In some versions of the old story about the youth who discovers the hoarded treasure of a gang of thieves, each of the 40 thieves in the band was a specialist in a specific kind of crime. In a similar vein, there are several ways in which your digital budget is being mis-spent by various parties, and while I'm not going to go through a list of 40 here, let's look at some of the key ones.
The context here is paid media - where you pay partners to deliver a campaign using some form of digital advertising material - as opposed to agencies managing social media or a community for your brand.
As a basic setup to examine this topic, let's say you're a client looking for a non-purchase KPI - something as simple as getting people to view at least 15 seconds of a 30 second video. Let's say your target is to get 100,000 views in a specific demographic and geography.
Now, let's look at some of the big drains on your budget
Agency rebate : 10-35% of your budget could be disappearing into the agency's pocket merely because they're able to twist the arms of DSPs, ad networks and publishers, many of whom are still relatively small startups who are desperate for revenue.
Mark-ups or hidden deals: Agencies who operate proprietary or 3rd party trading platforms are often able to add other layers to this practice - doing deals with ad networks and publishers where they get a chunk of guaranteed inventory at preferred rates but are able to make it look like it was bought via real time bidding, thus managing to artificially inflate the price that clients pay. Often only a couple of people in the agency will know about this and be managing the practice, so it's really hard to detect and will never show up in an audit. This is a classic example of the specialisations amongst the 40 thieves - a couple of experts who understand the technology and the ecosystem and know how to use it to generate significant margins.
Non-target impressions : 10-15% of budget : Between misreported IP addresses (rampant in the China telecommunications industry where ripped off data bandwidth from one province is sold in another), VPNs and deliberate misreporting by publishers, ad networks and DSPs, ads aimed at young Chinese women in Beijing could be getting delivered to a middle aged Indian male tourist in Kunming (actually happened to me several times). Lack of 3rd party research and monitoring contributes to the possibility of this kind of malpractice.
Fake views : 20-50% of views being misrepresented by accident or design. We've all been following the story on Facebook's miscalculations, which appear to be driven more by incompetence than by intent. However, the lesson is that viewing data can be easily manipulated. Again, this possibility is exacerbated by the lack of 3rd party monitoring.
Non-performing impressions : If you've given your agency a target - downloads, views, whatever - and they achieve it on a portion of the budget by buying good quality inventory and optimising it well, they're not going to come back to you and give you the savings. To be fair, you probably haven't incentivised them to do so. They'll ensure the rest of the budget gets spent on junk inventory and impressions just so they can earn their commissions, rebates and so forth on it. Particularly when a client is not very experienced in digital media and doesn't know what a sensible cost per KPI should be, there is room for a lot of this exploitation. Because they've now demonstrated that it does, in fact, take XX$ to deliver a download, that becomes your norm and you'll continue to pay that price until someone demonstrates how inflated it is.
If you look at those percentages it becomes pretty obvious that you could be wasting almost all of your digital budget. What are some easy ways to prevent this drain?
First of all, the one thing that really helps is starting a campaign with a hard KPI. Not views or impressions but a consumer action. The moment you do this there is a theme of accountability and outcome orientation to the campaign that forces all the players to pay more attention to actually delivering something that is externally measurable. You might say "we can't sell toothpaste (or hamburgers, or cars, or whatever...) online" but that doesn't mean you can't come up with a sensible KPI that's more in your control to measure than anyone else.
Once you've done that, taking a partnership approach is better than saying "Right, bid the lowest price for that KPI and then go deliver it". Allowing your partners to work through the stages of optimisation, sharing the data and learning from it together, and offering to share any savings they generate will go a long way to getting everyone's motivations aligned.
Something that eliminates a lot of wastage is cutting out as many layers of middlemen as possible. Starting with your 'agency' - especially if it's an old school media or 'full service' agency who are going to farm your campaign out to a bunch of other people. Even a lot of the so called digital specialists don't actually optimise and run your campaign themselves - so if you can eliminate all these layers and go directly to a performance specialist, DSP or even the media owners you've clawed back a lot of the money that's just disappearing in rebate deals. You can then treat these partners as real partners and try to align everyone's interests as I've just described above. Many smaller DSPs offer a "managed service" model with a lot of transparency and over time this can transition into a pure SAAS model where you have 1-2 people managing a platform and doing campaign optimisation directly.
It's really important not just to give your partners a one dimensional KPI (like getting 50,000 downloads at $1.25 each) but also adding in some measure of quality or response rate. If you don't do this, they might deliver the target downloads by buying up lots of low price, very low response inventory so you're going down to click through rates of 0.01% which means 1 person in 10,000 clicks on your ad. That means you're annoying 9,999 consumers for every one who responds. Unfortunately CTRs don't go very high nowadays but if you put in a norm of 1% that's 100 times better than leaving it completely open, and with good creatives and better targeting it is possible to get CTRs in the 5% range for specific campaigns.
There is one other thing which might help - which is having external measurement - but this is easier said than done. So far, there haven't been a lot of very credible 3rd party measurement tools and when I've seen clients use 2 different sources we often found lots of variances between them, as well as differences in tracking between them and us where a significant proportion of legitimate delivery was not being picked up. At the minimum however, investing in some tracking and then being open to understand it along with your delivery partner would help create more transparency.
If you're spending significant money on digital media (upwards of USD 5 million a year or so) it might make sense to invest in a platform and one person to manage it so that all your partners are delivering real-time data instead of printed reports. This eliminates a lot of the opportunities for doctoring and dressing up the data.
So, in summary. Set real KPIs, find the last mile delivery partners (eliminate middlemen), align motivations, share and learn along with your partners to improve outcomes. If possible, invest in a platform where you can have real-time data and someone analysing it who can own campaign optimisation. Doing that won't eliminate all 40 thieves, but it can put a lot of them out of work...
(Note: The "Ali Baba" here has nothing to do with the famous Chinese e-commerce giant - the reference is to the story from the Arabian nights)