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Advertising | Perspectives

The ad tech forest is falling. Here’s why

Over the past few years, marketers and publishers have become increasingly concerned that they can’t see through the forest of ad tech. Predictions of carnage in the “ad tech complex” are not new. Terry Kawaja, founder of LUMA Partners, has long foretold hard times. While Terry is in a privileged position as a mergers and acquisitions expert, his February statement that a whopping 90% of the current ad tech companies will disappear (without successful exits) took many by surprise.

As you likely know, I’m a firm believer in the open and competitive internet. One of its great advantages is an environment in which innovation and disruption can spawn seedlings of new ideas and opportunities without great barriers. In addition, I’ve long been on record that programmatic ad technologies will unlock new efficiencies in the market. Automation is the future and we should embrace it.

But there is no doubt that the trees have started to fall and the forest has begun to thin. I’ve personally been eager to take an axe to a few of them that are rotten to their core. But how they fall will be important. There are five strong forces about to hit the ad tech landscape that are likely to cause damage to those who are unprepared. Publishers should use this as notice to their operations teams to ensure their businesses are ready.

The Forces at Work

  1. Brand Safety

    The press had a field day lately covering Google and YouTube’s “brand safety” crisis as more than 300 advertisers publicly boycotted Google. It was the number one topic on both sides of the Atlantic as I witnessed at ExchangeWire NYC last Wednesday in NYC and the next day at European Advertising Week in London. All eyes are currently on Google. But the reality is this issue has affected our industry for many years.

    Brands are damaged when advertisers and their “agents” (quotes used intentionally) rely too much on technology to guide the flow and placement of their advertising. This is a familiar issue to the other half of the Duopoly, Facebook, too. Audience targeting without consideration for environment works fine for direct marketers who are simply trying to fulfill demand through clicks and moving product off shelves. But when brand stewards look to digital to create desire and demand—and shape minds—the context and environment for their advertising is vital. Clearly, the pendulum swung too far. As with many other road bumps for Facebook and Google, they’ll use their scale and dominance to lure advertisers back into the fold. However, many small and mid-sized ad tech companies won’t be able to adapt as advertisers seek assurances on their ad placements.

  1. Margin Pressure

    Advertisers have taken note of the amount of value leakage with these same intermediaries in the ad tech ecosystem. It’s clear that almost no one sitting in the supply chain has been truly accountable to the two principals, the marketer and the publisher. Remember, these are the only two stakeholders that are recognized brands and rely on the trust of the consumer. Marketers have now set a goal of 70% of their investments going to working media while the first lawsuit is being filed by a premium publisher.

    The investment community’s interest in ad tech has been built on outsized margins and models. If you’re in the middle of a supply chain, this can only be achieved by maximizing self-interests as principals. This has led to unsustainable growth through black boxes, volume rebates and incentives, inventory arbitrage and reselling of data and services. Advertisers have clearly put the industry on notice to end it. (See Rubicon’s most recent 10K disclosure.)

  1. VC Funds Dwindle

    Over the past year, the Sand Hill interest in ad tech has been drying up. There is a brutal combination of a maturing landscape and an absence of predictable exit strategies. While the public market has been unfriendly to ad tech for the past couple of years (see FUEL, RUBI, PUB, TRMR, MM), Google, Facebook, Oracle and Aol have also stopped buying. Yes, Chinese dollars are still out there but no one should be excited about this option. If trust and transparency need to be built in the ad tech ecosystem, it’s not wise to invite investment from China.

  1. Policy changes

    Google and Facebook are under a lot of pressure here in the U.S. Very quietly last week, ad tech was hoodwinked into supporting the Senate’s vote to abolish the FCC’s rules which will open the doors for all ISPs to now resell consumers’ browsing history and location data. This will relieve any concerns at Google and Facebook that rules may creep into their businesses as the bar has now been lowered even further.

    The regulatory concerns that forced Google to allow header bidding are gone in the new Washington. More importantly to ad tech, every ISP now has the ability to compete and replace the ad tech services business. Verizon is in the pole position to own this space having cobbled together and transformed an array of ad tech assets into an ability to deliver the full supply chain with unique access to the sensitive data of nearly every American coupled with the inventory of MSN, Yahoo, Aol and the wider web.

  1. G-D-P-R

    These are four letters that most small to mid-sized ad tech companies have wrongly delegated to their legal counsel. However, they need to know the European Commission’s General Data Protection Regulation (GDPR) is coming at them like a freight train that will impact their entire business. In a little over 12 months, the already finalized GDPR will be the law of the land across Europe.

    Importantly, it will create risk and obligations globally as it will serve as the de facto gold standard on data protection for much of the world. Well, except for the United States. Although the jury is still out, it likely will serve as an opportunity for any publishers who have a strong and trusted relationship with their consumers. However, it’s universally understood GDPR will take a chainsaw to much of ad tech as none of these companies have relationships with consumers to solicit or justify consent in order to continue their data collection.

The Aftermath

What is the broader impact on the ecosystem if Terry is right and much of the ad tech forest truly falls? It’s hard to tell. With careful planning, the companies who deliver consumer products will avoid impact. There is a fairly good argument it will benefit most DCN members—premium publishers.

Interestingly, the advertising relying on the ad tech ecosystem is a very small fraction of the internet economy. An expert at Harvard Business School, working with the IAB, put out their third version of a research study attempting to size the US internet advertising market. I took issue with this research, along with others, as it counted every bit of internet-based commerce–from Uber to Citibank to Amazon purchases–under the category of “advertising.”

That said, the study does allow us to better analyze the contributions of the ad tech ecosystem. The IAB/HBS study approximates the US internet advertising market at $1.21 Trillion (6% of GDP). Using the IAB’s own estimates of the revenue in ad tech, not counting the Google and Facebook duopoly, only a measly 1.5% ($28 billion) of the internet advertising market is at risk.

I guess the question is, will the felling of the ad tech forest even make a sound? And an important question for the industry: What happens if there are only two trees left standing?

Advertising | Perspectives

Coalition for Better Ads offers ad standards based on consumer preferences

Leveraging what is likely the most comprehensive consumer study of its kind, this week The Coalition for Better Ads (CBA) took a meaningful step toward potentially improving both consumer and advertising experiences in the desktop and mobile spaces with the release of its ‘Initial’ Better Ads Standards guidance. Capturing the voice of the customer is absolutely critical in driving efficacy in advertising and consumer experience.  This study very practically puts the industry on notice that invasive, disruptive, distracting and annoying ad formats must change. TrustX will use findings like these to continue drive change and support new ad standards benefiting consumers, marketers and premium publishers.

The CBA collected ad preferences data from 25,000 internet users in North America and Europe. Not surprisingly, they identified a bevy (four on desktop and eight on mobile, to be exact) of “least-preferred” ad experiences falling below basic thresholds of acceptability.  Ad experiences that are not only driving practices like the adoption of ad-blocking technologies, but adversely impacting perceptions of publisher content and brand experiences.  The results of the Coalition’s consumer-focused research define Better Ads Standards that identify the ad experiences that fall beneath a threshold of consumer acceptability.

Download a PDF of the CBA’s ad gallery here.

Advertising | Perspectives

Media alliances take on the Google-Facebook duopoly

The Google-Facebook digital advertising duopoly seems like a fait accompli at this point. So too is less-than-favorable revenue that publishers get from them, as a leaked DCN report earlier this year indicated. So it’s not surprising that publishers keep trying to team up to take on the online tech giants. The question is whether these efforts will amount to much more than throwing rocks at a Google bus.

Before we get into the latest efforts, let’s look at the numbers: eMarketer’s latest forecast finds that Google and Facebook continue to dominate in 2017. Online advertising in the U.S. is expected to grow 16% this year to reach $83 billion, and the two companies stand to earn the most from this growth. Google will account for 40.7% of U.S. digital ad revenues in 2017—more than double Facebook’s share. And Google will outperform on search and grow this year to seize 78% of all U.S. search ad revenues. Facebook, which rules U.S. online display ads, will grow to control 39.1% of the U.S. display market.

New Alliances

Condé Nast recently teamed up with Vox and NBCUniversal to join their year-old effort, Concert. The premium advertising marketplace was meant to help advertisers get better combined audience. It promises to reach over 200 million online consumers — including 99% of all millennials, according to the comScore data that the companies cite. As part of their new team effort with Condé Nast on board, Concert will develop new ad products catered around mobile video and branded content. Vox and NBCUniversal also now benefit from the addition of Condé Nast’s behavioral data-tracking platform Spire — evidence that these companies are thinking about a win-win situation for everyone, not just themselves.

Meanwhile, just as YouTube and Facebook have made moves into video and TV — or what some people are suggesting is “the new TV” — Fox Network Group, Turner and Viacom have created a new consortium called OpenAP. The grouping is meant to align offerings but also help navigate the tricky territory of audience measurement. The group says that a neutral third-party auditor will run OpenAP and attacks what it calls “proprietary walled garden, self-governed reporting” — a likely nudge at Facebook and its measurement flubs.

The team effort is also necessary for the TV industry to maintain a semblance of control in an environment where digital is taking hold. As OpenAP’s letter states:

“OpenAP will be a single platform that agencies and advertisers can integrate with their own planning systems to activate advanced audience targeting and independent measurement within premium content. That premium content reaches 93% of all television audiences today, and we hope it will expand if additional publishers join OpenAP in the future. This consortium is a necessity to move our industry forward.”

And there have also been newspaper alliances. The holding companies of The Daily Mail, The Guardian, The Telegraph, Mirror, The Sun, Express, Metro and The Daily Star in the U.K. are involved in a collaborative effort called “Project Juno” to take on the tech behemoths. Meanwhile, another U.K. body representing national and local publishers, the News Media Association (NMA), has called for an investigation into Google and Facebook’s online dominance because of their roles in helping to distribute fake news. This serves as a reminder of the perils of a news supply chain running on just a couple of distributors.

Coopetition Revisited

This isn’t the first effort at alliances to take on Facebook and Google. As I noted in a 2015 DCN column, coopetition — when companies put competition aside and cooperate for the greater good — has long been known in Silicon Valley. But for all the attention it attracted then, the Pangaea programmatic alliance of different newspaper publishers — including The Guardian, Financial Times, CNN International, Reuters and The Economist — has been fairly silent.

So too has the Truffle Pig advertising model that Snapchat, The Daily Mail and WPP became involved with in 2015. Like the real-life truffle hog it was named for, that advertising agency was meant to use its heightened sense of smell to sniff out and market content in a way only it could. As Digiday’s Jessica Davies pointed out last summer, “Such alliances have historically run into problems around infighting, lethargy and incompatible data and systems.”

And while some publishers are teaming up against Facebook and Google, others are imagining a different kind of coopetition altogether: working with them instead of against them. Some may refer to this as a “frog in boiling water” mentality (in which the publisher eventually dies). However former editor-in-chief of The Guardian Alan Rusbridger, is among those to suggest otherwise. His take is that it’s obvious the two companies will maintain an authority no matter how hard publishers resist. “I can’t think of an editor that can afford to not be on Facebook; that would be suicidal because a third to half of your audience is there,” Rusbridger has said. And some local news partnership groups are following suit.

In the end, the alliances are good for publishers who can share knowledge and audiences and get more attention from marketers. But the idea that they will somehow supplant or topple tech dominance is wrong-headed. In the end, it will take cooperation between publishers, as well as between publishers and tech companies, to succeed in a disruptive era.

Advertising | Industry-Research | Perspectives

Neurological research proves it: Context affects advertising effectiveness

The effectiveness of advertising depends, to some degree, on the content that surrounds it. In other words, content context has a direct impact on the way advertising is received. A new research study, “Why premium editorial content” from Teads, a native video advertising marketplace, analyzes why premium editorial content creates more impactful environments.

Teads partnered with Neuro-Insight, a neurological research firm, to better understand how premium content neurologically changes the way people recall advertising messaging. Four premium publishers, Conde Nast, Forbes, Time Inc. and The Atlantic participated in the research to expose video ads within their premium editorials on mobile. Consumers were also exposed to the same video ads within their personal Facebook feed in order to compare the two experiences.

The research revealed that premium editorial content is 16% more personally relevant and engaging than social news feeds. Interestingly, regardless of the personalization capabilities in a user’s Facebook feed, consumers still felt more personal relevance to the premium content. Users invest more of themselves in the premium editorial consumption experience.

Total Recall

What makes this finding so important? Premium editorial delivers a more powerful memory impact and a more memorable advertising experience. For the detailed-oriented left-side of the brain, premium editorial had a 19% greater impact on memory and for the emotional right-side of the brain, it had an 8% greater impact on memory. Memory encoding drives higher ad effectiveness and is an influencer of consumer purchase behavior.

Interestingly, both premium editorial content and Facebook social feeds create high impacts on long-term memory, however, premium content generates a greater and more even activation in both the left and the right sides of the brain. The triggering of both sides of the brain offers the best opportunity for broad video advertising creative approaches to influence a consumer’s long-term memory. Premium content is unique because of its impact to both the left- and right-side of the brain, meaning, it has an equal and considerable opportunity to influence consumers.

It’s not just that premium publishers offer advertisers a quality audience, their content also creates a higher impact on advertising. Teads’ research concludes that content with a high level of engagement is more likely to impact the memorability of online video advertising. Importantly, premium content raises the level of impact that social platforms cannot duplicate.

Advertising | Perspectives

We need to solve digital advertising’s quality control problem now

An explosive investigation in The Times of London found advertising from reputable brands like Mercedes-Benz, Jaguar and the NGO Marie Curie running on YouTube videos promoting extremism and pornographic content. So, by extension, those companies were helping to fund pro-Nazi, ISIS and other terrorist propaganda.

Despite YouTube’s investment in software to weed out such content, its continued existence — coupled with the advertising that appears on it — shines a harsh light on advertising’s poor quality control. And News Corp.’s CEO Robert Thomson released an incisive statement in reaction, saying that the industry’s actions are undermining its stated priorities, and vouching to bring its advertising under its own authority.

It’s clear that attaining actual solutions to this problem requires much more soul-searching within the entire industry, and a change in current operations.

A Looming Problem

In many ways, the recent report in The Times is not that surprising. Publishers and advertisers have found themselves in unwanted territory on the internet before, as we previously wrote in DCN. The attention fake news garnered at the end of last year was a game-changer in that regard, as it spotlighted the money to be made from hyper-partisan sites with misinformation. Google, Facebook, Twitter and Microsoft’s pledge last December to share information, to better eliminate extremist content, was therefore a lauded effort.

But even though Google says it has a “zero tolerance policy for content that incites violence or hatred,” blacklisting is apparently not enough. And ad quality has long been an issue before “fake news” became the term du jour in media and marketing circles. The pervasiveness of fraud and viewability issues has demanded better standards for metrics, and better advertising so that consumers don’t just reach for the ad blocker. Google doubled-down by removing 1.7 billion ads last year that defied its policies — which was more than twice the number of ads it took down in 2015.

But with Facebook and Google together controlling well over half of the digital ad market, that leaves smaller players in a desperate scramble for the scraps, undermining concerns about integrity.

Who’s to Blame?

Which brings us to the question: Is programmatic advertising to blame, or is it a scapegoat for other problems the industry can’t yet address? Marie Curie, for instance, claims it was absolutely unaware its ads were appearing alongside the content of a pro-Nazi group. Sandals Resorts, which had its advertising appear next to an Al-Shabaab video, meanwhile, blamed Google’s mishandling, stating the video hadn’t been categorized as “sensitive.”

The advertisers were quick to express their deep concern and withdraw their advertisements, but the “hands off, we didn’t realize it” response is not the kind of reaction that engenders trust. And that is the bigger concern here. News Corp’s Chief Executive Robert Thomson called this out in a statement. Some of his choice lines deserve highlighting:

“We are in an era in which integrity is priceless, yet digital distributors have long been a platform for the fake, the faux and the fallacious, highlighting an issue which we have long stressed – that they have eroded the integrity of content by undermining its provenance.”

“Ad agencies and their programmatic networks are also at fault because they have sometimes artificially aggregated audiences, and these are then plied with content of dubious provenance – the agencies win, the fabricators of the fake win, and advertisers and society both lose. Affinity and integrity are core elements of a sustainable relationship between advertiser and consumer, and yet affinity and integrity are far too often missing in the modern marketplace.”

If the demand for money and efficiency is eroding the integrity of content — not to mention that of brands and platforms — everyone involved must collaborate to gain that trust back. And that means investing the time, energy and resources in some not so quick-and-easy moves.

Identifying Solutions

One potential solution that puts the advertising industry back into the hands of advertisers is to rely less on programmatic and more on in-house ad networks. News Corp, for instance, is testing its own digital ad network to ensure a “high quality audience for advertisers.” The Scandinavian publisher Schibsted also has its own in-house ad network, and focusing on that has helped decrease ad-page load times while doubling viewability from 40 to 80 percent. Vox too has its own in-house ad platform. And alongside BuzzFeed, Mic and other publishers, it’s expressed an aversion to programmatic. Digital Content Next recently announced the formation of TrustX, a cooperative digital advertising marketplace made up of many DCN member companies, including NewsCorp and Vox.

The reality is that individual ad networks are not yet mainstream by any means. Most advertisers are not big enough or rich enough to opt out of automated advertising, and smaller publishers don’t have the size to build their own network.

What is possible, though, is a more consistent, industry-wide approach to addressing these issues and testing solutions. That means worrying less about the bottom line — at least for now — and taking collective responsibility for this problem. And more human oversight over the entire industry — even over programmatic advertising — is the first big step. Just as Facebook has acknowledged it can’t just rely on an algorithm to stamp out fake news on its platform, marketers know that it can’t rely on automation alone. Doing so only stands to create more problems for an industry already on the edges of consumer trust.

Advertising | Perspectives | Revenue

Ad blocking: No, we haven’t won.

About a year ago, Josh Benton of Harvard’s Nieman Journalism Lab asked me how concerned I was about ad blocking on a scale of 1-10. I answered “eight or nine.” And one year later, the situation has not improved: As of today it’s still a nine.

In the spirit of transparency, I thought the time was right to look at where we are in terms of ad blocking, if for no other reason than I don’t want my silence on the topic to suggest that the issue is less dire than it was during the flurry of discussion around it in 2015. Since then, DCN has conducted research on the ad blocking ecosystem – some of which has been released only to our member companies. We have also posed many questions about Google, the ad tech ecosystem and the actual flow of the monies.

The state of ad blocking today

Unfortunately, the ecosystem remains every bit as murky. The ambitions and fate of those profiting and suffering from ad blocking (including Google) have not yet been fully revealed. But one thing is crystal clear: The companies that create original content are being hurt the most by ad blocking because it prevents them from monetizing the audiences they attract. And the two companies, now known as the “duopoly” are likely hurt the least.

As predicted, the adoption of ad blockers continues to grow linearly according to PageFair’s latest Ad Block Report. While the sky is not falling, the U.S. desktop penetration did grow from 15% to 18% last year and this number matters … a lot. Despite this growth, the IAB oddly recently claimed victory over ad blockers “rendering them toothless” and suggesting the risk of “network-level ad-blocking has virtually disappeared.” This kind of thinking is where things get dangerous.

We have won neither the battle nor the war. In fact, PageFair’s report—which we have every reason to believe—clearly points to the contrary. Frankly, it’s for this reason that I’m writing now in parallel to our continued participation and support with other organizations on the new Coalition for Better Ads.

The danger is real

Here are three reasons we need to remain focused on ad blocking in order to maintain our ability to monetize audiences attracted by high-quality content:

  1. The companies in the ad tech ecosystem—where many of the ad blocking issues are forged—have very little incentive to be concerned about ad blocking. Their collective migration to the latest ad tech craze, header bidding, has increased their inventory and revenue access by an order of magnitude. It’s also widely recognized to have increased latency, data leakage and other vulnerabilities. So potentially good for revenues, arguably bad for consumers. The additional inventory dwarfs any modest increase in ad blocking so the ad tech companies’ incentives are in many ways at odds with consumers and content creators.
  2. Consumers are shifting to mobile, where ad blocking penetration is estimated at an immaterial 1% in the U.S. However, the value proposition of a mobile ad blocker is significantly higher (heightened concerns for security, user experience, data charges, privacy). So it’s risky to expect penetration to stay at 1% given that it’s currently 60% in parts of Asia, where ad blocking is built into the browser. The same functionality is already available in the States (through the Brave and Opera browsers). And not incidentally: In China, mobile users know how to change the proxy servers on their phones, so I’d expect Generation Z may soon be doing the same, in droves. And this is just one of the numerous ways in which ad blocking may rapidly impact mobile apps.
  3. Network-level ad blocking concerns will likely grow. The number one goal of the new administration’s FCC is to throw out the net neutrality rules. Yes, there is a rational argument against the current regulation. However, nearly 100% of the public wants something in place that protects the neutrality of the Internet against blocking, throttling and other nefarious practices. I’m pretty sure it is not a good idea to fight the Internet. To the point of ad blocking, if the FCC rules are thrown out and not properly replaced by Congress, there is nothing to prevent a carrier (why hello there T-Mobile!) from launching its own ad blocking plan. Meanwhile, the most powerful trade bodies in our industry have yet to take a stand in support of net neutrality (other than DCN, which is not conflicted on the issue).
Burning questions

So now that we’ve established that victory has not yet been achieved against ad blockers, here are some of the questions keeping me up at night:

  1. The financial impact of ad blocking trails its penetration mostly because advertising supply greatly outweighs demand. As long as there is considerably more desktop inventory than demand, then the financial impact is mitigated. But what happens when it doesn’t?
  2. The largest advertising company in the world, Google, is virtually untouched by ad blocking. Google has avoided most of the impact by paying to be whitelisted – as they’ve publicly disclosed – giving them a privileged position that, as far as I know, none of the nearly 80 companies inside of DCN have. Let that sink in. When a monopoly gets to set the rules…
  3. Privacy continues to be the third rail in the industry. The CMO of the largest advertiser in the world, Procter& Gamble, clearly expressed this concern a few weeks ago. The Chairman of the largest media buyer in the world, GroupM, has also called out this same concern. Meanwhile, the industry is aggressively pushing to keep the bar as low as possible, while cloaking the rapidly increasing level of tracking in darkness. This is happening through policy, as much of industry pushes to remove the FCC privacy rules on ISPs. It’s also happening through technology, as tracking has moved into digital fingerprinting and server to server sharing of browsing history. I know many people want to ignore it, but what if data leakage in the ad tech ecosystem is actually the common thread across the performance, security, transparency and consumer privacy issues that have resulted in a loss of consumer trust and rising ad block usage? There are both industry advocates and executives who make this argument.
  4. Facebook has opted to engage in a tech arms race against the very same engineers who are paid by the ad block whitelisting program. Facebook continues to fight a desktop war against ad blockers by circumventing the technology. Almost all of Facebook’s ad revenue growth on desktop came as a result of this tech hacking, according to their CFO during their earnings call. In mobile, Facebook is aggressively shifting content experiences away from the open web, reportedly even ignoring their browser experience, so that they can keep consumers in their app and fight back against ad blockers. Who is monitoring this?
  5. Who owns the number two blocker, Ad Block? At the very least, it’s dubious that a company with undisclosed ownership can block this much advertising. At the worst, it’s a clear-cut antitrust or national security issue to have that much control in the hands of an unknown actor. Can no one solve this riddle?

In the face of this uncertainty and looming unanswered questions, industry leaders need to refocus on meeting the underlying consumer needs. Yes, many articles have been written and many committees created. However, I challenge the industry to work with us, to dig deeper into the dynamics of ad blocking. As much as you might want to believe ad blocking to be a 2015 meme that’s now under control, that is entirely incorrect. Sitting idle while one company, whether it be Ad Block Plus or Google, controls much of the current future ecosystem could be the most dangerous failure of the Internet yet.

Advertising | Perspectives

Digital ad fraud: What’s a CMO to do?

A recent report from White Ops estimates that a Russian bot operation — dubbed Methbot because of references to ‘meth’ in its code — is netting up to $5 million per day for its owners in fraudulent online advertising. Considering that this is just one, albeit huge, operation, and that White Ops readily acknowledges that the operation could be netting far more dollars, it’s easy to work the math and arrive at the conclusion that online ad fraud is a multi-billion dollar global ad industry.

What’s more, this particular operation doesn’t have the telltale characteristics that digital veterans typically associate with ad fraud — low end properties tricking users into clicking but quickly leaving. Rather, it is characterized by “falsified websites designed to look like premium publisher inventory”. (Indeed, the report cites specific examples from The Economist, Fox, and International Business Times, among others.)

To add insult, this report comes on the heels of a tumultuous year for the digital ad business. In 2016, industry opinion-makers like the Wall Street Journal, AdAge, and the Association of National Advertisers (ANA) began to treat the subject of fraudulence seriously and with increasing frequency. Perhaps the most vicious commentary came from a guest post on CNBC, dubbed “The Subprime Advertising Crisis is Here,” likening it to cause of the 2008 Great Recession.

With digital marketing budgets continuing to expand quickly, and entire marketing operations becoming increase reliant on digital as their driver, CMOs and marketing leaders can’t afford to be unprepared when the subject of fraud comes up with their managers and peers.

Here’s what CMOs need to know:

  • Marketers Don’t Need to Fret The Hype (Yet). To be sure, ad fraud is a problem that needs to be successfully corralled in the coming years. But it’s not yet enough of an issue to slow down industry growth by much more than a couple of percentage points each year. On a relative basis, even using aggressive estimates, fraud chews up 15% of the market. This is not ideal, but not catastrophic, either. Digital works, warts and all, and it’s still the most accountable of the major media available.
  • Publishers Need to Do More Message & Damage Control. The impact of fraud on publishers is more acute, and the category would benefit from playing a more proactive role in defining the ad fraud discussion (which seems to have been hijacked by P&G’s Marc Pritchard) and aggressively employing new technologies to combat the issue (and publicizing those efforts). Though Google and Facebook control as much as 80% of the sector, they aren’t as dependent on digital advertising as their traditional publishing counterparts, so can’t be depended on to solve this problem in a timely manner.
  • Be Prepared to Explain What Fraud Is & How It Works. Conceptually, the mechanics behind digital ad fraud are fairly straightforward. According to Integral AdScience, illegal operators have “found ways to game the system and earn money by serving ads in ways that have no potential to be seen by a real person.” They do this by creating fake pages and generating fake clicks. Specifically, the tactics used by fraudsters are increasingly complex, and not easily understood by even experienced marketing technologists.
  • Steer The Conversation to ROI & Flexibility. The biggest strength of digital marketing since the early days is trackability, and this remains unchanged in the face of fraud. With enormous confidence, marketers are able to monitor ROI in near real-time and make strategy and budgets on-the-fly to take advantage of marketplace shifts. The combination of accountability plus flexibility allows brands more opportunities to manage to ROI.
  • Get Ahead of the Issue. For brands spending more than $10 million per year on digital advertising, installing a resource (internal or external) to monitor and combat fraud probably makes financial sense. As DCN has espoused (and partnered with comScore to research), smart digital media buying resulting careful placement in quality environments reduces the instance of fraud. The educate the executive team on marketing KPIs, including the impact of fraud, through monthly reports and performance review meetings. Lacking the surprise and shock factor, ad fraud issues can be more readily explained as a cost of doing business; knowing that it’s being proactively managed can minimize the sting.
  • Be Prepared To Move. No matter how strong the argument you make, or how vigilant the monitoring, executive leadership and boards may require a forensic assessment to measure the impact of fraud. Understandably, fraud can be a bitter pill to swallow. Whether you’re a marketer or publisher, you’ll want to be on top of this issue — with potential partners and solutions at the ready — so the issue isn’t hijacked by an aggressive CFO or board member.

Tim Bourgeois (@ChiefDigOfficer) is a partner at East Coast Catalyst, a Boston-based digital consulting company specializing in strategic roadmaps, digital marketing audits, and online marketing optimization programs.

Advertising | Industry-Research | Perspectives

Programmatic native: a nascent and growing category

For many advertisers, programmatic native feels like the holy grail. It brings the transactional efficiency, audience targeting and scale of programmatic to in-feed native units that match the look and feel of a publisher’s content. Additionally, publishers benefit by simplifying native ad sales, with instant access to demand sources through programmatic exchanges. Programmatic native offers real benefits to both sides – buyers and sellers.

However, with so much promise, what does the market look like today?

To find out, we at MediaRadar, took an in-depth look at what programmatic native advertising spend looked like in 2016. For the report, we analyzed programmatic native adoption over the last 12 months, identifying the number of brands buying programmatic native ads through popular exchanges, like Nativo, TripleLift, Sharethrough, Unruly, and Bidtellect.

Here’s what we found.

  • More Than 4,000 Advertisers: Last year, almost 4,200 unique advertisers placed programmatic native campaigns across the native exchanges we analyzed.
  • Adoption Grew 86% by Year’s End: Programmatic native surged throughout the year. In fact, the total monthly brands buying campaigns increased by 86% – from 593 in January to 1,133, by November. In Q1 2016 an average of 726 brands placed campaigns each month and by Q4 2016 the per month average leapt to 1,094 brands. This is meaningful growth over just a 12-month period.
  • Still, Penetration Remains Low: In 2016, 50,605 advertisers placed online ads on just the top-200 largest publisher websites alone. As percent of that 50,605, fewer than 10% ran on native exchanges. This means that for all the significant growth last year, there is significant headroom for expansion in 2017.

Takeaways:

There has been a lot of attention given to sponsored editorial and programmatic native in the press in the past year. While the programmatic native market is still small, relative to the overall spend in the digital market, it is expanding and at an accelerated pace. Renewal rates and advertiser feedback are positive, mostly.

That’s not to say that challenges don’t exist (The Wall Street Journal tackled these issues recently), but we observe that the market continues to be a legitimately bright spot for publishers. We forecast a positive outlook for it in 2017.

Todd Krizelman (@ToddKrizelman ) is Co-Founder and CEO of MediaRadar (@MediaRadar). Growing up near the epicenter of technological innovation in Palo Alto, California encouraged him to become an entrepreneur and co-found of one of the world’s first social media sites, theGlobe.com. Krizelman also held leadership positions at Bertelsmann’s Gruner + Jahr and Random House. With his expertise in ad sales and innovation, Krizelman joined veteran web architect, Jesse Keller, to found MediaRadar in 2007.

Advertising | Industry-Research

Ad blocking remains a threat to digital media

Ad blocking continues to be a serious threat to digital media. A new report by PageFair estimates that more than 600 million devices are now blocking ads worldwide. Ad blocking usage grew by 108 million to 380 million mobile devices and by 34 million to 236 million active desktops from December 2015 to December 2016. Interestingly, ad block usage on desktop browsers continues to grow despite the decline in overall desktop usage. Year-over-year global growth for all devices now represents 30%.

Some key findings from the PageFair 2017 Adblock Report:

Why are consumers using ad blockers?

Two of the top reasons for consumers installing ad blocking software include virus/malware concerns (30%) and interruptive ad formats (29%). It is important to note that over 70% of users chose more than one reason as “most important” in their choice to use ad block software.

How are consumers learning about ad blocking?

Word of mouth still leads in overall ad block conversions. Just less than one-third (32%) of ad block users report they learned about the software from a friend, colleague, or family member. An additional 28% learned about ad block software from the internet, news, or media.

Who’s blocking ads?

Ad blocking usage is the U.S is becoming more mainstream. Usage still skews male with 20% of U.S. males using ad blocking software compared to 15% of females.

Across all age groups, bachelor’s degree attainment was 45% among ad block users surveyed, versus 30% per the US Census. Ad block users in the US are 1.5x as likely to have a bachelor’s degree than the average American adult.

How do consumers react to ad block walls?

Nine in 10 ad block users report they have encountered an ad block wall (site will not allow access unless the ad blocking tool is disable) while using the internet. A full 74% of ad block users stated that they leave a website(s) after they encounter an ad block wall. It appears that ad block walls do not persuade users to turn off their ad blocker, even if only for brief time. However it is possible websites with highly unique and valued content that is not easily obtainable elsewhere may see a benefit to the use of ad block walls.

What are the most annoying ad formats?

Overall, over three-quarter (77%) of ad block users reported that they found some ads acceptable. Over half (52%) of ad blockers users preferred static banner while 35% prefer skippable video ads. In terms of most disliked ads, both non-skippable video ads (31%) and auto-play ads (23%) ranked highest.

Consumers are no longer passive and have taken control of their browsers and—wherever possible—their online experience. Across the board, forecasts are consistent with PageFair’s findings and show ad blocking will continue to grow in the U.S, particularly if ad-blocking software is preinstalled on devices in the marketplace.

Advertising | Perspectives | Revenue

Could in-image ads be an answer to ad blockers?

With increasing competition across various verticals, digital brands are always looking for ways to engage potential customers. However, the average online consumer often feels bombarded with ads and intrusive pop-ups on both their desktop and mobile screens. Tech savvy users simply download ad blockers to streamline their internet browsing experience, a move that has been increasing in popularity in recent years.

According to a report conducted by ad-recovery startup PageFair, “The number of consumers using ad blockers in the U.S. increased 48 percent during the last year,” referring to 2014-2015, which resulted in a loss of more than $20 billion in advertisement revenue for publishers on desktop computers alone.

Today, advertisers aren’t just focused on creating and disseminating their ads across various channels. This is simply not enough given consumers’ low tolerance for interruption and considering the viewability and engagement demands for their
ads.  Publishers must act in order to tackle the reasons why they are “blocking ads and tailor their messaging accordingly,” according to the head of Condé Nast’s Food Innovation Group’s Eric Gillin. Meanwhile, Mike Hofman, Executive Digital Director of GQ claims that people are increasingly looking to control the time they spent on a website, which provides a challenging environment for ads to sprout across screens.

With all these points in mind, publishers have to be increasingly creative in order to monetize their web and mobile sites. One way of going about this is to focus on creating personalized and relevant ads, ones that will remove the desire for adblockers in the first place. According to James Avery, CEO of Adzerk, “If we want to stem the growth of ad-blocking installations, we have to deter people before they click the install button.”

In-image advertising technology steps in
But one of the newer and more innovative monetization solutions for publishers directly helps them meet the needs and demands of both advertisers and users, namely in-image advertising technology. According to Optimind Technology Solutions, “Articles with images get 94% more views,” and this technology could help address the challenge posed by adblockers, as it addresses personalization and relevance, as well as engagement. Based on user behavior and contextual analysis, it provides users with a more natural exposure to advertisements rather than an impersonal and intrusive experience.

The reason that in-image ads can be very effective is because they are superimposed over prominent images on web pages that attract the most attention from users. Because in-image ads are personalized for their audience, they are typically more relevant to what the audience members are interested in. In turn, this means these ads are far less disruptive than traditional display ads and more engaging.

As such, in-image ads provide users with a natural experience and highly targeted ads, thus reducing the incentive to even download ad blockers. Below is an example advertisement on a publisher’s website from a leading in-image ad platform Imonomy. It offers a more compelling option to users as well as to advertisers.

Additionally, by exposing users to highly engaging and contextually-relevant images, such technology increases ad viewability and provides additional monetization opportunities (for instance, by triggering CTRs) for publishers.

While the world of advertising will always be a complex business, publishers will need to play a major role in bridging the gap between advertisers and tech savvy users that are always short on time. To help in this process of countering adblocking technology, publishers need to focus on improving the user experience by providing an added value for both users as well as advertisers.

For instance, by encouraging users to continue with the browsing experience in the most natural way, while simultaneously exposing them to advertisements that are cleverly embedded as in-article images, publishers can meet the needs of all parties, while creating additional monetization channels resulting from improved viewability.

Advertising | Industry-Research

Today’s challenges offer an opportunity to rebuild trust in digital media

With trust in mass media at a record low, publishers look to 2017 as an opportunity to distinguish quality journalism from the fake news landscape and bot traffic of big tech platforms.

CEOs, editors and digital leaders today recognize both the opportunities and the challenges in 2017. Reuters Institute surveyed 143 senior publishing executives in 24 countries to recognize current business sentiment, uncover trends and identify new developments in the digital marketplace. Interestingly, Reuters found that more than two-thirds (70%) of executives believe fake news offers them a chance to strengthened their brands. More than half (56%) say that Facebook Messenger will be an “important/very important” part of their offsite initiatives this year (53% for WhatsApp and 49% for Snapchat). And at the same time, just under half (46%) of these same respondents are more worried today than a year ago, about the role of offsite platforms.

In Reuters Institute’s annual predictions report, the key trends identified for 2017 include:

1. Addressing fake news

  • Fact-checking news outlets becomes the new norm.
  • Platform and algorithm changes allowing for easier reporting of false news (and feeding these signals back into the core algorithms so these sources get devalued).
  • Regulation threats to remove fake news from sites.
  • Algorithms are expected to challenge our bias.
  • Fighting for quality news brands.

2. Redefining publishers’ relationship with platforms

  • Publishers fight back by creating platforms of their own (e.g. Schibsted, started its own platforms for content and advertising to create the scale and data competence to compete with Facebook).
  • Platforms pay hard cash for content.
  • Mergers and acquisitions happen more often as scale will mean operating across multiple platforms.

3. Digital advertising and sustainable business models

  • Subscription payments will focus more about membership and less about paywalls. News publishers, especially, will need to attract new customers, offer new pay services and earn more money from their current subscribers.
  • Data, loyalty and personalization will help with converting unidentified web users into loyal customers by creating more relevant and personal experiences.
  • Mobile alerts and the battle for locked screens signifies the shift to mobile notifications to attract consumers back to apps and websites.
  • Acceptable ads and ad-blocking apply pressure on the marketplace to ensure a more positive user experience with non-intrusive advertising.
  • Sponsored content replaces the displayad model.
  • Pop-up newspapers and magazines will offer in-depth coverage on certain topics but for only a limited period of time.

4. Messaging applications and news bots

  • Voice news bots with voice-activated platforms gain strong penetration (e.g. Alexa and Google Home).
  • Fact-checking bots are activated (e.g. Full Fact, a UK based company, is already looking to developing a service that fact checks live press conferences).
  • Conversational commerce emerges (e.g. Crosby, a travel bot service, that reads your email or group messaging conversations and send you recommendations for where to eat, what to do and when to leave for the airport).

5. Voice as an operating system and the rebirth of audio

  • Podcasts and audio books get a big boost in the car.
  • Improvements to data and advertising around podcasts lead to significant investments by publishers. A new measurement system form Nielsen’s and a Swedish start-up platform Acast offer metrics for podcasts to support advertising models.
  • Businesses start to deploy Amazon Echo and Google Home speakers (e.g. hotels use voice-controlled devices to enable guests to order room service, check the weather and find TV channels).

6. Online video and the future of TV

  • Disillusion with Facebook Live shifts a live focus towards sport and exclusive music, both strong vehicles to attract audiences and advertisers.
  • Oversupply of short form video leads to falling advertising premiums.
  • New opportunities with feature-based videos for brands integrate messages into videos.
  • Video-selfies to experiment with new fantastical filters (e.g. Splash is a new app that allows you to create and annotate 360-degree experiences).

7. The blurring of television and online video

  • Top content will increasingly be watched on big screens.
  • Competition for talent and rights heats up to drive new subscription and retain existing users.
  • News bulletins lose audiences triggers new ways to appeal to young (e.g. CNN acquired video-sharing app start-up Beme, co-founded by YouTube creator Casey Neistat, is building a new brand around distinctive reporting and commentary for millennials).
  • New cross-platform metrics for TV.

8. Virtual Reality (VR), Augmented Reality (AR) and Mixed Reality (MR)

  • New reality tech offers huge potential to shape experiences for entertainment, education and commerce. Forecasters suggest around 30m devices will be sold by 2020 generating revenue of around $21 billion.

9. AI and algorithms under fire (e.g. An example gone sour was Microsoft’s friendly AI driven chatbot Tay. Within its first 24 hours on Twitter with Millennials, it was spouting offensive and racist messages such as “Hitler was right”).

10. Automation and a jobless future means robo journalism on the way

  • More automated stories.
  • Intelligent content production systems.
  • Computer and networked assisted investigations.
  • Filters and alerts are being developed to help manage the information overload (e.g. SamDesk and Dataminr are deployed in newsrooms to pinpoint and manage breaking news in social networks).

11. Cyber-Wars, and Personal Security

  • Encryption and surveillance are on the rise.

12. New technology

  • Sharper screens, fold out phones, better batteries.
  • Faster and more reliable networks (e.g. 5G).
  • Clothes as a platform with wearable technology.
  • Biometrics, the end of passwords and checkout-free shopping. A new shopping experience, Amazon Go, that automatically detects when products are taken from or returned to the shelves using computer vision and sensor fusion.

13. Start-ups to watch

  • Cheddar is a new business news video network for millennial. Founder Jon Steinberg of Buzzfeed is charging $6.99 for premium services on its own website and is looking to drive carriage fees from services like Facebook Live, Twitter and Netflix.
  • Zipline is a small robot airplane designed to carry vaccines, medicine and blood in developing countries.
  • Houseparty is a new group video chat, up to 8 people can chat at a time, from the creators of Meerkat.
  • Accompany aims to provide an automated briefing of all the information you need before you walk into any meeting including relevant files, email conversations with attendees, details about their lives sucked from the web plus up-to-date information on company performance.

2017 provides many opportunities for publishers to rebuild consumer trust in digital media. The Reuters Institute predictions suggest that publishers must help scrub the digital environment from bot traffic, annoying ads and fake or misleading news. They must hold themselves and others responsible and keep a watchful eye on the algorithmic accountability tied to the digital experience. Importantly, publishers must continue to build their digital brand and diversify their revenue streams beyond digital display advertising.

Advertising | Industry-Research | Perspectives

Viewability measure standards a good step, but issues go beyond measurement

If a mobile ad is displayed, but not viewed by a human or simply not rendered properly, does the advertiser pay? The answer is yes, but two top advertising trade groups are working to establish a standard that will address this wastage and ad fraud through a uniform means of tracking whether ads can be seen in mobile apps.

Viewability is a huge headache on mobile – where the variety of ad formats and the way consumers interact with them (scrolling in a newsfeed, not clicking individual banners, for example) makes it a difficult one to call. To complicate matters, both Flash and cookies – URL referrers and trackers that are ubiquitous across all major desktop browsers – are completely absent from mobile.

Moreover, the mobile ad ecosystem of buyers and sellers is, in itself, a bottleneck. While ad buyers insist on purchasing only mobile ads that people can actually see, many publishers are less eager to lift the lid on this data. Their reluctance can be linked to that fact that impressions (CPMs) not click-throughs (CTRs) are the measurement that defines their business and their bottom line.

Currently, tracking ad viewability on mobile apps is a complicated process as app developers and publishers must integrate software from multiple third party providers. It’s a process that costs resources and – more importantly – can slow down the app. This is critical as a recent HP- sponsored study by Dimensional Research shows that most consumers quickly lose patience, and will even delete, apps that take longer than 2 seconds to load and perform its actions. The result is a trade-off between viewability (for the advertiser) and usability (for the consumer).

Source: Failing to Meet Mobile App User Expectations: A Mobile User Survey

To strike a needed balance the American Association of Advertising Agencies (the 4A’s) and the Interactive Advertising Bureau (IAB) have thrown their support behind an open source initiative aimed at standardizing viewability measurement for mobile apps. The goal is to jointly develop a single code base that mobile publishers can plug into their apps, letting advertisers pull data on viewability in a standard fashion, Joe Barone, managing partner of digital ad operations for GroupM and chairman of the 4A’s Digital Operations & Technology Committee, told the WSJ.

The organizations will oversee efforts to develop a standard tracking code, with the input of various constituencies from across the ecosystem. “This will be a very regimented, very democratic process,” Alanna Gombert, general manager of the IAB Tech Lab, told the WSJ.

The initiative comes at a time when concerns about ad viewability and accountability in the industry are high, magnified by a string of serious miscalculations by Facebook. The mobile ad giant has publicly admitted to overstating or understating the metrics that publishers and advertisers use to measure ad effectiveness on the platform and the value of Facebook ads.

It’s important to have Facebook and Google, which account for 85 cents of every new ad dollar spent on digital, on board, but it remains to be seen if thy will adopt and implement third-party tracking code of any kind.

While there is growing need for a consensus on viewability tracking, and a single code to enable it, change may come slower than we think. Many ad buyers and publishers prefer to work with their preferred vendors to track and calculate ad effectiveness. Moreover, the vendors behind these technology solutions worry an open source approach would effectively replace their proprietary tracking code and potentially devalue their companies.

Peggy Anne Salz is the Content Marketing Strategist and Chief Analyst of Mobile Groove, a top 50 influential technology site providing custom research to the global mobile industry and consulting to tech startups. She is a frequent contributor to Forbes on the topic of mobile marketing, engagement and apps. Her work also regularly appears in a range of publications from Venture Beat to Harvard Business Review. Peggy is a top 30 Mobile Marketing influencer and a nine-time author based in Europe. Follow her @peggyanne.

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