New Research Shows Guaranteed Contracts Come With No Guarantees

Dec 14, 2017

"Is it Time for the Digital Advertising Industry to Adopt a More Financially Sophisticated Model for its Transactions?" That is the primary question explored in the latest original research from The 614 Group as the independent group surveyed and met with 60 key executives at the nation’s top media buying and selling organizations including ESPN, Fox, Thomson Reuters, and many others. If the opinions and plans of those surveyed are indicative, pressure for a new model will only intensify as today’s digital environment and programmatic options remain lacking.

According to respondents, the direct transactions between advertisers, agencies, and publishers do not offer the appropriate level of sophistication to support prolonged sustainability. The problem is simple: the ad industry has no classification standards--a major issue for buyers and sellers. This lack of classification standards in turn creates inefficiencies in the inventory discovery and sales process.

Today, while 88% of publishers offer “guaranteed contracts,” 100% have out clauses and 50% said cancellations make it difficult to forecast inventory and revenue. In short, according to buyers, guaranteed contracts come with no guarantees.

Publishers are equally disgruntled. In fact, nearly one third of survey respondents spend over $100,000 a year to resolve discrepancies, and many research roundtable participants report costs that are significantly higher.

Both the buy-side and the sell-side are open to new structures. Survey respondents responded positively to the concept of a “guaranteed-revenue contract,” with 64% finding the concept appealing.

Addressing these and the other gaps and needs expressed by respondents, the research also examines changes required by all parties to move to a more sophisticated financial model and benefits that can be gained by the increased financial rigor involved, as well as challenges that must be resolved in order to implement more sophisticated models.

Within the full report, the following key findings are developed in depth:

  • Higher degree of automation is possible: 50% said it’s largely feasible to automate premium direct deals
  • Publishers want specific sales controls: 74% cited a need for creative control over the ads as well as the ability to screen the ads for fraud.