By David Nelson, co-founder and CEO, Limelight Inc.
In business, the line between partner and competitor can be surprisingly thin. A wholesaler might one day decide to bypass retailers and sell direct. A marketing agency could launch a product that rivals one it once promoted. These scenarios are often theoretical and rarely pursued outright.
But what happens when the conflict isn’t hypothetical? When a company supports your business on one side and quietly competes with it on the other, on an ongoing basis? That’s not just a thought experiment. It’s a common, ongoing reality in the programmatic advertising world.
Here’s an example, plucked not entirely at random. Let’s say a programmatic ad platform signs a contract with you, a publisher or ad network, to host your digital advertising environment on a white-label basis – supplying all the necessary infrastructure, support, dashboard and analytics to underpin your profitable ad business.
But then, in parallel, it proceeds to sell the same inventory you’re selling through its own trading arm – at a discount. So it’s supporting your business, driving your revenues – but also competing with you and taking those revenues for itself. Still glad you signed up?
The underbelly of programmatic has always had issues like these. Right now, this double game appears to be a remarkably common state of affairs among ad platforms and their clients, and I think it’s time we all looked at it a bit harder.
Numerous programmatic operators (yes, a handful of the big names) offer a white-label platform for those who want to trade media, while trading the same media themselves – not just blurring, but thoroughly erasing the distinction between supportive platform and ruthless competitor.
The plot gets thicker
Sometimes, there’s more to the play than just quiet competition. Frequently, a programmatic platform will give new suppliers a little extra-contractual bonus when they sign up: we’ll buy your media from you, we’ll provide you with demand, we’ll give you spend. Good news. But over time, that spend often dwindles. And as it does, the supplier’s ability to trade in the way it once did dwindles along with it.
That’s because, in the meantime, the platform has been consistently selling the same inventory for less – which it can afford to do, because it is charging the poor supplier a tech fee. And that fee is clearly removed from the equation if the platform trades the inventory on its own.
Before long, the supplier finds that the partner who came aboard to give them an exciting new platform has in fact stolen, blocked and eroded their business and made off with their relationships.
Is any of this illegal? Not necessarily. But speaking personally, if I was licensing a platform and I found that platform was competing with me, I would question very seriously the value of that partnership. So what would I advise?
Ask the obvious question: Before you make any agreement, ask your platform if they’re trading media too. If the answer is yes, ask who they’re trading media with. Is it the same people you want to trade media with? One of the major DSPs had a banner at Cannes that said something like, ‘You have lots of competitors. Your tech partner should not be one of them.’ And it’s absolutely true, if you are licensing tech from somebody, your interests should be the most important thing in that relationship. That means no side hustles that conflict directly with your interests.
Know who you’re dealing with: Companies that trade media first and foremost, and offer their platform on their side, are media exchanges. When you sign up to use their white-label platform – even when it’s marketed under another name – you may well be signing up with the trading entity itself. Check your contract. If they’re a media trader, they will probably compete with you.
Don’t get drawn into semantics: So, your programmatic partner is openly wearing two hats, and you invite them to explain how it all works – they have access to your data, after all. Now, beware of offering them space to wriggle out here. They may well tell you that everything is properly siloed, that client teams and trading teams don’t have access to each other’s data. Maybe that’s true. All the same, is it appropriate to pay a partner to support your business when they are also competing with you?
There may be certain legitimate caveats. For the first six months of our business, we traded media, simply because we needed to test and trial, to make sure the software we built was working properly. Then we shut it down, because why would we compete with our own clients?
So, what are the benefits of a platform that doesn’t compete with you?
This is an important question, because a platform that is turning its back on substantial trading revenues, and isn’t plundering your business, may charge you a slightly higher tech fee.
What you should get for that is wholehearted support, and the ability to be entirely transparent with your platform partner. When you are able to share with them exactly what you’re doing, they can help you strategise, they can lean into your business, they can give you more of the insights and assistance you need.
The financial upside isn’t only protection against lost revenue to your frenemy; it’s also about capturing more revenue because you’re getting more support, more intelligence, more familiarity with your business.
We’re often asked, ‘if you don’t trade media, how do you help your clients grow?’ It’s a fair question, and the answer is that while we don’t do their business development per se, we do actively support the formation of trading relationships between our partners. This type of introduction-based commercial growth is sustainable and 100% owned by our partners. And that’s the point: putting our partners first, always.
In summary, it’s not right that any partner should be incentivised to undercut and disenfranchise you, or steal your revenues. We think this odd duality in the market is something that merits more attention – and we’d urge you to give it some more of yours.
