Publishers receive just half the money spent on their digital ads by premium brands such as Unilever and Nestlé, according to research which lays bare the fees taken by adtech companies and untraceable middlemen.
The two-year study by PwC, prompted by the deep concerns of publishers and advertisers, is the first end-to-end look at the inner workings of a market worth £2bn in the UK and about £100bn worldwide.
As well as finding that at least half of a brand’s digital marketing spend is absorbed before reaching a publisher, the researchers also discovered that almost a third of those ad-placing costs were completely untraceable.
“It’s important to realise that this study represents the most premium parts . . . the highest profile advertisers, publishers, agencies and adtech,” said Sam Tomlinson, the PwC partner who led the study which comes during a worldwide slump in marketing spending because of coronavirus. But he added: “If examined, the ‘long tail’ would presumably further reinforce these findings.”
Big publishers and advertisers have long complained of being short-changed by the many service providers involved in so-called programmatic advertising, an automated system serving targeted ads to consumers as they move from site to site.
“The market is damn near impenetrable,” said Phil Smith, the director-general of Isba, the trade body for UK advertisers that commissioned the study. “As you start to break down the value chain for the impressions we have matched, the erosion of value is really significant.”
He added that the 15 per cent of spending that was untraceable “was really shocking” and underlined the need for more shared standards and transparency.
While previous studies have produced similar figures on the supply chain costs of digital advertising, most of these were based on estimates rather than tracing the full cycle of transactions.
Fifteen advertisers participated in the research including Disney, HSBC, Unilever and Nestlé. About 300 distinct supply chains were identified to reach 12 publishers, which included the MailOnline, The Times and the Guardian.
Out of a total of 267m of ads placed online, it was only possible to match the end-to-end process for 31m.
Remarkably, the UK advertisers tracked appeared on an average of 40,524 websites during the first quarter of 2020. One brand’s ads appeared on 152,231 sites, following potential customers as far afield as a Nepalese calendar site, according to the researchers.
From every £1 spent by an advertiser, about half goes to a publisher, roughly 16p to advertising platforms, 11p to other technology companies and 7 per cent to agencies. Adtech companies that took part in the study included Google’s dv360 and Ad Manager, Amazon Advertising and the Rubicon Project.
On average roughly 15p is untraceable, a figure that rose to as much as 83p in rare instances. The gap may be explained by fees that are not visible in the data, reselling between adtech providers and some foreign exchange effects.
Jon Mew of the IAB, the trade body representing the digital advertising industry, said programmatic advertising was “complex and relies on many companies to play a part”.
“However, it is not a dark art and we shouldn’t lose sight of the crucial role programmatic plays in supporting our ad-funded, open web,” he added.