Who knew “Father of the Bride” could perfectly illustrate one of the biggest misconceptions in the travel marketing industry? You might remember when Steve Martin’s character, George Banks, has a near panic attack over the cost of a wedding cake. Sitting on a crowded couch scrunched between his wife and his daughter’s wedding planner, he deconstructs the confectionary masterpiece back into its cheapest raw ingredients, scoffing at the high price tag, “A cake, Franck, is made of flour and water.”
George’s “flour and water” mentality reflects similarities with how our industry can misconstrue media value when discussing vendor margin. It ignores the artistry, the architecture and the expertise required to turn raw ingredients into a cake that has greater value than the sum of its parts.
Since the early days of my time in travel adtech (Sojern, circa 2013), the topic of vendor margin has been a red herring. This seemingly easy-to-explain number has often been used to distract focus from the true value of your media partners’ performance, while ignoring a myriad of components that uniquely drive those results. I am not arguing against scrutiny, but rather for informed scrutiny. If we are going to ask questions, we need to ask the right questions.
In an industry crowded with jargon, margin may be the most misunderstood term we use. Margin is commonly perceived as the profit a vendor puts in their pocket and is often calculated as the difference between the cost per impression (CPM) charged and the cost of the underlying media inventory. We hear it framed as:
Margin (aka “take rate”) = Vendor CPM – DSP Inventory Cost CPM
Example: Vendor CPM ($6.00) – DSP Inventory Cost ($3.00) = Margin ($3.00)
Expressed as a percentage, this would be $3.00/$6.00, or 50%.
From there, the conclusions come quickly:
- “The media vendor is ‘taking too much.’”
- “The system is inefficient.”
- “Only 50% of my investment is actually buying media.”
- “Margin transparency is the solution!”
While this framing may be intuitive, it is also oversimplified and deeply flawed. It assumes that modern media vendors are little more than resellers of inventory – selling flour and water versus beautifully decorated wedding cakes. This simplistic definition of margin may have made sense when media buying was primarily about access to impressions, but it makes far less sense today.
What You Are Actually Buying From Media Partners
Today, modern and reputable media vendors invest heavily in:
- Unique first- and third-party data
- Data science and engineering teams
- Identity resolution infrastructure
- AI optimization and machine learning models
- Measurement frameworks
- Fraud prevention and brand safety systems
- Compliance, privacy and security
- Future-ready product innovation
Because these investments are not “inventory cost,” they are often disregarded in conversations about margin. You wouldn’t say that Tesla’s margin on a car equals the sales price of the car minus the cost of raw materials, and, similarly, media margin shouldn’t be defined the same way. In actuality, these elements are what you are purchasing as a media client. They drive true performance.
How Margin Is Actually Defined
In today’s ecosystem, media inventory is easily accessible; any buyer can access inventory via DSPs like DV360 (including YouTube), The Trade Desk, Amazon, Walmart, Meta, Google Ads, and others. Therefore, the true value of a media vendor should be defined by what they provide beyond inventory access.
So, how does that translate to our definition of margin?
- Inventory margin?
- Net revenue margin?
- Gross profit margin?
- EBITDA margin?
These are radically different measurements. Beyond the investments we’ve already discussed, many media vendors are also investing in new technology, talent and scale. These efforts are what create advancements in media capabilities and move our industry forward. To ignore these distinctions is to devalue the product that reputable media vendors are building and selling. They are not resellers of inventory but media and audience experts who enable advertisers to reach their audiences more effectively.
So How Should We Be Defining Value?
Calls for margin transparency are understandable. Media effectiveness is difficult to measure cleanly. Incrementality is imperfect, and attribution remains contested. In the absence of certainty, buyers seek clarity wherever it seems available – often in cost structure. Transparency may provide visibility, but it provides neither validation nor proof of value. Instead, media buyers should focus on outcome evaluation over margin inspection.
This includes:
- Cost per outcome (not cost per impression)
- Inventory quality and brand safety
- Fraud prevention
- Measurement integrity
- Performance and delivery consistency over time
- Added value (creative services, proprietary data and insights, custom research)
A CPM is justified (or not) by what it produces. I’ve always enjoyed this anecdote:
A homeowner once called a handyman to fix a squeaky wood floor. The handyman inspected the floor, took out a single nail and drove it in. The floor stopped creaking. When the homeowner saw the $100 bill, he objected, “All you did was hammer one nail.” So the handyman revised the invoice:
- Nail: $1
- Knowing where to put the nail: $99
In our case, the nail = the impression. Knowing where to put the nail = the vendor technology and audience identification. The silent floor = the incremental outcome. We must consider the full picture of what is being purchased and not just the underlying impression inventory.
It is important to acknowledge that there are bad actors out there. None of this discussion is intended to excuse unethical behavior in our space. If a vendor cannot clearly articulate what unique capabilities, inventory and audiences are being provided; what value beyond inventory access (premium or nonpremium) exists; what risks are being assumed; and how success will be measured, then the CPM is unjustified regardless of margin.
Performance, ideally measured by the cost per incremental outcome, must be the final judge of how valuable a media product is. If travel and tourism marketing is to improve, the conversation must shift from what vendors take to what vendors and their media deliver.
That shift does not lower standards. It raises them. Let’s stop being George Banks and instead focus on the quality and artistry of the cake.
