SWA study: Transparency is not a given!

The response rate and the results show that—as in most relationships—there is still work to be done. The goal is shared success in the market, and that requires transparency and trust.

«The response rate and the results show that—as in most relationships—there is still work to be done.»

A partnership-based relationship between advertising clients and agencies is the key to a long-term collaboration. For example, Appenzeller Käse and the Bern-based agency Contexta have been working together for 55 years! To analyze the transparency and working methods of digital and media agencies, the Swiss Association of Advertising Clients (SWA) commissioned a transparency study last year—the third of its kind. The ZHAW University of Applied Sciences was commissioned to lead the project, thereby ensuring anonymity, independence, and scientific rigor. Unfortunately, the response rate this time was modest, at only 26%. In the two previous surveys, conducted in 2019 and 2021, the response rate was still around 50%. This lower willingness to provide information alone shows that there is still a need for action when it comes to transparency. Nevertheless, 25 agencies ultimately completed the comprehensive questionnaire and provided their views on specific topics (see box). Here is an overview of the results of the transparency study:

Digital advertising based on CPC, CPM, and CPV dominates

Among the numerous ways to purchase digital advertising, CPC, CPM, and CPV are dominant, each accounting for over 90%. Agencies also purchase on a CPL basis (70%), vCPM (54%), CPE (54%), CPA (46%), eCPM (41%), and eCPV (41%). Just under one-third of agencies report that they have completed the «Digital Ad Trust Ambassador Program,» which was launched a year ago by IAB Switzerland, Leading Swiss Agencies, and SWA. Agencies and clients who complete the Ambassador Program must, following a short video training session, demonstrate through a quiz that they possess up-to-date knowledge of viewability, brand safety, ad fraud, and user experience.

Markups remain in a gray area

28% of the agencies surveyed stated that they offer media inventory to their clients. However, only seven of the agencies surveyed disclosed an average markup of 9.5%. This means that these agencies purchase media inventory from publishers and resell it at that margin. This is an important issue that advertisers should discuss with their agencies—especially since an average markup of 15% is also applied when purchasing non-inventory media!

Brand safety measures have become standard practice

The measures most commonly used by agencies today to ensure legal safety for their clients are exclusion lists (80%), inclusion lists (75%), private deals (75%), contextual targeting (65%), guaranteed deals (45%), content categories (35%), pre- and post-bid blocking (30%), and brand safety tools (25%). The appropriate measures for ensuring brand suitability are practically the same as those for legal safety, just in a slightly different order.

Agencies are not funded solely by client fees

The agencies participating in the study reported that two-thirds of their revenue from planning and booking digital campaigns comes from client fees. Additional revenue comes from markups on ad servers (15%), payments from publishers/marketers (10%), and tech fees (7%).

Hourly rates are the most popular form of compensation

The most popular forms of compensation for media and digital agencies are, in this order: hourly rates, media commissions, and project fees. The median hourly rate is 179 Swiss francs.

Most agencies are satisfied and break even

For 72% of the agencies, the fees for planning and booking digital campaigns cover their costs, and 76% consider their own fee structures to be fair. For agencies that did not fully cover their costs in some cases, the reason was that not all services or hours could be billed. Overall, however, 88% of the agencies are satisfied with the agency-client collaboration from their perspective.

It is precisely this high level of satisfaction among the participating agencies that gives the SWA—as an interest group representing advertisers—a positive outlook for the future. Now, when these studies are conducted again, we simply need to get many more agencies to participate! Transparency cannot be taken for granted; all stakeholders must continually stand up for it.

Interested advertisers can obtain the 2023 Transparency Study from the SWA at [email protected].

Contents of the SWA Transparency Study 2023:

• Agency Structure
• Technologies Used
• Media Buying
• Media Visibility
• Dealing with Ad Fraud
• Brand Safety Measures
• Handling Data Protection
• Agency Fees
• Controlling/Audit Options
• Approach to Sustainability (Green Media)
• Client-Agency Collaboration

This article is a contribution from SWA, an m&k partner association.