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Perspectives | Revenue

Why publishers and advertisers need to get native advertising right

Native advertising has come a long way from its debut in the digital marketing environment, when the lines between advertising and editorial were blurry at best. But a new study from the cloud-based intelligence platform MediaRadar, “Leaders and Lessons in Native Advertising,” found that 37% of publishers still aren’t complying with the Federal Trade Commission’s rules on disclosure for native advertising.

In late 2015, he FTC clamped down with more guidelines and an 11-page guidebook for businesses to promote more transparency within native advertising and ensure clarity for audiences, as I wrote at the time. Of course, 37% is a huge improvement from 61%, which was the figure cited in last year’s study on non-compliance. But the bottom line is that honesty about native ads has yet to become the status quo. In a world where fake news and ad fraud have troubled audiences and skewed our instincts for what’s valid, it’s to the benefit of publishers and advertisers to work harder.

The Evolution of the ‘Explicit Native’

Attracting the attention of users quick to download an ad-blocker or scroll past promoted posts on social media poses a significant challenge for marketers and publishers. Enter native advertising, thought to be the panacea for balancing editorial interest with advertising dollars. The FTC guidelines emphasized explicit disclosure of native ads in proximity to the headline (which, let’s face it, is the only thing many readers will allow their eyes to glaze through).

While the IAB deemed the terms “overly prescriptive,” DCN’s own Jason Kint said the impact of the guidelines would largely depend on what cases the FTC brought to the fold. There’s a difference between publishers and advertisers “trying to do the right thing” versus those engaging in “egregious acts of deception,” to use Kint’s words.

Native Exposed

And we saw the first case the FTC brought up, in March 2016, when it charged retailer Lord & Taylor for allowing 50 Instagram stars to wear the exact same dress — with none of those influencers noting in their posts that wearing the dress was a coordinated campaign. Nylon magazine also ran an article and an Instagram post featuring the dress. It was almost as if Lord & Taylor had decided to blatantly disregard the FTC’s disclosure rules.

The FTC saw it as such and brought charges against the retailer, eventually reaching a settlement. The company, for its part, announced that it “never sought to deceive” its customers. But it was a clear warning that the FTC was serious in doubling down on enforcement, and that actions speak louder than words when it comes to trusting marketers. No matter that the FTC’s makeup under President Donald Trump is still a mystery (there are only two current members of the Commission) — the stage has already been set for advertisers to work harder to ensure compliance and not outsource this work to other parties.

And if the evolution of labeling content as native indicates anything, most digital publishers are trying harder. There’s been a 119% year-over-year growth in doing so. So how about the 37% of publishers choosing not to comply? They’re risking their reputation and revenue.

The Benefits of Going All In

With native set to continue to grow again this year, it seems only logical to go all-in on following the rules while delivering good advertising, and not circumventing the rules for the same goal. Yet some challenges going forward are that most native advertising campaigns only last a couple of months, and native renewal rates are fairly small at 33% across all media sites.

How should we address this? Well, MediaRadar’s study indicates that publishers who have robust native advertising operations and have invested in the necessary tech — including the New York Times, Wall Street Journal and Quartz — have a stronger renewal rate at 49%. Top publishers who sell and measure the impact of native successfully can expect renewal rates of 60 to 80%, according to MediaRadar’s forecast.

Tips for Success

That being said, here’s some advice for publishers going forward:

  1. Invest more in native advertising for more profit. It’s not going away, so seizing the right packages and running campaigns long enough to actually benefit is key. That also means considering the use of in-house native advertising teams, or freelancers devoted solely to creating native advertising.
  2. Communicate the results. This helps prove the efficacy of the advertising. And, granted the results are positive, this helps increase renewals.
  3. Consider newer ad categories that have yet to jump on the native bandwagon. Media and entertainment, professional services, finance and real estate, tech and retail were the top five categories in native advertising last year, so look beyond those to expand.
  4. Invest in the right technology. It will help sustain your business in the long run.
  5. Don’t break the rules. Unless you’re OK with potentially risking some revenue (a fine of $16,000 for every native ad violation) and your reputation among users.
  6. Try harder. The big issue for publishers who don’t follow the FTC’s guidelines, it seems, is that they want to game the system to make bad native ads work. But sacrificing quality or trust isn’t the way to go. The answer: Better advertising.
Perspectives | Revenue

Media brands with superfans most likely to succeed with digital subscriptions

Leaving this year’s Digital Content Next Summit in New Orleans, I was struck by how much of the conversation revolved around media companies moving from an advertising-supported model to a subscription-based model. There was a lot of healthy debate around the optimal types of brands and level of scale required to succeed in this transformation. Everyone wants to know what the best offering is and what types of content are best suited to capture subscription revenue.

One variable not discussed as deeply was the value of passion. Ask yourself: How passionate are your fans about the topics you cover. How passionate are they about the media brands themselves? The answers tell you a lot about your odds for success.

Passion Play

At TEN, we believe our passionate fan base is a key success factor in transitioning from a legacy publisher business model to a direct-to-consumer business with multiple revenue streams, including subscriptions and events. Let’s start with how we quantified how passionate our fans really are.

We partnered with market research specialists GfK to try to put a monetary value on our fans’ passion and influence. GfK’s proprietary study told us that our fans are two to five times more valuable than the national average in terms of buying power and buying influence across auto, action/outdoor, and home tech—our core content pillars.

We have built trust with these fans and through years of covering their passion and being a market leader in that particular space. Brands such as Motor Trend, Hot Rod, and Surfer go back decades as the respective bibles of their categories. Our job has been to leverage that brand trust and deliver great experiences on new and evolving platforms. In many cases, the business model is free with ad support, paid, or a combination of both.

Ready for Action

And now we are seeing it come together. Strategy is meeting up with execution. Looking at social, our auto reach is more than 106MM with an average age of 27. They are the greatest collection of millennial automotive fans in the world—an unexpected position to be for a legacy publisher reinventing itself in the new media landscape. Passion produces engaged fans. And that engagement provides a bridge to monetizing these fans in a variety of ways.

When we talk about original content and digital video, the story is even stronger. Our Motor Trend YouTube channel is ranked number one in the U.S. by Tubular Labs in every category they track, from subscriber monthly views and cross-platform views to engagement rates. This translates into revenue through pre-roll and ad-supported sponsorships and integration into our programming.

In our events business, we’ve gotten 30,000-plus fans to attend Roadkill Nights, an extension of our original video series of the same name. This past summer, Roadkill fans got to drag race down the iconic Woodward Avenue in Detroit. The show’s host, David Freiberger, is now (much to his chagrin) a genuine social media influencer, mobbed by autograph-seeking fans at every event, some bearing Roadkill tattoos.

That kind of success is what created the optimism around our original content and our SVOD service, Motor Trend OnDemand, which we launched in 2016. Today, you can find our shows and SVOD service on Amazon Prime Video, Netflix, Roku, Apple TV, iOS, Android, and Chromecast. Hundreds of thousands of people engage with us there each month on top of the millions who watch us on YouTube and Facebook Live. Most important, they care enough about this content to pay for it.

The Passion Grows

This passion and viewership is further amplified through our existing media footprint. We use our social channel, sites, magazines, and events to drive viewership, subscription, and engagement—often in real life. Moving forward, we expect to add more affinity models, where we bundle the SVOD, print, events with exclusive experiences to surprise and delight our fan base.

All this leads us to encourage our media peers to monetize their consumers directly. This means focusing on the brands and properties with the highest engagement metrics, most passionate level of fandom, and the kind of content opportunities best suited for today’s consumption platforms of choice: on-demand digital video and social. If you do that, passion will beat scale every time.

Scott A. Bailey serves as President, Automotive, for TEN where his primary responsibilities include enhancing the relationship between the Automotive Group’s brands and its audience, leading the continued development of TEN’s digital businesses, and improving its customer offerings by expanding its media platforms. Scott is a two-time nominee and Emmy Award winner for his work in advanced media technology and brings decades of digital and publishing experience to TEN .  He came to TEN from Synacor, Inc., where he served as Chief Operating Officer and was part of the management team that took the company public in 2012. Before Synacor, Scott served as Senior Vice President at Comcast Interactive Media, and prior to Comcast, he was the General Manager for Turner Sports Interactive, a division of Turner & Time Warner.

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Perspectives

DCN’s must reads: week of March 9, 2017

Here are some of the best media stories our team has read so far this week:

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Perspectives

DCN’s must reads: week of March 2, 2017

Here are some of the best media stories our team has read so far this week:

Perspectives | Policy

Press freedom—and friction—feed democracy

Freedom of the press around the world declined in 2016 for the 12th year in a row, according to Freedom House. Between reporters being jailed as enemies of the state and news organizations being shut down completely, journalism today faces a very hostile environment. Our current president’s tweet that the press is “the enemy of the American people” only introduces more turmoil for journalists and emboldens dictators around the world. His claim also couldn’t be further from the truth.

As Ronald Reagan famously noted, America is “a shining city on a hill.”  Our experiment with democracy is on full display for the world to see. And one of the more important factors of our success is a free and independent press. Over the course of our history, the world has seen an educated, relentless and free press expose the Teapot Dome Scandal and President Nixon’s Watergate along with countless local cases of corruption and deception. A free press is a bedrock principle of democracy. It provides necessary transparency, helping to educate citizens and fulfilling an important check on power.

On Presidents and a Popular Press

Yet, despite its importance, a recent Gallup poll showed that public approval ratings of major media platforms are at all-time low. It’s worth noting that, in the last 20 years, the media’s approval ratings have never risen above 40% for digital, print or television news. One could argue that if the press isn’t hated, then it’s not doing it right!

Before he became president, Thomas Jefferson was an original proponent of a free press. In a letter from 1787, he wrote “And were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.” However, during his successful campaign for President in 1800, candidate Jefferson endured heavy scrutiny by the press. By the time he took office, he hated the press or at least what he thought it had become. In his second term, he even ordered the arrest of newspaper editors for sedition. However, by 1816, seven years after he left the presidency, Jefferson wrote in a letter “where the press is free, and every man able to read, all is safe.”

Similar, strained relationships with the press continued with later administrations. After the failed invasion at the Bay of Pigs, President John F Kennedy stated “…the abrasive quality of the press applied to you daily, to an administration, even though we never like it, and even though we wish they didn’t write it, and even if we disapprove, there isn’t any doubt that we could not do the job at all in a free society without a very, very active press.”

Declaration of Independence

And just a few days ago, when asked about the role of the news media, former President George W. Bush responded, “I consider the media to be indispensable to democracy. We need an independent media to hold people like me to account. Power can be very addictive. And it can be corrosive. And it’s important for the media to call to account people who abuse their power, whether it be here or elsewhere.” This from a president who lost the popular vote but won the Electoral College. He assumed office at a time when the nation was highly politicized and divided. He weathered withering criticism from the press about his policies, cabinet picks and early missteps.

This is the point: Elected officials and most citizens will never like a healthy press corps. We don’t need journalists to be loved. We need them to be aggressive, persistent and abrasive. In turn, politicians should respect the press’ role in our democracy, not undermine it for their own political gain. Struggling democracies and entrenched dictators around the world are watching our “shining city on a hill.” What do we want them to see?

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.

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Perspectives

DCN’s must reads: week of February 23, 2017

Here are some of the best media stories our team has read so far this week:

Perspectives

Let your content be the consumer’s guide on the path to discovery

Once upon a time, the world was a much simpler place for marketers. Not that many years ago, a 30-second television commercial would more-or-less tell consumers exactly what they were going to buy the next morning. The brand would describe a problem and present the immediate solution that consumers would then rush to purchase. Looking back, it was almost like magic. But the age of a short, predictable consumer journey has come to an end.

The Internet has changed everything. Today, the consumer knows almost as much about the product and the brand as the company. They come to purchase prepared with an arsenal of facts and figures to ensure they are making the right decision.

Conquering the Zero Moment of Truth (ZMOT)

Google’s Zero Moment of Truth (ZMOT) Research found that consumers interact with an average of 10.4 items of content throughout their journey to buy. So the question becomes: How many of these pieces of content that will influence the consumer’s decision belong to you?

Brands that aren’t actively doing something to be a part of the online consumer journey and conversation are leaving an opening for their competitors. They also make themselves more vulnerable to the impact of bad reviews, or unflattering articles, that tarnish their brand’s story. The risk of not being a part of this path to purchase is significant. An ad campaign loses much of its effectiveness and becomes exceedingly more expensive if the first time a consumer sees it they have already made up their mind about the brand.

Meet the Consumer at The Right Time and Place

There are three opportunities to grab the consumer’s attention and engage them as part of their online journey.

  1. Search – “I need something, I google it. Whoever answers my needs first wins.”
  2. Social – “I’m on Facebook, Instagram, LinkedIn, Snapchat. I share, scroll, like. Whoever reaches my friends is also a friend of mine and gets my attention.”
  3. Discovery – “I consume content that is interesting to me on leading premium publishers. Whatever interests me wins my attention.”
Adjusting to the Age of Discovery

The Age of Discovery is upon is. It is an age when everyone gets to choose what they want, when they want it. This is especially true with the younger generation: They aren’t willing to be bombarded with information. They want their content, but aren’t willing to get it in exchange for being interrupted. eMarketer research estimates that more than 25% of internet users this year will have used ad blockers. This figure represents more than 85 million people in the USA, and more than 400 million people worldwide. The age of aggressive advertisements is over. The future is in exploration-based marketing, also known as discovery.

Letting People Discover for Themselves

Understanding that potential customers will consume a number of content pieces before making their purchase decision, provides an opportunity to control as much of these content encounters as possible. Otherwise, a competing brand might do so, effectively control most of your (would-be) consumer’s journey.

What this means is that brands need to collect, organize and, in some cases, create a large assortment of content. This might take the form of customer reviews, a flattering video, funny short clips, an article in a leading content website, a reference in a well-regarded blog or news piece, or a blog post. And in order for more audiences to discover this content, brands need to consider multiple distribution channels — many of them paid.

The consumer’s conversation happens on many levels and a variety of content helps the consumer feel that they have adopted a balanced and objective opinion. The more control you can have over the content they consume, the closer you will come to influencing the consumer’s journey.

Choose Your Path Wisely

Once you’ve decided to prioritize discovery to attract new customers, it is just as important to determine where this discovery will take place. Social networks get a lot of traffic and are an easy platform to reach the masses, but when your content is up against a picture of a colleague’s adorable daughter or a friend’s awesome trip to Barcelona, you may find that you are at a disadvantage.

When people discover your content through a leading and trustworthy website, having already enjoyed or sought out another story, you immediately have the advantage of their attention. Our data suggests that the choices audiences make about what content to engage with is significantly impacted by what channel they are on.

Always Be On

Unlike advertisements, promoting content in this manner works in a way that it is “Always On” and effective throughout the whole year. Content discovery mode ensures that users meet your content at the moment when it is most appropriate for them. When consumers are exploring a leading content website, they are in a mind set to consume more comparable content. And this doesn’t just mean text-based articles, but a wide range of content such as videos, quizzes, and reviews.

Going on the Journey with Your Customers

In order to see the true impact of an investment in discovery, you must make a strategic decision for content to be a substantial part of the consumer journey. The consumer’s journey is constantly expanding—and within it, many decisions are made. All this happens long before the customer sees an advertisement. More opportunities to connect with your customer means more opportunities to for them to discover your brand. It’s time to control of the story and conversations that you truly want them to keep top of mind.

Sophie is the head of marketing APAC & EEMEA at Outbrain. She is a Global Brand Strategist, Co-Founder, and Entrepreneur with over 15 years of experience with a measurable track record of creating successful online and offline strategic branding concepts, product lines and events, each time finding the brand story that inspires action and create a strategy to meet ambitious new growth goals. She shares a passion for innovation, a curious mind, and expertise in defining business initiatives and plans, adapting to a changing business and technological landscape.

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Perspectives

DCN’s must reads: week of February 16, 2017

Here are some of the best media stories our team has read so far this week:

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.

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