• by Sean Hargrave , Staff Writer, October 30, 2015

There has always been a question mark around programmatic, and it ties in with another industrywide question. If the cost of media is going down, as is the cost of labour now that machines are doing the bidding and placing, how come it still ends up costing a lot? Which give rise to the question: if media has come down in cost, and the big agencies make their fess as a percentage of those mega deals, why are their profits going up?

It's a conundrum, isn't it -- and it ties into what pals at smaller independent agencies have quietly moaned about for the past couple of years. Big agencies pitching their big clients is nothing out of the ordinary because all is fair in love and digital marketing. But programmatic has, in their opinion, taken this to a whole new level. Not only does it allow a large agency with its own trading desk and demand-side platform (DSP) to work at an unprecedented scale, it also provides a new channel through which fees will notch up. So the media may be more cost-effective, but there are fees involved in data management, campaign management, brand safety tools, viewability checking and so on. I'm not suggesting for a moment that these are not legitimate charges, but the fact remains these previous third parties are being increasingly brought in-house so a large agency can do more under one roof. That means, of course, that a good proportion of the fees paid remain under the same roof.

Again, there's nothing wrong with running a simple, streamlined service in-house -- it makes perfect sense. More to the point, it speaks to brands' desires to simplify their agency and tech partner relationships.

So where's the rub? I have to careful how I put this -- it's a complaint, or at least a suspicion that I have heard from different independent agencies -- particularly those who have a specialty and work with some big household names which they are, not surprisingly, reluctant to see go to a massive chain of agencies. 

The suspicion is this. A brand spending a decent amount, for an independent on SEO or paid search and maybe display too, gets an offer it can't resist. Display with a big agency's DSP can be supplemented with a far "better" deal on other aspects of their digital marketing. Say a thousand dollars a month is shaved off their SEO or PPC costs, and maybe both -- that revenue can then be pocketed by the client or even put into additional display that will earn far more impressions with a big agency than a small one because of more favourable media rates.

The big question, then, is does the client actually save any money -- or does it go in fees surrounding programmatic display? Is programmatic being used to attract more business from independents allowing big agencies to make up any reduced prices on other aspects of digital marketing to be made up for through intermediary fees and rebates chalked up through programmatic display campaigns?

I honestly don't know the answer, but it's a question that has been posed enough times for me to pose it to you now.

This post was first published as part of the RTBlog.