
The wild west gold rush days of programmatic media are ending.
A telling statement is the following:
Roth, IPG’s CEO, also said he didn’t believe the profit margin on the resale of inventory was significantly higher than other agency/holding company offerings and are likely to shrink over time.
What’s not being said is that the gold rush days of large agency trading desks is coming to a close. Early movers took advantage of imperfect market information. Many agencies and advertisers were not willing or able to invest in time or technology to test and gain expertise in new market opportunities. Flailing agency margins and an abundance of talented people virtually ensured that large agency holding companies leveraged this new marketplace. Programmatic media lets advertising executives of all ranks think more with their hearts and their heads about how to best serve clients.
Those who took aggressive stances to invest in people and technologies to buy programmatic media were rewarded with high margin businesses. That high margin media was certainly a handsome reward for the immense cost of for such forward thinking. Costs for training, licensing fees, infrastructure, sales and the impact to existing businesses were certainly all priced into that high margin business.
Over the next few years programmatic media will become part of the general advertising marketplace, as Matt Prohaska, Principal of Prohaska Consulting, recently pointed out at an IAB advanced programmatic training in Los Angeles. It less becomes an offshoot or a new way of operating. Programmatic becomes the de facto way that media businesses operate.
IPG’s change also shows that marketplace dynamics demand that early adopters win with high risk investments. We’re seeing middle and late movers who don’t have to take such immense risks to leverage the benefits of programmatic media also don’t earn the same high reward that early movers had access to.
For everyone though, programmatic media lets technology take on more of the burden for monotonous and tedious tasks. As Prohaska mentioned: Programmatic media lets advertising executives of all ranks think more with their hearts and their heads about how best to serve clients.
