The New York City-based Interactive Advertising Bureau (IAB) recently launched a programmatic transparency calculator aimed at providing “advertisers and publishers with a granular, partner-specific evaluation of their … costs as a percentage of their effective CPM.”

It’s thought provoking.

It’s asking all the right questions.

It could generate an important dialogue. But no one is going to use it — least of all the individuals who should be concerned with programmatic transparency — namely, clients.

Transparency Is Critical

Transparency in programmatic is a critical topic that clients, agencies and media and technology providers should be thoroughly investigating. Such an examination is critical because marketers need to understand exactly what input factors programmatic requires in order to generate optimal performance.

Running programmatic campaigns without being buttoned-up on the details of technology, staff, data, and inventory makes marketers more vulnerable to false traffic, inaccurate attribution and optimization systems, ineffectual targeting and poor-quality inventory.

You don’t want to be “that” marketer, do you?

But Transparency Is Tricky

While clients need to be knowledgeable about the basics of their programmatic infrastructure, the IAB calculator itself and even the explanatory white papers that accompany it are so complex that they require a programmatic background simply to interpret them, much less put them into motion.

Can you say “Catch-22?”

Ask These 5 Vital Questions

So how can a smart, heads-up marketer dissect a programmatic CPM campaign to ensure quality, effective results? Ask these five questions and if you don’t understand the answers, keep asking until you do:

What are the technologies being used and why are these technologies, in particular, best for meeting my campaign goals?

Using digital programmatic media requires a DSP (demand side platform). It’s vitally important to note that there is a lot of white-labeling in the programmatic ecosystem.

Marketers need to be clear what DSPs are being used and if they are being white-labeled from another DSP. Now, on the surface, all DSPs provide the same function — connecting data and inventory — but each DSP has unique selling points that differentiate it. So always be sure to ask “why this particular DSP?”

Bear in mind, too, that there are also incremental technologies that get layered on top of a DSP, such as optimization or attribution systems. These technologies are not free. Their fees are typically calculated into the CPM and can add 15-25 percent to your base inventory cost.

Whose hands are on the keyboard?

For a so-called “automated" media tactic, programmatic actually requires significant manual resources to set up, monitor and optimize. A marketer should be clear going in about who is running the campaign — the agency team, a subcontracted partner or the DSP provider itself.

All those hands cost money: Ask what the service fees are. Find out if those fees are fixed and if not, when and how they will vary. Ask if the agency accepts rebates from the DSP.

What brand safety and pre-bid functionalities are being used?

Viewability and non-human trafficking are significant issues in digital advertising and therefore incremental technologies need to be used to assess and focus bidding on quality traffic. These incremental technologies also cost money. Additionally, other brand safety measures such as content ratings, category blocking and black lists need to be layered on.

Remember, too, that as more parameters are put in place, the inventory available for bidding decreases. Decreased inventory is a function of reducing the supply of inventory that meets the criteria and restricting the DSP’s ability to categorize impressions that match the new, stricter parameters.

There may be other impressions that meet the criteria but historically, if an impression cannot be categorized, it will be eliminated. Bottom line: Incremental technologies and brand safety measures will add to the total CPM.

What is the approximate cost of the data based on the ratio of 1st- versus 2nd- versus 3rd-party data being used?

At its most elementary, programmatic is the practice of combining data, inventory and bidding in an automated fashion. Data exist in many forms:

1st-party data is data that an advertiser owns. It can be in the form of cookies collected from website visits, CRM files, social followers or information about offline purchasers. Generally, the cost of using this data on an ongoing basis is low, since there is often no incremental charge to use it.

However, in some instances 1st-party data will require what is referred to as an “onboarding” fee. Onboarding is the process of making files usable for digital targeting by, for example, removing personally identifiable information (PII) and matching to online IDs or cookies.

2nd-party data is data shared in a partnership between a marketer and another entity. For example, a CPG company may be able to leverage shared data from a retailer whose consumers have purchased their product. These data will typically have a CPM cost.

3rd-party data is publicly available data that comes from a variety of sources. Most DSPs are integrated with data providers such as BlueKai, Experian, Nielsen, Exelate, etc. The CPM cost for this data typically varies between fifty cents and three dollars but combinations of data points will increase the CPM.

What are the inventory sources and what formats are being used?

Sources for inventory will range from open exchanges to private marketplaces — and can even include direct sites. A good rule of thumb is that the total CPM will increase as the inventory sources become more exclusive.

Digital unit formats will also play a significant factor in programmatic costs, based on the available supply. For instance, the CPM will change if the format contains display banners, social ads, native content or video. Typically display and social have more efficient costs, while native and video tend to be more expensive.

Mastering Programmatic Basics

The programmatic ecosystem is highly complex. As a marketer, you don’t need to know every intricacy of the technology. However, some basic knowledge of the input factors and asking the right questions can deepen your understanding of what you are purchasing, which can vastly improve your campaign performance.

And, who knows? Armed with the answers to these questions, you may even have a shot at understanding the IAB Programmatic Fee Transparency Calculator.

Title image by Catherine McMahon