- The Guardian
The Guardian is preparing to file a lawsuit against ad tech company Rubicon Project, alleging the ad tech vendor did not disclose fees it levied on advertisers looking to buy the newspaper’s online ad inventory, sources told Business Insider.
The Guardian is due to file its legal papers at the UK High Court’s Chancery Division, Business Insider understands.
A Guardian spokesperson confirmed the matter with Business Insider: “We can confirm that we have commenced proceedings against Rubicon Project for the recovery of non-disclosed buyer fees in relation of Guardian inventory.”
A Rubicon Project spokesperson provided a statement saying the company’s buyer fees are disclosed, including in a contract it signed with The Guardian and also in its SEC filings. The ad tech company plans to defend itself against The Guardian’s claims in court.
The Rubicon Project statement reads:
“We charge buyer fees for certain services we provide and have disclosed that fact publicly, including in our SEC filings, and in client contracts, including a contract we signed with Guardian over a year ago. We split our fees between sellers and buyers, reflecting the value we provide to both. Our marketplace fees on transactions support the considerable and compounding costs of performing an open auction – including our extensive brand protection and inventory quality screening, and malware protection. As we add new buyers and sellers onto the platform, the resulting impact is compounding infrastructure costs. Without buyer fees we would need to charge sellers more, and we think our approach is fair. Rubicon Project connects more than 500,000 advertisers, hundreds of DSPs, more than 1 million websites and 20,000 mobile applications. We believe that the aggregate fees we charge represent the value for our services and are in line with industry practice. The Guardian’s claims amount to a contract dispute, which we will vigorously contest in court.”
Business Insider understands the amount The Guardian is looking to recuperate from the supply-side platform (SSP) spreads back over a number of years, but is only in the single-digit millions. Nevertheless, no matter what the outcome, the legal dispute will likely shed more light on the complicated nature of the online ad buying ecosystem.
SSPs enable publishers to sell their online ads through automated technologies, which is meant to be more efficient than getting a direct sales team to sell each slot individually.
The technology connects publishers’ advertising inventory to multiple ad exchanges and demand-side platforms (DSPs – automated technology ad buyers use to target specific users across a range of websites), opening up their ads to a large range of potential buyers who bid in an online auction for the available slots in the milliseconds it takes for a web page to load.
Publishers pay SSPs a fee for their technology. Ad buyers also pay a fee to the SSP in order to take part in the auction.
Publishers can demand in their contracts that the SSP discloses how much it is charging those buyers to participate in the auctions for their inventory. But many don’t – or sometimes the wording in the contracts is not explicit – so lots of publishers simply receive the net ad rate (after the buyer fee has been taken off) that their SSP pays them, without knowing exactly how much the ad buyers actually paid in total. It’s also tricky because SSPs charge different DSPs different fees, which can fluctuate according to circumstances.
Last year, The Guardian conducted a test where it bought its own ad inventory on open ad exchanges so it could get a sense of how much of the money put into the ad tech ecosystem made it back to the publisher.
In the worst case scenario, The Guardian found that for every £1 spent on its inventory, just 30p actually made it to The Guardian, as MediaTel reported in October.
Back then, The Guardian’s chief revenue officer Hamish Nicklin said: “There are so many different players taking a little cut here, a little cut there – and sometimes a very big cut. A lot of the money that [advertisers] think they are giving to premium publishers is not actually getting to us.”
Rubicon Project’s share price has dropped almost 70% over the past year as the company reported a series of weak results after admitting it had been slow to jump on the latest trend in ad tech: header bidding.
Earlier this month, Rubicon Project hired ad tech veteran Michael Barrett as its CEO, replacing founder Frank Addante, who has moved to the chairman position. In an interview with Business Insider shortly after the management changes were announced, Addante explained the company is now “refocused and reinvigorated” around the focus of being “the largest independent global advertising exchange.” Barrett also denied the rumor that the company is setting itself up for a sale.