The Transparency Bear
Two friends are in the woods when a bear begins chasing them. The first friend begins to run away, and the second friend says "You can't outrun a bear!" The first friend yells over his shoulder "I don't have to outrun the bear. I just have to outrun you!"
For two decades, digital advertising outside of search and social has been a rounding error for most brand marketers, creating plenty of room for inefficiency and waste. With the imminent convergence of digital and traditional media, these inefficiencies are starting to look like real money, and smart brands are starting to demand transparency from the advertising supply chain.
Transparency is coming. And for ad tech companies, the question is simple: can you outrun the transparency bear? And if not, can you outrun your competitors?
As I walked around the IAB Annual Leadership Meeting last week in Palm Desert, I heard three basic responses from ad tech executives:
I hope this transparency thing goes away, since it would cost me a lot of money if I had to give up my non-transparent margins. I'm going to wait and see if it's real.
Translation: I can't outrun the bear, so I'm just going to sit here and hope he goes away.
In concept I like transparency, but if everyone's take rates are exposed, it will be a race to the bottom on pricing, which would cost me a lot of money.
Translation: Can we agree that nobody's going to outrun the bear, but maybe if we all sit here he'll leave us all alone?
We'll disclose some of our fees and do a lot of marketing about transparency and hope nobody looks under the covers.
Translation: I heard that banging pots and pans makes bears run away.
Here's the deal people: the bear is coming. If you want to sit there and see what happens, I wish you the best of luck. I'm running, and I think you should too. What that means:
Expose all fees that you charge to buyers and sellers
Examine each aspect of your business and make sure the value you provide is worth the actual cost of what you're charging
Make sure your contracts enable transparency, and update them if not
Address the complex, annoying, but necessary aspects of ad tech (foreign exchange, payment terms, discrepancies) and make sure your policies are transparent and reasonable
Integrate with third-parties that can audit the supply chain, like Amino Payments[1]
Get your board and investors ready for the financial impact of transparency and take rate compression
Running away from the transparency bear is going to be hard, but all evidence suggests that the alternative is worse.
If you're spending money in digital advertising, demand transparency and audit your supply chain. Unleash the transparency bear. As Warren Buffett says, "only when the tide goes out do you discover who's been swimming naked."
Disclosure: I'm an angel investor in Amino. ↩︎