Car Company Ad Chiefs Confess They Don't Understand Web Advertising

A delightful video of the ad chiefs at Mercedes-Benz, Lexus, Honda and Volkswagen expressing absolute bafflement at a conference where they were asked about "agency trading desks" and "DSPs" illustrates a potential ticking time bomb in the world of online advertising: When clients finally bother to understand what those things are, they might not like what they see.

The issue surfaced recently in a TechCrunch story that alleged ad agency holding company Publicis (PUB) funnels its online ads through its agency trading desk to Google in return for payments that go to Publicis but not the clients whose cash generated those ads. Agency trading desks and so-called "demand-side platforms" are large, consolidated online ad-media buying systems in which agencies and clients can make their buys without going to several different ad exchange networks.

Publicis, Omnicom (OMC), WPP (WPPGY), and Interpublic (IPG) all have them, but what clients don't know is that they often license the technology from Google or other large ad media vendors. Google is thus on both sides of the buying-selling transaction, which is one potential conflict of interest. Any payments or assets flowing from Google to the agencies that don't reach the client would be another.

Although managers are frequently advised to keep their eyes on the big strategic picture and not sweat the details, this is one of those cases where not understanding the technicalities of the business you're in can cost you money.

At Merc, Lexus, Honda, VW -- and, I suspect many other companies that do a lot of online advertising -- they don't seem to understand the business. This video was shot at the J.D. Power Automotive Internet Roundtable, which took place Oct. 20-22 at Red Rock Resort, in Las Vegas:

When asked by the panel facilitator, "How do you feel about agency trading desks, do you feel there's a conflict of interest?" VW general manager of digital marketing Charlie Taylor replies:

I'm not familiar. So maybe that's a problem.

Ironically, trading desks were set up in an attempt to avoid a different conflict of interest. When agencies bid on media provided by various different ad exchanges, they could end up bidding against themselves for the same media space, thus artificially increasing the price. By centralizing the process, trading desks did away with duplicate, self-competing bids.

But because Google is so dominant in web advertising -- and so helpful to ad agencies -- it created a different problem:

Google recently strengthened its partnership with [Publicis-owned digital shop] Vivaki, and also has a deal with Omnicom. In fact, all six major ad agency trading desks purchase ads through the DoubleClick Ad Exchange [which is owned by Google].

It is all a black box to clients ...

Related:

• Publicis Has Some Explaining to Do on "Payments" From Google for $1B in Ads
• What a Conflict of Interest Looks Like: Microsoft Has Publicis Over a Barrel in Ad Deal
  
• Client Hell! BNET's Guide to the Advertising Underworld