A hand covering around a mobile device_supply and demand

There is no denying that the AdTech ecosystem is a complex arena, requiring more synergy between the advertisers and the publishers (or the demand and the supply) than currently exists. With the sheer number of players in this system, it is no surprise that the value exchange has repeatedly come into question.

Advertisers and publishers alike have a hard time breaking through the chaos and achieving their goals within reason. The former seeks to maximize its advertising budget while reaching its target audience, and the latter looks to get the greatest value out of the sites on which they display the ads. However, one key variable has created challenges between the two players: the ad tech tax.

To recap, the “ad tech tax” is commonly known as the cost of doing business, or what is subtracted from the advertising dollar as it travels down the supply chain to the publisher. The fees paid from that dollar to various intermediaries, such as agencies and ad buying technology, is the ad tech tax. 

It is argued that the journey to getting an advertisement onto a website and in front of the intended audience is far more arduous and costly than it should be, creating a gap between the supply and the demand that seems to only be getting wider. Ogury called upon a panel of three industry players to discuss the ad tech tax and this gap at Cannes Lions 2022.

In case you missed it, read Ad tech tax: the cost of doing business and Where is the trust? Transparency (or lack thereof) of the supply chain in this three-part series.

Who are the middlemen in the advertising ecosystem?

Several technologies, agencies and intermediaries are involved in the digital advertising buy-sell process. They are supporting services, and while they are designed to make ad buying and delivery simpler, it is often difficult to discern the purpose of the fees involved, largely due to a lack of transparency. These fees, or the ad tech tax, may come as a deduction from the overall spend or as a fixed sum. 

Those receiving these fees have created a massive gap between the buy side and the sell side. And the more elements or middlemen involved, the larger the gap becomes – and the greater the cost. 

Who are the intermediaries? Where are these fees going? Demand side platform (DSP), Supply side platform (SSP), Ad servers, trading desk/media agencies, technology vendors, and other software, to name a few. 

It’s all in the tech… right?

The supply and demand sides each have entirely different sets of technology supporting their respective initiatives. The primary components of an ad tech stack are the Demand Side Platform (DSP), where advertisers buy ad space, and the Supply Side Platform (SSP), where publishers sell ad space. But it doesn’t stop there. Each side utilizes a selection of tools to accomplish additional objectives such as data management, targeting, and campaign management. However, a common opinion in the industry is that neither side fully understands the inner workings of the other, particularly since technology evolves regularly and so many players are involved.

According to panelist Oleg Korenfeld, CTO of CMI Media Group, we can bridge the gap between the two parties by allowing a greater understanding of all the tools involved. “From the buy side, we often don’t try to understand the stack that the publisher side is using. We’re fixated on the technology facing us, and part of it is an overengineering of the overall ad tech that is between the buyer and the seller,” Korenfeld remarked. “And we tend to focus only on the tools that were built to support our initiatives.”

“There’s absolute necessity for technologies to be between the buyer and the seller to provide efficiencies,” Korenfeld continued. “But because we know that ad tech stack has been severely overbuilt, and a lot of the platforms that we end up using do not talk to one another, that fragmentation is the unnecessary tax in this calculation.”

Things may be further complicated by a gap in education, perhaps particularly on the demand side. The panelists agreed that an advertiser’s job is to invest ad dollars, whether on behalf of a brand or a client, as efficiently and effectively as possible. And if there is a technology that allows them to do that, even with an input cost – or ad tech tax – that drives ROI, then it is worth it. There is value there. But that value is greater when those on the demand side are more educated on the industry, the tech, and the relationships within, and have substantial experience buying and validating advertisements.

Why the gap?

The duplicative nature of the ad tech industry isn’t lost on most advertising experts. In fact, it’s glaring enough that it often raises questions over what tax is necessary and what is gratuitous – what’s acceptable and what’s analogous to highway robbery. Naturally, both parties want to get their money’s worth.

While Korenfeld references duplicated audiences across multiple channels, for Alex Payne, VP of Ad Operations at Vice Media Group, it’s the verification and measurement of space. “Having that essentially counted twice on the buy and sell side is in its nature duplicative and unnecessary, and not helpful to the trust we should have in one another through the supply chain.”

Like many industry players, Mike Brooks, SVP of Revenue and Marketing at WeatherBug, has concerns over the role of identity in the ad tech tax. ID is largely considered the apex of online advertising, as advertisers can target specific audiences based on their interests, behaviors and location. Publishers need it, advertisers and agencies need it, and AdTech companies need it. However, the deprecation of cookies, coupled with the power held by walled gardens, makes it difficult to know where IDs are going and if they will be necessary as it relates to the ad tech tax. “Identity is the kind of thing where everyone is going to sell something that we need, but it’s something that’s been baked in up to this point. So, in the future, what is the role of identity there?” Brooks commented.

And then there is the matter of brand safety – placing ads next to appropriate content to protect a brand’s reputation – and ad fraud. Korenfeld noted the importance, and perhaps murkiness, around it. “I’m not sure I understand why both sides of the coin need to pay, and often pay the same companies, to validate the same impression.” 

The effort to eliminate most of the middlemen involved in digital advertising is significant in discussing brand safety. In some cases, intermediaries intentionally maximize their profits at the demand side’s expense, even if it involves fraudulent activity or placing advertisements in unsafe or irrelevant contexts. However, the problem doesn’t stop with poor placements unrelated to campaign goals. Instead, it spirals into a greater issue, as advertisers are faced with negative brand associations that they may not even be aware of until it is too late. 

Payne agrees, adding viewability as an essential consideration when assessing quality inventory. “Multiple vendors out there measuring the same space with the same technology, and there’s a tax on both the publisher side and the advertiser side,” Payne said. “I feel there needs to be trust in the solution. Trust that number, trust that relationship. Let’s provide reporting from one place, not compare and contrast ultimately two of the same solution.”

Watch the full conversation here.

Learn more about the ad tech tax in this three-part series: