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InContext / An inside look at the business of digital content

“Nobody goes there anymore, it’s too crowded.”

October 13, 2016 | By Jason Kint, CEO – DCN @jason_kint

One of Yogi Berra’s finest quotes. But the truth is that a crowd can signal a good time. If a whole lot of people showed up, there must be a good reason!

Of course you’ve probably also found yourself at a packed event where you don’t seem to know anyone. In that case, context suddenly matters much more: Is this a room of people you want to spend time getting to know? Are you feeling like engaging with these folks? Are you with a trusted colleague who can broker some valuable introductions? Are you being hit up by people who are just interested in your contact info so they can try to sell you something? Is there a creepy person eavesdropping over your shoulder?

Whether networking at an industry event or building your data strategy in digital advertising, relationships and context are everything. Earlier this week, I read about The Guardian’s investigation into their programmatic strategy. Like many, they’ve discovered that the promise of programmatic has been body snatched, transformed into a black box to be used for direct response advertising and retargeting, which their analysis shows can vacuum up close to 70% of the ad revenues and the marketers’ working media.

And they’re not the only ones being manipulated: Brand marketers have also been duped by the promise of automation. In reality, the system suffers from a lack of direct seller relationships that promote trust and encourages agencies to protect their investment and maximize the value they receive in their advertising spend.

The Guardian analysis ends with this from their CRO, Hamish Nicklin (who, it should be noted, was a senior executive at Google for more than eight years.):

“The idea that the only thing that matters is the audience is nonsense,” Nicklin said. “Quality of creative and quality of environment matter massively to advertisers.

“The problem we’re seeing is that technology doesn’t value everything in the same way…building your brand and deep relationships with consumers, these things matter; but if we look at how we buy media in order to achieve that goal, purely through the lens of an audience-based, direct response mechanic, we don’t achieve any value. We totally lose context.”

This thought also applies to data usage where, as I’ve written, Google and Facebook leverage their unique dominance and scale to seize 90% of the incremental revenue growth in our industry. In early 2014, I wrote a controversial op-ed on Digiday, “Publishers are getting screwed in the data-tracking era.” I wrote the argument before my hire at DCN but I revisit it here because I now believe that marketers are also getting the short end of the stick—not just publishers—with today’s data-tracking. Industry leaders must step up to set appropriate guardrails before rules are set by burdensome or inflexible regulatory bodies (see recent FCC privacy rules or the GDPR changes which will hit both sides of the Atlantic in the next two years).

Here a critical paragraph from my Digiday article about the shared interests of both publishers and marketers:

“Media companies invest in content and build trusted relationships with their consumers — which can then be shared openly with marketers. Readily available data and limitless lowest-common-denominator inventory on the Web has been a significant factor in a race to the bottom in content production, content investment and the type of advertising to support it. The industry has spawned a complex web of intermediaries that, much like high-frequency traders, move dollars towards third parties arbitraging on supply and demand of inventory, which, in this case, is the consumers’ data.”

“First party” versus “Third party”
Data is often characterized in our industry as “first-party” or “third-party.” Since these words are often used to also describe a technical issue with data (first-party cookies vs third-party cookies), the definitions often get confused. In practice, first party vs third party has nothing to do with cookies but everything to do with the consumer relationship and the context in which we communicate.

Allow me to define them:

A first party is a brand, company, app or widget that a consumer knowingly communicates with. When you visit a website like newyorktimes.com, you obviously know you’re choosing to use it. There are various signals, including the link you clicked, the web address that loaded, the brand, the terms of usage and the spectacular, high-quality content. Likewise, when you launch the Twitter app on your phone, you know you’re using the app because of signals like the brand icon and the familiar interface.

When you tap the “Like” button at the top of an article, you should know you’re communicating with Facebook due to the familiar icon and the response when you “Like” something. When you click on an advertisement on a webpage, you likely also know you’re communicating with the company that paid for the ad. You made a conscious and clear decision to interact in all of these experiences.

Third party refers to everyone else.

The industry’s self-regulatory group, the Digital Advertising Alliance, has also adopted these distinctions for first party versus third party in their principles so the industry agrees with us.

Here is where I need you to lean in. There are two types of third parties. One type acts as service providers—often as contractual legal “agents”—and have responsibility and accountability to the principal (whether the publisher, advertiser or consumer). Service providers do things like protect against fraud (e.g. White Ops), measure audience size (e.g. Nielsen), deliver consumer experiences (e.g. Google Chrome). They have terms of use in which they’re bound to deliver value to the principal. These terms should be clear and understood and importantly may be revoked if they’re not following through on them.

However, inside the black box of third parties (which I noted in 2014), we also find a slew of third parties who are acting as their own principals. They are not bound by any social contract with the consumer and, in many cases, not even to the advertiser.

The math and research is simple. If intermediaries are designed to maximize their own profit, and not the consumer or advertiser’s, then the social welfare for advertisers and consumers declines. Historically, it’s been the publisher’s responsibility to arbitrate this art in balancing interests and trust with consumers—something I believe we’ve done a pretty good job on over the years.

Economic impact 
The difference between first party and third party matters because it greatly impacts the economics of digital. Companies that directly communicate with consumers carry the burden of providing value to them. In our DCN world, we often describe this responsibility with the word “trust.” The consumer pays for our significant content investment with their wallet or their attention because they want the news, information or entertainment being provided. If they don’t get the value expected then they’re a lot less likely to click, visit, or renew the brand in the future. Trust is built through recommendations, references, satisfaction and repetition.

The same is true for marketers. When they put their ads in front of consumers, they must respect that relationship or risk damaging their brand or ability to sell to those consumers in the future. We see this playing out in real-time with the ad blocking epidemic (along with a number of other items on the marketer’s priority list). And certainly advertisers are more and more concerned about the “halo effect” to their most precious brands in a noisy world.

As programmatic has grown over the past decade, it’s relied on more technology to target audience via a direct response mechanical fashion as described by Nicklin. In the process, the creative art of building a brand relationship with a consumer is being lost. Marketers are growing concerned with where their dollars and ads are running—CMOs don’t want their investments to end up in the hands of criminals or their ads to end up running in bad neighborhoods. The Trustworthy Accountability Group is working hard on these issues under the leadership of Mike Zaneis.

So I ask that you reconsider the rules around data ownership, which often become the third rail to progress when translated as “consumer privacy” and the incumbent business impact around them. We are setting the table for the future of media. Data ownership and the collection of it is a pivotal balance in order to advance the future of trusted advertising.

Unbridled tracking of data extracts value from the two end points, consumers and advertisers. This lack of accountability on the value of intermediaries introduces technology and financial taxes on the ecosystem that manifest as things like latency, security vulnerabilities, bad user experiences, data breaches, undisclosed arbitraging, nonviewable ads, the list goes on.

The innovators and responsible companies acting as intermediaries—which includes publishers and agencies if you stop and think about it—make certain that they’re providing the promised value to the consumers and advertisers in every transaction. If they don’t, they are likely to go elsewhere next time. And that won’t be a good time for anyone at that party

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