Programmatic Tech Tax: Where does the money go?

Whether you are aware of the phrase “programmatic tech tax” or not, if you have read any of the digital or advertising press around the subject of programmatic advertising you will know that there is a transparency issue. And the main question that I get asked by advertisers when discussing programmatic advertising is:

How much of my money actually goes on buying advertising?

Advertising know what CPM they are being charged for the advertisers, and they are aware there are a number of channels that the money runs through before it reaches the publisher to buy an advert. But with regards to who takes a but, and how much along the way, this is where it gets very murky.

There is no single answer to this questions as it really depends on:

  • The provider you are booking the activity through and what their role is. i.e. Trade Desk, DSP, Platform Provider?
  • The technology that forms part of your tech stack, and that of others in the chain
  • The number of provider in the chain
  • Any fraud or brand safety software utilised
  • The type of programmatic buy i.e. open exchange, private marketplace (PMP) or programmatic guaranteed
  • The exchange your buying on

The below example from Future Media Lab and the European Magazine Media Association gives on view of the flow of funds and suggests 61% is cut from your spend before it reaches the publisher.

Most of the examples I have seen first hand have been slightly different to this. The agency fee would be separate so would come from your media budget. But the fee for any Trade Desk involved would be much steeper than the 5% listed above.  The tech fees by provider will generally be 10-15%.

Far and away the biggest cuts are made at the front end before the money reaches any technology based usage fee. Non-transparent trading solutions will be taking a direct cut from you money before it goes into any technology (or using mark up functionality). Often this can be upwards of 30%.

If you want to try and get to the bottom of how much of your programmatic advertising spend is ending up in the hands of publishers, and how much is being siphoned off by middlemen, then get in touch and I can help you get to the bottom of it.