Mobile Tutorial Series – What is an Agency Trading Desk (ATD)?
An agency trading desk (ATD) is a service provided by some advertising agencies, to which clients can outsource their programmatic media buying efforts. The trading desk manages most or all aspects of buying, managing, fulfilling and reporting on media purchased on the advertising exchanges.
A Tool for Programmatic Media Buying
With programmatic media, many aspects of buying media are automated using software instead of human planners and buyers. Programmatic is becoming more popular for buying many types of “standard” digital advertising units, especially in display or banner advertising, where human intervention can’t add much value.
Instead, software automates the buying processes, eliminating the need for insertion orders, in-person pricing negotiations, and the like. Programmatic is growing rapidly in Mobile and Video advertising as well.
Much of programmatic media falls into the class of “real-time bidding,” which describes buying each advertising impression one-by-one, based upon the characteristics of the individual that will see the ad. When the consumer requests a web page, an auction-based transaction occurs in milliseconds, in which brands bid on the ad view based upon the “fit” between the would be viewer and their target audience specs. Obviously, humans could not conduct such a transaction within that amount of time, or in an affordable manner.
Why ATD: Expertise and Execution
Buying programmatic media effectively requires technology, expertise and the labor of programmatic experts. Some brands prefer to outsource these tasks to their agencies, so that they can keep their internal operations focused on developing and delivering products and services. That’s where agency trading desks come in.
Agencies are sometimes better at attracting experts in programmatic buying than individual brands, and can amortize the cost of software, training and operations across a multitude of clients. Thus, they can offer an efficient alternative
Thus, they can offer an efficient alternative for brands.
Traditionally, agencies earned a percentage of the cost of media in compensation for their work. While the advertising business has evolved to offer many different compensation models these days, most programmatic media is still purchased based upon some sort of a percentage markup over the base cost of impressions.
Varying Levels of Transparency
If a brand purchases the media itself, it pays a percentage to the DSP in exchange for use of the software platform. If a brand uses an agency trading desk, they pay fees to that agency that cover both the platform charge and agency fees.
Many agencies have chosen to offer their ATD services by quoting a certain CPM for the impressions that they buy. They then keep any margin between the price the client contracts to pay and the actual cost of the media. The actual media costs are not shared with the client. Such agency ATDs argue that they assume the risk of earning less or more money that prevailing rates of commission based upon their success at delivering against the audience or KPIs outlined in a client agreement.
But, over time, more and more clients have insisted on transparency from agency trading desks. The core argument in support of transparency is that an agency should be an agent working on behalf of the client, not a nontransparent middleman. Some clients that used to do business with the nontransparent desks have since chosen to take their planning and buying in-house. Some agencies have always been transparent about how much they mark-up programmatic media to compensate for their services.
All the leading advertising holding companies created trading desks. Some have since redefined or closed these free-standing entities in favor of integrating data-driven marketing and programmatic expertise across their brands. This doesn’t signal an abandonment of the idea of ATDs but rather a recognition that there needs to be close integration between programmatic and brand strategy/creative.
Holding Company Trading Desks They Created
WPP Xaxis, [m]Platform
IPG Cadreon, Magna Global
Dentsu/Carat Dentsu Audience Network, Amnet
In addition, there are also independent trading desks, including Digilant, Accordant Media and The Trade Desk.