How a Low-Fee Adtech Vendor Can Quietly Empty Your Pockets
David Nelson, co-founder and CEO, Limelight Inc., discussed tech stack expenses.
Every few months in the life of a publisher, a new supply-side platform or white-label exchange appears with an attractive proposition: “license our technology for just 2-3% of spend, and we’ll even inject demand into your pipes on day one”.
On paper that looks like free margin. In practice, it’s the start of a silent wealth-transfer from publisher to platform. Here’s how these tech vendors perform their sleight of hand, and how it siphons off your revenue.
The silent expense in your tech stack
A tech vendor that both licenses technology
and trades media earns revenue twice: once from the tech fee and then again from the bid-spread it pockets when reselling inventory. Crucially, it does
not pay its own tech fee on those internal trades. When margins on inventory can reach 50+%, the arithmetic is irresistible: poach a partner’s best-performing placements, resell them directly, and bank the difference.
Since that second income stream scales beautifully, the vendor’s commercial mindset soon turns away from improving the platform and towards harvesting client opportunities. The technology becomes a data-gathering instrument, quietly mapping where demand is richest, so the vendor knows exactly which floor-price to shave, or which relationship to mirror.
Why the usual “conflict-of-interest” question is not enough
Even if publishers or agencies ask point blank, “Do you trade media?”, vendors now arrive armed with a standard answer: “Yes, but our trading and client teams are strictly siloed,” mentioning safeguards like audit trails and NDAs.
That reassurance misses the point. Even if the data were hermetically sealed, the pricing discrepancy would still exist. A player exempt from its own fee can outbid you while showing buyers the same end price, or even a lower one. In other words, the conflict is structural, not behavioural. No policy document can fix a business model that rewards the diversion of value from the client to the ad platform.
Calculating the hidden premium
Assume two vendors offer identical tooling. Vendor A charges 5% and never trades. Vendor B charges 3% and runs its own desk. At first glance, Vendor B looks cheaper by two percentage points. Yet whenever its trading arm flips an impression out of your stack, it pockets the full media margin
plus the 3% fee you still pay on the rest of your volume. Over a year, that leakage can dwarf the nominal saving, especially if the vendor cherry-picks your highest-CPM segments.
Seen through this lens, the “expensive” single-revenue vendor is actually the cheaper option. Its only path to growth is helping you grow.
A forensic due-diligence playbook
To gain clarity on what your tech partner is doing, run the numbers and follow the contracts. Five checks expose where incentives really lie:
Revenue-stream map - request a breakdown of every line of income, including affiliated entities and demand-side mark-ups.- Fee exemption clause - confirm whether the vendor, its subsidiaries or “strategic partners” pay the same platform rate you do. Any carve-out is a red flag.
- Contract cross-reference - verify the legal counter-party on your licence. If the name matches a media exchange, you are effectively financing a competitor.
- Bid-log access - insist on log-level data for all bids, not just those routed through your seat. Patterns of identical DSPs appearing under two account IDs often reveal house trading.
- Conflict statement with teeth - ask for a warranty that the vendor will neither trade nor fund trading of inventory it services. If the clause triggers a price rise, you have just proven the hidden premium.
None of these steps requires public mud-slinging or naming names. They simply shine a light on the commercial mechanics that most NDAs politely gloss over.
The long-term upside of single-stream partners
Publishers sometimes baulk at a slightly higher flat fee, worrying it will hit quarterly margins. Yet clients working with non-trading tech vendors report the opposite: better strategic collaboration, faster road-map influence, and deeper troubleshooting support.
Freed from hiding their tactics, they can share revenue data, bid strategies and road-map ambitions without fear of cannibalisation. The vendor, meanwhile, has every incentive to reinvest fee income into features that lift client revenue because that is its
only revenue.
Time to retire the false economy
Dual-trading is not a new phenomenon; it’s the underbelly of programmatic that’s been quietly shaping the market for years. What has changed is the maturity of buyers. Agencies and brands increasingly demand log-level transparency, and regulators are circling opaque auctions.
The next time a platform promises efficiency at a bargain price, ask yourself one question: ‘who is paying for that discount?’ If the answer is: ‘you, on every impression they siphon off’, the platform isn’t a partner, it’s a margin machine. As a publisher, you have lots of competitors. Your tech partner shouldn’t be one of them.
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