Key ad industry players propose new standards to Big Tech for digital auctions - WSJ

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According to a Wednesday report by _The Wall Street Journal_, the advertising industry’s largest players are proposing new standards to Big Tech for transparency in the digital auctions that increasingly dominate online ad sales.

Eighty percent of all digital ad sales occur in "closed loop" auctions run by one major player, according to the Media Rating Council, the industry self-regulatory body that published the proposal last month. Auction operators, including Google (NASDAQ:GOOG [https://seekingalpha.com/symbol/GOOG]) (NASDAQ:GOOGL [https://seekingalpha.com/symbol/GOOGL]), Meta Platforms (NASDAQ:META [https://seekingalpha.com/symbol/META]), and Amazon (NASDAQ:AMZN [https://seekingalpha.com/symbol/AMZN]), decide how much to reveal about their processes to ad buyers, the _WSJ _report said.

The report said those that adopt the MRC standards would agree to disclose key information such as the types of auctions they run, how they decide winners, and what influences prices on their platforms, including any fees, discounts, or bidding minimums. They would also pledge to disclose any significant changes.

“We’re trying to bring sunlight into the ecosystem,” Ben Hovaness, chief media officer at OMD Worldwide, an agency within ad giant Omnicom, told the _Journal. _Hovaness approached the MRC nearly two years ago to begin developing the standards and chaired the steering committee.

According to Hovaness, many auctioneers don’t disclose which type of auctions they run. That lack of transparency keeps advertisers and publishers from making informed decisions about which auction platforms they use and how.

The proposed disclosures matter to advertisers because the auctions don’t always go to the top bidder, and the ultimate price paid isn’t necessarily what the winner bid, the report said.

Hovaness estimated that the impact on both buyers’ costs and sellers’ revenue over the years adds up to billions of dollars.

The new standards wouldn’t require auctions to run in any particular way, and participation would be voluntary, though parties that agree to audits would be eligible for a new MRC accreditation, the report said.

The proposal doesn’t mention any companies by name but comes as regulators have taken unprecedented interest in digital ad auctions.

Organizers of the proposal, led by Omnicom (NYSE:OMC [https://seekingalpha.com/symbol/OMC]) and MRC with contributions from the major trade groups representing advertisers, agencies, and companies involved in digital advertising, don’t plan to identify all the participants until it’s finalized, the report said.

But working group members included Meta and Amazon, the second- and third-largest digital ad platforms, sources told _WSJ_. Google, the largest, declined to participate.

According to Katherine Freeley, who oversees U.S. ad planning and investment for German pharma giant Boehringer Ingelheim, advertisers’ only leverage for the longest time with auction platforms has only been their ability to warn them by saying, "I will give you less money." She said that knowing the rules of the auctions will give them another tool: information.

Freeley told _WSJ _that Boehringer Ingelheim spends tens of millions of dollars with the largest digital ad platforms each year, and if certain auctions adopt the standards and others don’t, the company may reconsider its spending with the holdouts.

Some industry players say the proposal has flaws. Kelly Abcarian, a former executive vice president of ad measurement at NBCUniversal and a veteran of measurement firm Nielsen, told _WSJ _that MRC can’t make anyone adopt the standards or do worse than pull accreditation from those that don’t live up to them.

Even auctioneers that disclose everything will remain free to design and implement auctions however they want, Abcarian told _WSJ, _but any transparency would be an improvement because tech companies today "keep their auction mechanics completely hidden."

"Standards without mandatory adoption creates false confidence," Abcarian told _WSJ_. "We’d still be relying on the platforms to define their own rules, apply their own models and self-report their outcomes."

Garrett Johnson, associate professor of marketing at the Boston University Questrom School of Business, told _WSJ _that big platforms may hesitate at MRC's proposal, which suggests that they task one or more employees with ensuring compliance. The promise to announce any changes may also be a hard sell, he said.

"Once you start to disclose how you’re doing things, if you’re deviating from that, then it leaves you open to legal challenges," Johnson told _WSJ_.

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