The Crusade Against Principal-Based Buying

Summary

AdExchanger Podcast Episode Summary: The Crusade Against Principal-Based Buying

Podcast Information:

• Title: AdExchanger
• Host/Author: AdExchanger Talks
• Description: AdExchanger Talks is an authoritative podcast in the advertising and marketing technology sphere. Hosted by managing editor Allison Schiff, the podcast delves into critical issues and emerging trends within ad tech, featuring interviews with industry leaders tailored for brand marketers, ad agencies, publishers, media companies, and technology providers.
• Episode: The Crusade Against Principal-Based Buying
• Release Date: December 10, 2024

---

Introduction and Guest Profile

[00:15] Allison Schiff: Introduces the episode's guest, Jared Belsky, CEO of Acadia—an independent digital marketing and analytics agency he co-founded in 2021 after departing from his role as CEO at Dentsu's 360i. Allison highlights Acadia's mission to educate marketers about principal-based buying, also known as arbitrage, emphasizing transparency in how brands' advertising budgets are allocated and ensuring they understand the associated fees.

---

Personal Insights and Anecdotes

[02:33] Jared Belsky: Shares a lesser-known aspect of his career, recounting his experience chaperoning the Fantanas during a spring break activation at the Georgia World Congress Center. This anecdote underscores the blend of strategy and unpredictability inherent in the marketing industry.

[04:08] Jared Belsky: Discusses his foray into the Consumer Packaged Goods (CPG) sector with a brand named Dynamite Plant Food. He reflects on the multifaceted challenges of starting a CPG business, from pricing and packaging to legal considerations and distribution. Jared emphasizes that this experience broadened his understanding beyond traditional marketing, making him a more versatile problem solver.

---

Company Culture: Embracing Radical Candor

[09:43] Jared Belsky: Highlights the significance of Acadia's foundational napkin sketch, which outlined their business strategy featuring areas like retail media, marketplaces, SEO, social media, data engineering, and Martech. More importantly, he delves into the company's core values, particularly radical candor, which fosters an environment of honest and constructive feedback.

[13:09] Jared Belsky: Elaborates on implementing radical candor within a 250-person organization. He outlines a three-step approach:

1. Make Candor Safe: Demonstrates vulnerability by acknowledging when he's wrong, thereby encouraging open dialogue. (e.g., [12:18] "I had someone rip me in a semi-public setting, and I thanked them, reinforcing that candor is valued across all levels.")
2. Teach Productive Candor: Educates team members on delivering feedback in a way that is motivating rather than demoralizing.
3. Model Candor Consistently: Ensures that honest feedback is maintained even in challenging situations, reinforcing the company's commitment to transparency.

Jared cites an incident where Acadia parted ways with a major client due to the client's emotionally abusive behavior, underscoring the company's dedication to upholding its values. (e.g., [03:45] Allison Schiff: “Oh, that's really nice, though. They'll listen to this podcast.”)

---

Critique of Principal-Based Media Buying

[20:49] Jared Belsky: Articulates the core issue with principal-based media buying, labeling it as a manipulative practice where brands are unaware of how their advertising funds are utilized. Citing an ANA study, he points out that over 60% of respondents were unfamiliar or unaware of principal-based buying in their media transactions.

Key Concerns:

• Lack of Transparency: Brands do not know the extent to which principal-based buying affects their media buys.
• Education Deficit: Brands are ill-equipped to question or understand the associated fees and allocations.
• Financial Implications: The practice leads to brands being overcharged without clear justification.

(e.g., [22:56] “My first passion and this not just me but at Acadia, is that education is number one. Every brand, every client needs to understand this so they can make their choice.”)

---

Agency-Client Relationship Dynamics

[29:53] Jared Belsky: Analyzes the persistent friction between agencies and clients over the past two decades, attributing it largely to the agency side's manipulative practices rather than client shortcomings. He cites historical trust breaches such as:

• Markup on Technology Services: Agencies inflating DSP rates and engaging in arbitrage.
• Viewability Issues: Brands discovering their ads appearing alongside inappropriate content.
• Opaque Trading Desk Practices: Agencies making substantial margins through arbitrage without transparent disclosure.

Proposed Solutions:

• Simplified Fee Structures: Advocates for straightforward fee agreements where agencies are compensated fairly without hidden markups.
• Transparency and Accountability: Encourages brands to demand transparency and to audit agency practices rigorously.
• Education and Empowerment: Emphasizes the need for brands to ask the right questions and understand their media buys fully.

(e.g., [36:22] Allison Schiff: “What other advice would you have for advertisers in terms of what they should know and what they should be asking and how they should set their contracts.”)

---

Impact and Industry Reactions

[41:46] Jared Belsky: Discusses the positive feedback from industry peers following Acadia's campaign against principal-based media buying. He notes support from other independent agencies' CEOs and acknowledgment from the ANA, signaling a growing movement towards transparency.

[44:04] Jared Belsky: Comments on the slow but steady shift in the industry’s perception of principal-based buying, drawing parallels with past practices like trading desks, which eventually faced backlash due to lack of transparency.

(e.g., [42:23] Allison Schiff: “Do you feel like that's starting to make an impact?”)

---

Strategic Advice for the Ad Tech Industry

[25:20] Stephanie Paterik: Though briefly featured, Stephanie, GM of Editorial and Editor-in-Chief at The Trade Desk, provides insights into the evolving ad tech landscape. She attributes current industry maturation to three main forces:

1. Consumer Behavior: Increased time spent on the open internet rather than walled gardens.
2. Regulatory Scrutiny: Actions by the Department of Justice targeting opaque practices.
3. Innovation: Opportunities for improving quality content delivery, supply path efficiency, and overall transparency.

Career Advancement Tips:

• Cross-Disciplinary Knowledge: Encourages professionals to understand aspects beyond their expertise to gain a holistic view of the media ecosystem. (e.g., [26:41] “Get outside of your own expertise to understand the big picture.”)

Role of Education:

• Trade Desk Edge Academy: Promotes continuous learning to keep pace with the rapidly evolving digital advertising space.

(e.g., [27:28] Stephanie Paterik: “Edge has served the advertising community for 11 years and it's evolving to stay ahead of the curve.”)

---

Revisiting Agency-Client Trust

[28:40] Allison Schiff: Ties the discussion back to the main theme, emphasizing that the lack of trust stems from both the agency's opaque practices and the systemic issues within principal-based media buying.

[33:16] Jared Belsky: Criticizes the agency side for intentionally creating mistrust and highlights long-standing industry issues such as inflated fees, inadequate transparency, and exploited margins. He argues that agencies have often prioritized financial gains over ethical practices, leading to deteriorating client relationships.

(e.g., [35:15] Allison Schiff: “Mark Goldman... made this point that if the holding companies still contrarian were held accountable to like the right metrics…”)

---

Addressing Industry Terminology and Practices

[46:02] Jared Belsky: Responds to the suggestion of dropping euphemisms like "principal-based buying" in favor of more direct terms like "arbitrage." He agrees that transparency in terminology is crucial but adds that simply renaming practices doesn't address the underlying issues of financial manipulation and lack of trust.

[50:04] Jared Belsky: Reflects on a mentor's advice about maintaining integrity in controversial practices, emphasizing that ethical standards should withstand public scrutiny and personal accountability.

(e.g., [51:08] Allison Schiff: “If you had a time machine... what specific point in time would you go back to…”)

---

Looking to the Future: Restoring Trust and Integrity

[53:37] Allison Schiff: Encourages listeners to engage with Acadia’s campaign against principal-based media buying by visiting saynoToPrincipalMediaBasedBuying.com.

[51:46] Jared Belsky: Imagines reshaping the industry's foundational moments to prioritize transparency and ethical practices, suggesting that early establishment of clear doctrines could have prevented the mistrust and friction currently plaguing agency-client relationships.

(e.g., [53:37] Allison Schiff: “Stop the march of the margin machine... visit saynoToPrincipalMediaBasedBuying.com”)

---

Conclusion

In this compelling episode, Jared Belsky fervently advocates for transparency and ethical practices within the digital advertising industry. By critiquing principal-based media buying and emphasizing the importance of radical candor and trust in agency-client relationships, Belsky positions Acadia as a beacon for positive change. The conversation underscores the necessity for brands to be educated and empowered to question and understand their media buys thoroughly, ultimately striving for a more trustworthy and efficient ad tech ecosystem.

---

Notable Quotes:

• Jared Belsky [20:49]: “Principal-based media buying is absolutely, positively an advent for these companies to create margin... that’s what this is about.”

• Jared Belsky [22:56]: “Acadia will make no money in any other way other than the agreed upon fee. You may audit us at any time in any way you choose.”

• Jared Belsky [29:53]: “Agencies are playing too many games and creating too much mistrust.”

• Stephanie Paterik [26:41]: “Do not silo yourself within one area of expertise. Understand how the entire media ecosystem works.”

---

This summary encapsulates the essence of the episode, providing a comprehensive overview of the discussions surrounding transparency, trust, and ethical practices in the ad tech industry, all while highlighting Jared Belsky's advocacy against principal-based media buying.

Transcript

[Jared Belsky]

Welcome to Ad Exchanger Talks, the podcast.

[Allison Schiff]

Devoted to examining the issues and trends in advertising and marketing technology that matter most to you. This episode is sponsored by the trade desk Edge Academy, the online learning platform designed to help marketers stay ahead in the evolving world of digital advertising. Check out their certifications, expanded course curriculum, and more, all led by the people who are shaping the world of ad tech. Enroll today for free at edgeacademy.thetradedesk.com this is Allison Schiff. You're listening to Ad Exchanger Talks, and my guest this week is Jared Belsky, the CEO of Acadia, an independent digital marketing and analytics agency he co founded in 2021 after leaving the CEO job at Dentsu's 360i fun fact Acadia is named after the Acadia national park in Maine, which is one of Jared's favorite places to go hiking. Over the past year, Jared has been on a mission to educate marketers about principle based buying, AKA arbitrage. Brands deserve to know how their money is being spent and why they're being charged the fees they are. But they'll never get the transparency they're entitled to if they don't know what questions to ask and they don't start pressuring their agency partners for answers. We'll get spicy. But first, if you're not listening to our other podcast, the Big Story, you're missing out, guys. It's a weekly roundtable discussion of the biggest news of the week with a rotating cast of the Ad Exchanger editorial team. And we're fun. We make it amusing. So let us entertain you and inform you while you do the dishes or go for an afternoon stroll. And while you're at it, please also save the day for next year's CTV Connect March 12th and 13th in New York City. Ad Exchanger is joining forces again with Synopsys, Admonsters and Chief Marketer to host a Can't Miss summit on all the key issues and opportunities in Connected TV. Learn more and [e-mail] hey Jared, welcome to the podcast.

[Jared Belsky]

It's good to be here. Thanks for having me.

[Allison Schiff]

All right, so what is something about you that not a lot of other people already know?

[Jared Belsky]

Well, if I was to go marketing related, it would be that I had to chaperone the Fantanus in spring break when I was getting indoctrinated as a brand manager. That was fun and humbling, but I don't know, that's the best I got right now.

[Allison Schiff]

So the Fanta ladies, the dancers?

[Jared Belsky]

Yeah, they were called the Fantanas. It was Panama City beach, and it was an activation, and I got to go down to Florida and sort of be a chaperone and make sure it all worked out. And it's just one of those moments where you realize marketing is awesome, strategic, and ridiculous all at the same time.

[Allison Schiff]

Yeah, that's an excellent description. Any crazy stories from your Florida sojourn as a chaperone for the Fantanas?

[Jared Belsky]

No, I think it's. When you. I think it's actually very much in the bucket of. There's a lot in our industry that seems absolutely glamorous, right? You hear about commercial shoots and photo shoots and even things like this spring break, but there's. It's like anything else. There's a lot of waiting rules. Try not to get sued. Trying to keep things on the rails. So I would say no. And now that I'm a dad of two high school kids, I don't need them hearing one if there was one.

[Allison Schiff]

Oh, that's really nice, though. They'll listen to this podcast.

[Jared Belsky]

One will.

[Allison Schiff]

All right, well, one more thing about you, I mean, a fun fact that I uncovered. It's not hard. I mean, it's in your bio. I just thought it was really interesting that you started your own CPG brand at one point called Lawn and Garden. I mean, what's the story there? Is it still around?

[Jared Belsky]

Yeah. So to give, like, proper credit, first, the brand itself was called Dynamite Plant Food, and it was really started by a friend of mine named John Rosenthal, and I was comfortably working at Coca Cola and Brand Management, which was. Was a dream job at the point in time, one that I worked really hard for, but he brought me to the Georgia World Congress center to something called the Flower Show. I thought I was just going with him as a friend to walk a flower show, which seems even strange as I talk through it. And he asked me what the monopolies were that existed in the world, and I'm like, well, I don't know. What. I'm not sure. And he goes, well, Scott's. I go, okay. And he goes, you want to help me break up the Scott's Miracle Grow Monopoly? I'm like, I guess. Maybe. So we. He really, you know, him and I and the ragtag, you know, gang sort of started this brand called Dynamite Plant Food, and we actually got it, you know, nationally available at Home Depot and a bunch of Lawn Garden stores like Pikes. It was an incredible adventure. Made a lot of mistakes, learned a lot. I would say maybe to take the ridiculous part of that story.

[Allison Schiff]

Right.

[Jared Belsky]

Is essentially I was a paid salesman. And so that's, you know, that's humbling and you kind of get out of the fancy marketing world that so many of your listeners and even I get to be in a privileged day to day basis and you get into the slot and card world. The more interesting maybe serious answer to your question is I think a lot of your listeners and even me, we're told that we're something, right? I'm a brand marketer, I'm a media person, I'm a social person, I'm an analytics person. But starting a CPG business, you have to learn about everything. I had to learn about pricing, had to learn about packaging, had to learn about legal sales, UV filters, you had to learn about distribution, all sorts of things, environmental laws and regulations. And I think you realize there's this big world outside of marketing that you, to be a great marketer you have to better appreciate. And I think it taught me a lot of that and I think it helped me realize I was a better problem solver than I was maybe a marketer. So I don't know, I think it's, I think everybody should maybe try something a little bit strange and get off their predetermined ladder just to see if they maybe can learn more than they thought. So I don't know, sorry, I went a little deep there, but I liked your question.

[Allison Schiff]

No, this is about going deeper on ad exchanger talks. So feel free and feel comfortable. I think it's also a way to learn that things are more connected than you necessarily realized. Something that seems so other like let's break up the Scott's monopoly kind of ties into what you're doing today in a way. I mean you're very retail focused in your new venture.

[Jared Belsky]

We are. You know, the idea was I were looking in the market and there was a couple things that I think are underserved. The first is that there's not enough attention paid to the upper mid market. Right. Think like Puma, not Nike, think Red roof in, not Marriott, think you know, Orkin, not Terminix, this sort of thing. And there are these incredible brands with modest but still really important budgets. And they need sophisticated help that's affordable, fast, less fussy, less overhead one. So I think that was, that's, that's a big thing, right? Too much of our industry. I love our industry. I'm not a hater at all. I love our industry. But so much of our industry's time is spent talking about the same Fortune 500 companies, it drives me up a wall. So that was. That was insight number one. Insight number two was there was this thing growing called retail media. And it no longer was just this little thing like Amazon ppc, right? It's just growing and growing. You've got Amazon, of course, and Walmart and Instacart and Kroger and Ulta and Chewy, Home Depot and Lowe's. Everything is retail media. But now you see it infusing other things, right? Whether it's Walmart Visio announcement of today or how Instacart and YouTube are doing, you know, a partnership or how, you know, Walmart data could be bought through trade desk. I think retail media is no longer just this thing. It's permeating everything. And so it just felt like those were two gaps and something worthy to pursue.

[Allison Schiff]

I was looking at the Acadia website and I saw a photograph of a napkin that you saved that you posted. You and your co founder, Sean Belnick, you were having coffee at your favorite local coffee shop in Atlanta and you started sketching out the idea that became Acadia on a napkin. So business strategy, insights, management written across the top and then a bunch of boxes underneath, like retail and marketplaces in one box, Amazon, Walmart, Instacart, then SEO, Social Influencer in another box. And then EE com, Shopify, WordPress, Klaviyo in another box. Paid, Social and Bidable and SEO and yet another. And then this rectangle along the bottom with data engineering and Martech, and then along the side, the word invest with this. With this big arrow pointing up all the way to the top. So it seems like you've stayed pretty true with Acadia to what you and Sean jotted down on a napkin that day at the Chastain Coffee Shop.

[Jared Belsky]

It's yes and. Which is a very common saying we have around here. So the yes is. Look, I had the greatest business partner in the world. Sean Belnix is just an incredible person and visionary and investor. And yeah, that's real. That napkin, it's actually got coffee stains on it. And now it's framed and sort of sits either on the wall here at Acadia or on my desk. A couple things when you, if you're lucky enough ever to start a business as we have from scratch, and you have the chance to make it great, you have to have a great business architecture. And I think we had one, which is referring to the idea of like we had a market thesis, which was the mid market. We had a thesis to bring together retail media with paid media with first party customer analytics with social creative and all things you mentioned. But as I look back, the napkin actually had just the business architecture. Four years later, I think I've come to appreciate that the mortar or the heart was even more important than the head. And what I mean by that is our focus, for example on core values is something that I've never seen as strong as it is here. Our focus on bringing back learning and development, our focus on the right incentives, our focus on having a really flat organization. We have 250 people and zero vice presidents, zero SVPs. Our focus on the Acadia Academy where we bringing in young folks from all different walks of life and teaching them the trade and then graduating them into full time jobs. All this has resulted in a 9% turnover rate two years running in an industry that averages 40%. And so my thesis with Sean here, as I'm talking about the heart, not just the head, is we're in what I still believe is like the greatest industry ever, right? Whether it's digital agency or digital media or just digital. This is incredible. But we've been screwing it up for too long by focusing just on financial engineering BS and have gotten away from learning development, gotten away from honesty and transparency, gotten away from teaching, gotten away from taking risks on interesting hires. But I guess the answer to you is yes. We are so proud of the napkin again. It hangs proudly above my desk. But that's the business architecture. I think I've come to realize our unique advantage is the softer stuff.

[Allison Schiff]

One of those core values that you just mentioned that you espouse is radical candor. So you want honest feedback from everybody and from clients. And I assume that you give honest feedback back to them. And I'm speaking as someone whose job involves every day giving and receiving a lot of feedback like editing and writing. And I can also say from firsthand experience that even constructive criticism is hard to take sometimes. So how do you like support real honest expression so that it's positive and constructive but you're not poking through people's usually pretty thin skin. And there are a lot of, there are just a lot of egos in this industry.

[Jared Belsky]

I think there are three steps to making radical candor real for 250 people. I'll quickly rattle them off and maybe try and describe them so it sounds real. I think you have to make it safe, I think you have to teach it and then I think you have to model it. So the first part is very underrated step. You have to make candor feel safe. And so if I'm in a leadership meeting or if I'm in all hands and someone challenges me or even says I'm wrong, I'm really, really fast to acknowledge that person, to say they have a great point, to show where I'm wrong, to show where I'm willing to rethink. So you got to make things safe. And then, in fact, we have this thing called the Wall of Fame where we shout out people who are exemplifying core values. So I had someone sort of rip me in a semi public setting, and in that moment I thanked them, but I actually took to this Wall of Fame slack board. I shouted out this person for exhibiting candor and let all 250 people know that this junior person was right and I was wrong. Right. So what did I hopefully accomplish there? I made Candor safe. And more importantly, I made it clear that candor could go up to any level. I think the second thing is you have to teach how to make radical candor productive. Right, Allison? Like I've learned, you can tell someone that they could be better, but you have to do it in a way that's healthy and productive and motivating. Right. If you go to someone, actually, Adam Grant talks about this. If you go to someone who works for you and says, you know, fake name Sally, I'm about to give you some feedback. It's going to be a little hard to hear, but I'm sharing it with you because I believe you have another gear and you haven't reached your greatest potential yet. And if you're willing to hear this, you'll reach that destiny and that potential that I know you have. Are you open to hearing this? Right, Allison? Like, if you just take the time to share those 20ish, whatever words that was, you're going to have a good conversation. But if you just jump in and you let someone know, like Frank Costanza, you know, the 30 ways they suck. Why do you. The airing of the grievances. Remember that one? Like, why would you think that would go well, you have to take time. So I think two is you have to teach people how to give candor. And then the third is you have to be willing to live that value of candor when it's raining and hailing and 32 degrees, not when it's 72 and sunny. And so about two years ago, when we had more risk at our company, you know, when we were still growing, we gave notice to our, at the time, largest client on 25 December on Christmas Eve, because they were being absolutely emotionally abusive to our team. And that was scary, but it was taught, you know, but my team gave me candor about how bad their day to day was and they were looking to me and our leadership team to defend them. And it was time to give candor to that client, but they didn't want to hear it. And so we, we parted ways. But, but I, I, I love and appreciate your question because a core value is horseshit. It's nothing unless you're willing to defend it when the stakes are high and, and when you're willing to make it safe and when they're willing to model it. And I don't think I'm amazing. I think I've learned a lot of this from the leadership team here. I've learned a lot of this from great mentors. And I think being independent maybe and being private might give you a little more confidence to take these risks that candidly I may or may not have taken when I was running 360I at Dentsu. I don't know, I'm not sure.

[Allison Schiff]

Yeah, I mean it's, it's hard to go back and think about what you would have done or would not have done if there were different rules in place. But, but how else do you apply this approach, like radical candor to the agency client relationship? Because sometimes it's about having to just say goodbye. I mean, it's scary, but you did it and it seems to have worked out and it was better for everyone's mental health. But what about the back and forth that happens when a client is more open? How does that actually play out?

[Jared Belsky]

I care a lot about this topic. That's why I wrote two nerd books on the topic. One was called the great client partner. The other one's called you get the agency deserve. I don't know. Like your question is an awesome one and there's so many places to go with it. I guess I'll pick two favorite topics within your question. You know, I think the first is that I wish for our industry, both client side and agency side, that people would, people would try and work through things before they send the you're fired FedEx letters. I truly think it would benefit agency and client alike because when you take the time to ask hard questions and give feedback, you can get to better before just quitting. Right. And so I'll just give you an example. You'll hear all the time that a client fired an agency for X, Y and Z reasons, but you really never fire an agency. You're firing a team and you're actually never firing a team. A team is made up of these individuals who you interact with. And so I'll give you an example if you ask the client. Hey, I hear you're frustrated with us. I hear you. I'm sorry. I know we can do better, but I'd like to understand what's wrong. Oh, well, you're just not responsive enough. Okay, I hear you're talking about response time. That's interesting. So is that maybe a function of the account person, Sally, who just, you feel is not getting back to. Yeah, yeah, that's what I feel. I mean, Sally just doesn't realize how urgent our business is in Q4. And then I'll say, okay, client, what I hear you saying, really, is that Sally, your account person doesn't realize the stakes of Q4 urgency that you feel. Are you open to me coaching her for two weeks? And if you feel she's responded, we'll keep going or I promise you, I'll rotate her. Yeah, thanks, Jerry, for listening. So my point of that silly little vignette is that too many things go to a 10 or for quoting Spinal Tap, it goes right to an 11.

[Allison Schiff]

Yeah.

[Jared Belsky]

Whereas we have to avoid the vagary and feedback and we have to probe for the problem and then we got to fix the problem and then things could be great. So I think that's kind of where my head goes when I hear your question. I don't know if that was you just blowing up, but that's kind of where it goes.

[Allison Schiff]

Well, look, I think Sally has a lot of potential. Really? She does.

[Jared Belsky]

Me too.

[Allison Schiff]

I'm going to broach a topic now before we take a quick break. And the second half of this episode will be all about this thing. And this thing is principle based buying because you've been on a crusade to get agencies to stop doing principle based buying. But also, just as importantly, and very much part of that process is to nudge, or more than nudge brands, to really understand what it is and to talk to their agencies about it. So to bring radical candor to the conversation about principle based media buying. But what is so bad about principle based media buying and what is precipitating this very vocal stand that you're taking against it?

[Jared Belsky]

I think the central problem with principle based media buying is that it is not a victimless crime. These brands and these clients are under educated and so they are being taken advantage of without them knowing it. Right. If you look at the ANA study, it was something like 40% of respondents were somewhat familiar 13% were very unfamiliar. And this is my favorite one. A fifth of the respondents of the survey had no idea if principal media buying was even part of their buy or not. Said another way, more than 60% of the respondents don't know. And we're talking about billions and billions of dollars being transacted without them understanding. So I think that's the problem here. It's like no one is even acquiescing to this. They just don't realize what's happening. And so this is happening in the shadows. This is happening without understanding. Clients and brands are embarrassed to ask. They don't know what to ask. And so the margin machine marches on. And I just, I'm. The mission for me is actually to arm brands and clients with the right questions and to expose with a flashlight the problem so that they can ask. It is not for me to tell them to do it or not to do it, although I have a definitive opinion. But I do think I can make a difference. And there's other brave people trying to make a difference to arm these brands with the right questions and then let them make their choice.

[Allison Schiff]

The margin machine marches on is my new favorite phrase. I really love alliteration. So one more question actually before we hit our break. You kind of answered it, but just to put a finer point on it. It's not that you're, well, you have an opinion on this, but you're not telling agencies not to act as principals, but that this practice just shouldn't be happening behind the scenes in the shadows without brands knowing about it.

[Jared Belsky]

I don't want to weeding my way out of this just because I'm on a well listen to podcast. So let me answer directly.

[Allison Schiff]

Okay.

[Jared Belsky]

My first passion and this not just me but at Acadia, is that education is number one. Every brand, every client needs to understand this so they can make their choice. I that that's who I am. That's who we are as a company educators. And we want people to be armed with the facts. That's number one. But number two, no, I'm very happy to say what I think. I think that principle based media buying is inappropriate and it's not in the best interest of brands or client or the trust in our industry. Which is why the URL we bought was more or less just say no to principal media buying. And why the ads that we took out on Ad Age. Maybe we'll talk about that said, just say no because I want people to know what we think. What I think, I don't think it's a good practice. No, But I'm also not the industry babysitter and there's a lot of very smart people smarter than me who, if educated, make that decision. I certainly don't look down on them. It might mean that we politely disagree, but that's the long winded answer to why I'm starting with fervor for education first. But yeah, if you had to pin me down, I would absolutely say to the average bear, just say no to principal based media buying. I don't, I don't think it's a positive net for our industry or our clients and I'd love to talk more about that.

[Allison Schiff]

Well, we're definitely going to talk more about that. The website that you mentioned, the ad campaign to promote education about principle based buying that you teased. So everyone stick with us and we'll, we'll get back into it soon. I'm Alison Schiff, managing editor of Ad Exchanger, and today I have Stephanie Paterik with me, GM of Editorial and Editor in chief at the trade desk where she leads the content strategy and execution. And she also has more than 20 years of experience in media and journalism. Stephanie, welcome.

[Stephanie Paterik]

Alison. I admire your work. So happy to be here.

[Allison Schiff]

Thank you very much. So what shifts or forces are driving the evolution of the ad tech industry? This is such a big question.

[Stephanie Paterik]

It is a big one. And I think we're in a remarkable moment in time because we're really witnessing the maturation of the ad tech industry. And by that I mean, you know, just in my career as an advertising journalist, I've seen programmatic go from this niche part of the ecosystem that transacted primarily in remnant inventory to a vital player that's supporting premium content. And I think that three forces are sparking this. It comes down to consumers, regulators, and innovators. And first, I think it's important to understand that more people are spending time on the open Internet than in walled gardens. So they're spending more time streaming shows, listening to podcasts, reading news. And second, the Department of Justice has really held Google's feet to the fire this year, and that has exposed the danger of black boxes. So everyone in the supply chain is being scrutinized and there's a pressure to add value, not just extract it. And all of this really represents a massive opportunity for innovation and for adtech to keep evolving with quality content, supply path efficiency, and really transparency for all parties at the fore.

[Allison Schiff]

What is one piece of advice that you'd give to someone looking to take their career to the next level?

[Stephanie Paterik]

I love this question so much. Get outside of your own expertise to understand the big picture. I think one of the biggest mistakes that people make in their careers is to silo themselves within one area of expertise. And I want to be clear. Specialization is valuable, but the more that you can get curious about what your stakeholders know and the deeper you understand how the entire media ecosystem works, I think the more brilliant you'll be at what you do. So don't be afraid to play the role of a reporter and ask the subject matter experts in your organization what they know. I think you'll be surprised at how generous people are with their knowledge.

[Allison Schiff]

Advice for your career, advice for life. And how can the trade desk Edge Academy help a marketer with their career?

[Stephanie Paterik]

We talk about transparency a lot in our industry, and one place where it's vital is education. At Edge, we have a strong belief that the more everybody understands programmatic, the healthier the whole ecosystem becomes. And we really believe that this knowledge is an advantage for anybody who's looking to grow their career or their business. And this goes for the cmo, the planner and the trader. Edge has served the advertising community for 11 years and it's evolving to stay ahead of the curve. So we've got new classes on timely topics like omnichannel advertising, Connected tv, as well as foundational certifications like Trading Essentials and Marketing Foundations. So it's just a fun challenge to meet learners where they're at and help them navigate this space that changes, as you well know, literally every day.

[Allison Schiff]

Stephanie, thank you for the insights and for the advice.

[Stephanie Paterik]

It's been so fun to be here. Thanks for having me.

[Allison Schiff]

All right, welcome back. And we're going to stick with our principle based media buying theme. But I wanted to take a quick step back and tie principle based media buying into what we were talking about before the break, before we started talking about principle based media buying, which is the agency client relationship. It's all part and parcel. And I want to diagnose a little bit how we got here, this lack of trust and transparency between agencies and brands. I mean, having been on the brand side yourself, you were a brand manager and associate brand manager at Coca Cola back in the day, 2005 to 2007 and of course on the agency side, 360I for years. And now you have your own thing. You've had a front row seat to what creates points of friction between agencies and their clients. So what, what do you see as the main points of friction? How did we get here? Since you've sat at both sides of the table. And in asking the question that way, it almost speaks to the problem, right? Because when you're sitting on opposite sides of the table, it immediately sets up an adversarial dynamic.

[Jared Belsky]

Yeah, you have it right. It's just been this perpetual friction parade the last like 20 years. And it's very much self inflicted on the agency side. Look, brands and clients can get better. I do think they have a role, but it's not, this is not on them, this is on us. And as I process your question, let's just take a very brief trip down not so happy memory lane over the last 20 years about trust breaches. You got crazy markup on tech, right, where agencies were taking DSP rates and doubling them and taking arbitrage. There you had the viewability escapades where brands started realizing, you know, huge amounts of impressions that agencies were buying were ending up next to porn or inappropriate content. You had the trading desk fiasco that lasted, I don't know, the better part of 10 years because it took the industry eight years to understand what was actually happening. But trading desk was right, were regularly making 40, 50, 60, 70% margin against arbitrage. Again, brands didn't understand what were going on. I mean, I keep going, you know, sows that don't make sense, fees on fees, rust proofing. I mean it's, it's like, it's like a joke. It just is a joke. And it should be a lot simpler. The brands and clients should pay an agency some fee that they both feel is reasonable to do a job well. And then all the rest of the monies that are used to do that job well should be monies that are just invested appropriately, transparently, carefully, thoughtfully, frugally. That's it. I don't know why it's hard. I don't, I don't, I just don't. And I don't know. Someone has to shake me more to help me understand why I'm wrong. I need someone to tell me why we should steal. I need someone to tell me why if we can get a 15 cpm for our clients, we shouldn't and that's the lowest we can get. Why shouldn't we give that to them? That's the agency job. That's the agency job. You're either an agency or you're a middleman. Like are we whole Foods, are we buying bananas and then sell it, you know, for a dollar and selling them for two? No, we're not middlemen. We're supposed to be agents Fiduciary So I just. Anyway, yeah, to your point about friction, it's friction that we've knowingly created. It's mistrust we've knowingly created. Right. Also, when I really process your question, anyone who's listening to this, who's in a, you know, a relationship with some someone they love, they know that any relationship has friction. Right? You misunderstand each other. Someone loses their temper, someone's impatient, there's a season of stress. That's all going to happen. Right. So brands and clients, sorry, clients and agencies are going to have to deal with what I call the natural friction. That's hard enough. Why are we inviting mistrust into the equation? Why are we creating friction on top of that? Why the cat and mouse games? Well, financial engineering and pressure.

[Allison Schiff]

So clients maybe are from Mars and agencies maybe are from Venus.

[Jared Belsky]

But no, no, no, no, no, no, no. Well, I don't think that's fair.

[Allison Schiff]

Okay.

[Jared Belsky]

I think, I mean, yes, a little in the sense that there's different, but I don't think. Look, brands and clients have to get better at certain things. Okay? Yes, yes. This is not them. Agencies are playing too many games and creating too much mistrust.

[Allison Schiff]

Well, let's talk about the games. So you, you were featured in a really interesting story. It was on Digiday recently, early November. The headline was One Media Agency gets vocal against Principal Media and Hopes Others will too. And it's about how you're raising awareness about this issue. Principle based media buying. And Michael Burghi who wrote the piece, he posted it on Linked in as one does. And there was an interesting discussion in the comments. Mark Goldman, the CEO of Adelaide, which is an attention startup, he made this point that if the holding companies still contrarian were held accountable to like the right metrics, quote unquote, like media quality, then principle based media buying would maybe be preferable to cost plus pricing where you add a fixed markup because it creates a good long term incentive toward the right metrics. And he was like, the only price that matters is the one that you paid. And when you buy like a stock from somebody, for example, and it's $50, it doesn't matter if the person who owned it before paid 20 bucks or 75 bucks or whatever. Like when you are trying to compute the value of that stock yourself once you own it. So what do you think about that point of view?

[Jared Belsky]

I don't know him well or really know him and I think how I process that is that I understand the point. Right. Because the point's been played out for 20 years in a sense of like if the metrics are right, this wouldn't happen. But that's not really true. It's obfuscating the real issue. That's not why this is happening. So that's why it's not so much that I think he's right or wrong or I'm incensed by his remarks. That's kind of not what I'm thinking. Where my head is actually going somewhere very different is principle based media buying is absolutely, positively an advent for these companies to create margin, to lift share price up, to counterbalance the fact that so much of the rest of their model is under attack and that they've lost margin in other places. That is what this is about. And so I just don't like anything that draws attention away from the fundamental problem.

[Allison Schiff]

Well, and you launched a website all about the fundamental problem. Say no to principle based media buying.com to teach brands about what it is. And the first thing you see pretty much when you hit this site are the words brands should not engage in principal media buying without knowing all the facts. So facts like know what percentage of your total media buy is involved in principle based buying and if that percentage is large, you should negotiate your fee. And if you get pushback from the agency, you know, and they counter and say, well you know, you're getting a very low fee on all media, then be educated enough so that you can come right back with, well, it's not really a low fee when you agency are making millions more through arbitrage and your real rate is way higher. And then just see what they say because a real partner, and this is a quote from the website which I really like, a real partner doesn't hide behind process and legal documents. So that's very good advice. I mean what other advice would you have for advertisers in terms of what they should know and what they should be asking and how they should set their contracts.

[Jared Belsky]

Yeah, I'll get that in a minute, I promise. I'm so happy that you seized on that quote because like that's how simple this would be. Sometimes when we're at Acadia, fortunate enough to about to win a piece of media business and we get to the sort of sow legal documents, someone a client will ask me or procurement ask me, are you willing to abide by the, you know, the, the 20 page IAB or whatever it is, you know, template on transparency. And I say no and you can see that they're scared. And I go no. I'd actually like to replace all that with one line. Acadia will make no money in any other way other than the agreed upon fee. You may audit us at any time in any way you choose. That's it. Because that's where I think we need to be to restore trust. Okay, now I'll answer now I'll kind of go back to where stay on the soapbox. Yeah, Go Go is a little bit about. Yes, they have to ask these questions. What I want the listeners to also understand is the types of clients that are the victims here because a lot of the bigger brands, right, who are at some of these larger agencies, the Aflacs, the nationwide, the Pfizers, right. There is a sort of like stated important mission to get lower priced media to create the sort of reach numbers they need. And that's fine, right? I understand the math argument for that. So let me not focus on them because they got the millions and billions. Let's talk about Converse. And by the way, this is fictional. I'm just using. They're not a client of mine. I'm just using them as an example.

[Allison Schiff]

Let's call it Sally Inc. How about.

[Jared Belsky]

Yeah, Sally. Yeah, that's right. I use Sally a lot. But it's like it's just small client X, right? Small client X that's at a holding company. All of a sudden the junior buyer, because that's always who it is, it's a junior buyer. The junior buyer might be pressured or tapped on their shoulder to start taking some of their barely $8 million in budget and shoveling it towards NBCU or whatever where that large company happens to have a large commitment. And so all of a sudden small brand X who really should have their young media buyer thinking of like something unique for them, I don't know, fortune cookies, pizza boxes, the match group of dating sites like Tinder, whatever. Something creative, something unique that's going to break through. Instead they're buying Tonnage on NBCU to make some commitment. So I think that's what people don't realize here, that this isn't just about quote unquote, if I do principal media buying, it's okay because I get a better rate. That's not right. A better rate is still bad if you are getting the wrong media for your brand. So that's the other thing here. There's a lot more victims. It's not just like that. I fundamentally think this is close to stealing because no one understands what's going on. The smaller brands and medium brands are having pressure brought to Bear unbeknownst to them and their media ends up in places that may or may not be right for them and they wouldn't know.

[Allison Schiff]

Reminds me of that. I'm going to mess it up. But that joke about someone who buys a bunch of shiny junk and someone says to them, like, why did you buy this? You're like, because it was a great deal. You know, like two for one. It's like, well, okay, this is what you're left with.

[Jared Belsky]

No, that's, that's. Look, I think that's right. And I can tell you after we at Acadia and I was allowed to bravely put out that ad buy, just say no to Principal Mace me by an ad age, I had a lot of junior and mid level media buyers from the industry privately reach out and DM and just say thank you for writing that. I can't publicly comment on your post because I might get fired, but someone had to say it and I'm hoping they'll be changed.

[Allison Schiff]

Well, I've alluded to it a couple times, but we didn't explicitly say in case people don't know, in case they didn't see. It was very cheeky, very clever. Last month you did an ad buy on Ad Age and I think also on LinkedIn, right. To raise awareness about the dangers of principle based media buying. And it directed people to say no to PrincipleMediaBased Buying.com. so you've gotten reaction to that. Just one on one, kind of under the radar people who can't talk about it publicly. But what other reactions have you had? And do you feel like that's starting to make an impact?

[Jared Belsky]

Yeah, so there was a lot of different types of reactions. You know, the first that really I think like grew our spirits here at Acadia, me personally, is that there were a lot of other independents, large independents, where their CEOs jumped in and said that they agreed that that was really positive. It was great to see the ANA acknowledge it and get behind it. It was great to see a lot of, you know, sort of digital media luminaries jump in the fray and talk about it. And then I did see an increased amount of coverage about it. So look, Alison, like, I'm under no false illusions. I'm not particularly important person. I'm one voice. There are certainly fancier, more famous people in the industry, but I think it needs to start with some brave voices. And there are others. There are others, right? Vayner in this industry and cross media and from what I can tell, tenuity and a bunch of other Shops w. You know, there are people starting to come out and talk about it. And so I think that's how this moves. I'm going to be speaking, I think in April, I was invited to ANA's, the financial procurement Conference. There'll be a room of hundreds of the more powerful procurement people. And I hope not to bore them or lecture at them, but just help them understand their choices. And. Yeah. So I don't know. Hard to answer your question. Right. Like, because, you know, you don't want to be like delusional, just.

[Allison Schiff]

Right.

[Jared Belsky]

One human. But I'm pleased with the response. I think there's a lot of people who can't speak up yet, but they will over time. Look, the trading desk situation, you remember it well. Yeah.

[Allison Schiff]

So I started at ad exchanger in 2014 and trading desks were absolutely a thing. But wasn't the heyday like a little before that? I feel like I.

[Jared Belsky]

It's funny you mentioned 2014, because I wrote an article then calling for reform, but I'd say the heyday was maybe a little before that. But you're. Exactly. But you're right on. The point is that it took a while. Right. They started and people are like, oh, that's exciting. Then there were these margin machines that people became dependent on. Then people started asking questions, then it went into disfavor and then it went into, if you're doing that the wrong way, it's near fraud. Right. But there was a life cycle of it. And my hope is that we're somewhere, hopefully in the middle of this life cycle and education is starting to bubble up and knock on wood, two years from now it'll be less prevalent and. Or at least people will be far more educated.

[Allison Schiff]

Well, I want to ask you. We're nearly to the end of this. I want to ask you a question that I asked Wendy Clark, the former global CEO of Dentsu, when I had her on this podcast just a few weeks ago in November. So I. And I can tell you what her answer was. I asked, should we just stop calling it principle based buying and be clear about what we're talking about? Because I think some of the confusion comes from a very anodyne term. But we're all adults. Like, it's arbitrage, so why not just call it arbitrage without the need for euphemisms. And her answer, which you can also react to, is that and she's not in the agency world anymore. She works at a consulting firm.

[Jared Belsky]

Yep.

[Allison Schiff]

But that agencies have been under a ton of pressure and this is one way they've been making money. But what's needed is an open and honest conversation about what an appropriate profit margin looks like for an agency. Agree on that in the sunlight as a starting point and then take it from there.

[Jared Belsky]

Yeah, look, I know Wendy a little bit personally, and she's very bright. And so I think that's a very reasonable posture. I guess I take it a little further. First of all, yes, let's call it what it is. It is arbitrage. But I guess I just fundamentally don't understand it. The very reason why these large agencies are able to buy these big positions and have these rates is because of the money that these brands entrust to them. Like, they're not banked randomly. It's not like these big companies are just like, have gold doubloons in some sort of, like, safe, and they're able to buy it on their own. They're using their clients commingled money to buy it. So if the clients got all together and said, this is bs, just, if you can get the lowest rate, get me the lowest rate, but I'm not going to give you money to pretend that you get me a low rate. It's crazy, right? Like, Allison, that's why, like, I'm so sorry. I just feel like everyone wants to talk about half measures only because they're uneasy, they're scared, they're worried about their career. They're worried, like, even me talking about this. Guess what? Okay, I've just eliminated five people who might ever want to buy a Katie one day. Whoopsie woo. Okay, like, why are people. People are talking about half measures because they're fundamentally anxious or they're part of the gravy train or whatever, or they're scared. I'd rather just return to a simpler view of this. I just think that's it. I don't know why there has to be arbitrage. Why can't it just be simple that clients are willing to pay an agency a fair, mutually agreed upon rate to do a hard job well and then go do that job well? Right? Like, I mean, this, this is why people hate home builders. Not, I don't mean like the corporate contractors like, you know, your local general contractor, because it feels like that your GC is picking subs and getting kickbacks. I don't know, maybe just to end sort of where you started, and I so appreciate it, is where you started is trust agencies, or the agency brand relationship only thrives where there could be trust, where there could be vulnerability. That's sort of one, two is careers. Right. Because there's people here involved, like people, junior employees want to fundamentally show up at work where they feel like they're doing something good and doing it the right way. So there's two types of trust that need to be restored. I fundamentally would love young people to be proud of the agency landscape again. And the only route to being proud is to feel like your employer is making ethical and reasonable choices. So that's one thing to fight for. And then the second thing is if we want to stop bemoaning why agencies are fired every goddamn 24 months or whatever it is, then we have to reinvest in trust there. And if all of a sudden we're having conversations like debating, you know, it's like debating words, then we're probably not winning the trust battle. But most of the agencies I'm tracking right now and respect and admire are ones who are on the right side of this issue. And I think we're just getting started here, that we're going to knock on wood like 4 years from now. Wonder why the heck did IPG come out proudly that they're going to go do more of this and how is that acceptable?

[Allison Schiff]

Yeah, that, that might not age well.

[Jared Belsky]

I don't think it will. You know, I had a mentor. I don't know why I'm saying, like he's dead. He's still very much alive. One of my most important mentors is a gentleman named Brian Wiener. He runs Profitero over at Publicist now. Anyway, great, great person. He used to just say to me, if you're about to figure out a process or a new method or whatever, it's not the point. He says if you're about to do something and it's controversial, picture yourself sharing that at a 200 person cocktail party. You know, up on a, up on a box. Like would you be proud of that? Would you, would you say even if your mom and grandma came and the answer is yes, you're probably good to say it. If you feel embarrassed and you can feel your grandma or your mom staring at you in a bad way, it's probably not good. And I think this issue could be that simple.

[Allison Schiff]

I 100% agree. However, I'm pretty sure my mother be proud of me no matter what I did on a stage.

[Jared Belsky]

Sounds like you got a good family then, which is great.

[Allison Schiff]

Last question. And at the risk of being repetitive, I've asked this question of a bunch of people. I just think it's a fun one. If you had a time machine and we can put aside the paradox of time travel. What specific point in time would you go back to like a wild haired prophet? And what change would you make so that you would alter the future? So the present of the agency client relationship for the better. Is there some point in time where it kind of went off the rails?

[Jared Belsky]

It's interesting. Wow, that's a really hard question. I can just share a blurry vision of where I'm going with this. I think that it would have been interesting to parachute to 1994. 1994, I'm pretty sure it was 94. It could be 97. I'll go 94. 1994, I believe is when the first digital ad appeared on what? I think it was an AT&T ad. I think it appeared on Wired.com and I think the ad said it was a banner. Ad said, you know, have you ever clicked on this? You will. And that ad at a 75% click rate. So we'll just sort of say that that was the dawn of digital marketing. And I think now my first job out of college was in the late 90s. So very, very recent. You know, relative to that moment, I remember the feeling of this industry at that time and the premise and the promise of digital was biddability, targetability, but really transparency, measurability, math, science, less emotion. Right? You remember those words. I do, I do. Because when all my friends at college chose to go into finance and consulting, I chose to go to a digital marketing agency called Eyeballs, which no one in my family knew what it was because of the romance of that opportunity. And so right there at that moment, I think it would have been awesome if some of the founding fathers and mothers of this great industry would have got together and wrote a some simple doctrines about measurement and about transparency and about fees and about learning. And I don't know, it was like a moment that maybe could have altered time. And I guess that's where my. That's where my brain. That's where my brain goes with your question. It's a great question.

[Allison Schiff]

Well, I have one more thing to say. Stop the march of the margin machine and everyone listening. Go visit say no To Principal MediaBased Buying.com this episode is sponsored by the Trade Desk Edge Academy. Whether you're a seasoned programmatic pro or are just starting out in digital advertising, the trade Desk Edge Academy's expert led courses and certifications are here to help you stay relevant, ready and ahead of the curve. Enroll today for free at edgeacademy.thetradedesk.com.