In our world of eye-popping stats, John Herrman recently shared a new one from a Morgan Stanley analyst that shakes the wobbly legs of the digital media industry in this New York Times column: “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” Industry sources quickly tried to discredit this number as way too high even though for years many, including DCN, have noted overall market consolidation with this IAB/PWC report tracking the top ten’s growth from 70% to now 75% of the market.
But 85% to only these two companies?
Well, last week, IAB/PWC also released its quarterly U.S. advertising report, which was quickly followed by a “groundhog day” press release from the IAB, the industry trade group for the advertising sector, announcing the rapid rise of digital ad revenue. The Report notes that first quarter U.S. internet ad revenues hit a record-setting high after the highest growth in four years hitting a “21% rise over the same time period in 2015.” We don’t dispute this number. We just think it’s important to highlight that only two IAB members are benefitting from this increasingly lopsided ecosystem.
Using Facebook and Google’s public earnings, it’s very simple to back into the math. The table below illustrates the estimated U.S. ad revenue growth for Google, Facebook and what I affectionately like to call “Everyone Else.” These calculations show nearly 90% of the growth going to the two companies. If you’re in the “Everyone Else” group, you’re competing for $300 million of the $2.7 billion in Q1 growth.
Stop and let that sink in for a minute.
It seems the only other ways money is being made in the digital advertising ecosystem is through:
Intermediaries who capture 55% of the supply chain according to IAB research on the “Ad Tech Tax” that marketers are funding;
Fraud, which according to the ANA, results in more than $7 Billion per year being dislocated; and
Other shenanigans, which the ANA reported on last week in its groundbreaking Transparency Report.
And whether we like it or not, no discussion of ad revenue is complete without factoring in ad blocking. I want to once again applaud the IAB for bringing together its members last week to discuss user experience issues in light of ad blocking. I was pleased to be able to listen through the entire day and appreciated that most of the agenda was filled with DCN’s premium publisher members. Because DCN’s members depend on trusted and direct relationships with consumers and advertisers, our members are often closest to the value exchange with the consumer and to the impact from the installation of ad blockers across the web.
Senior strategy executive Mark Frost of Strategic Ink, opened the event by sharing the key findings from a recent IAB, 4As and ANA workshop. Most important was the self-awareness about the failures of ad tech, retargeting and unbridled data collection that often doesn’t serve the consumer. As we’ve written many times, the fact that digital advertising consistently ranks as the least trusted form of advertising speaks volumes. And, it is interesting in light of the revelation that Google and Facebook have a near-monopoly on digital advertising, that a recent report from Wells Fargo Securities and Optimal showed that consumers trust Google and Facebook least of all with their data.
This brings me to my final point. Princeton released research last month showing that Google and Facebook together account for all of the top ten third-party data collectors across the web. The impressively-credentialed researchers Arvind Narayanan and Steven Englehardt wrote, “In fact, Google, Facebook, and [their increasingly poor cousin, my words] Twitter are the only third-party entities present on more than 10% of sites.” It’s worth noting that Twitter is the only one of these three companies to publicly honor Do Not Track.
Google alone owns all of the top five third-party domains across the top one million websites. In the words of Harvard Business School Association Professor Ben Edelman, “No other firm engages in even a fraction of this tracking.” Importantly, his comment came in a filing of concern about the FCC opening up the set-top box business. While there are consumer merits to the FCC’s position, there is also significant concern we’ll be lowering the privacy bar so that Google and others can spoil another ecosystem with tracking and copyright issues. And this at a time when all bars need to be raised to protect consumers and the content they often enjoy for “free”— that is, at the cost of their time spent viewing advertising.
All of this information is vital to understanding the dynamics around data ownership and ad blocking — two complex issues which will impact our ability to evolve and improve the web we want as an industry. Facebook, due to its closed platform, and Google, due its dominance in browsers, ad tech, search and advertising, will have a large seat at nearly any industry or regulatory table discussing critical issues. So we urge the industry to keep your eyes wide open. Lax rules around data collection and use and incomplete solutions to ad blocking may very well play into their hands as they angle to swallow up that last 10%.
Notes and References
1Google 2016 1st Quarter Earnings Report – estimated based on reported total U.S. revenues x 90% (percentage of Google revenues represented by advertising).
The media environment still presents numerous growth opportunities despite the competitive marketplace and the struggle for consumer attention. Importantly, PwC’s Annual Global Entertainment and Media Outlook Report projects the U.S. media and entertainment revenue will increase and account for $632 billion, or 29.4% of the worldwide total of over $2.1 trillion. Further, the entertainment and media revenues are expected to grow at a compound rate (CAGR) of 4.4% from $1.7 trillion in 2015 to $2.1 trillion in 2020. In order to provide this forecast for 2016 to 2020, PwC analyzed historical and projection data for advertising and consumer spending in 13 major industry segments across 54 countries.
U.S. highlights:
Internet advertising in the U.S. continues as the largest market in internet advertising revenue, projected to grow from $59.6 billion in 2015 to $93.5 billion by 2020 with a 9.4% CAGR. Important to note, internet advertising ($75.3 billion) is expected to surpass broadcast TV advertising ($70.4 billion) in 2017.
Mobile has been a key driver of digital advertising revenue comprising 34.7% or $20.7 billion in 2015 of U.S. total internet revenue. PwC projects mobile video advertising revenue will grow from $3.5 billion in 2015 to $13.3 billion in 2020 for an increase of 30.3% CAGR.
Video on Demand (VOD) and over-the-top services (OTT) will drive TV and video revenue from $121.4 billion to $124.2 billion in 2020 (0.5% CAGR). In addition, TV advertising revenue is expected to rise from $69.9 billion to $81.7 billion in 2020 (3.2%CAGR).
Continued declines are anticipated for newspaper publishing, declines of 2.9% CAGR by 2020. Further publisher consolidations are expected. As well, magazine publishing revenue is not expected to decline but register a fractional increase, from $30.5 billion in 2015 to $30.7 billion in 2020. In addition, radio is predicted to increase from $21.4 billion to $23.1 billion in 2020 (1.6% CAGR).
Virtual reality devices and games will be the impetus for rising video games revenue from $17.0 billion to $20.3 billion by 2020 (3.6% CAGR). Virtual reality devices and games will be the impetus for rising video games revenue from $17.0 billion to $20.3 billion by 2020 (3.6% CAGR).
Overall, PwC projects that consumers will look for less expensive content bundles, streaming offers and less commercial interruptions. As a result, consumers’ share of time for ad-supported media will not increase. For advertisers and content providers, this means a detailed examination of the consumer experience to identify drivers of engagement and understand their impact on time spent and their influence on advertising effectiveness.
We live in a visual world. To make a story or campaign compelling, visuals or video are absolutely essential. In fact, it is commonly cited that the brain processes images 60,000 times faster than text. People are captivated by short, instant bursts of content—even content that disappears after a few seconds like Snapchat.
Platforms like Pandora and Vine offer bite-sized video content with homegrown, organic videos that go viral in a matter of days. Recently, Pepsi announced a collection of five-second ads designed to to gratify millennials. Pepsi plans to make 100 different ads for TV and digital this summer to promote their new emoji-themed bottles. And YouTube will soon show 6-second “Bumper” ads before videos, which cannot be skipped.
The market for online video has evolved immensely. When online video first launched, brands re-purposed existing 30 & 60-second TV commercials. The ads looked more clunky, required click-to-start, and didn’t assimilate with the surrounding content.
Instant gratification has become the norm—with advertisers and publishers adapting to meet the consumption behavior of today’s shortened attention span. Video ads are easier than ever to consume with the broad installation and access to broadband on desktop and mobile. Shorter videos ads have higher viewability and completion rates since the content is near instant. In effect, shorter ads may be more successful since consumers are more likely to watch the ads and remember the advertiser.
Today, online video ads are custom-created for each channel, the ads auto-play and compete for attention with a surplus of surrounding ads. Eighty-five percent of online video ads are un-skippable. MediaRadar found that almost all of the video ads (98%) that run less than 10 seconds are un-skippable.
According to MediaRadar data, there were over 1,100 new video advertisers in Q1 2016 alone who didn’t place ads in 2015. Online video is a key driver in digital ad spend with $9.6 billion predicted ad spend for 2016. In 2015, $1.5 billion dollars shifted from linear TV to digital. And yet there remains ample opportunity to grow. Only 10% of TV advertisers bought online video ads in Q1 2016.
Publishers are constantly innovating and introducing new products or ad offerings too. From premium page takeovers to YouTube’s new Breakout Videos that will highlight the fastest-growing videos as an indicator of viral potential.
Todd Krizelman 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.
Each year, analyst Mary Meeker — a partner at the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers — releases her massive Internet Trends report, with businesses scurrying to take advantage of her insights into what’s hot and what’s not. This year, Meeker released the report while at the Code Conference, for maximum high-level impact. There’s a lot to chew on, but here are the most important trends for content creators and online publishers.
Google, Facebook Dominate; Mobile Undersold While U.S. Internet advertising is growing, Google and Facebook remain the dominant platforms for selling advertising on the Internet. The two platforms collectively control a 76% share of the growth in U.S. online advertising, Meeker noted, using numbers from last year’s IAB/PwC Advertising Report. All others besides Google and Facebook saw growth of 13% in online ads in 2015.
On another front, advertising growth has yet to actually reach its full potential because marketers aren’t spending enough on mobile. As Wired’s Davey Alba wrote, “They’re still committing too many of their dollars to so-called legacy media.” As such, the $22 billion that is spent on mobile advertising in the U.S. is a tiny amount of what it should be, according to Meeker’s report. Indeed, only 12% of all advertising right now is mobile. While this presents a boon for content created or optimized for mobile, it’s also a huge risk and concern for traditional media players, as Larry Downes wrote in the Washington Post.
One big hurdle for mobile is the rise of ad-blocking. Four hundred and twenty million people around the world are now using some form of ad blocking software on their mobile phones, according to PageFair. When looking at the reasoning behind the rise of ad blocking, including privacy concerns, the onus is on publishers and marketers. They must not only appeal to consumer behaviors, but also to their aesthetics and feelings of what good advertising should be. Advertising on Snapchat, for example, is in part successful because it’s short, sweet and integrated into the platform seamlessly so that it’s part of the user’s natural experience. (And it’s outside the realm of ad-blocking.)
Messaging and Visual Communication Rising Among Millennials and Generation Z, visual communication is king. As Recode’s Noah Kulwin pointed out, “People worldwide shared almost twice as many photos in 2015 as they did in 2014, and almost half of that happened on a service owned by Facebook.”
And whether it’s a photo, video or live-stream — such as Candace Payne’s viral Facebook Live video trying on a Chewbacca mask — advertisers can very much take advantage of the sharability of visual communications. Take the Candance Payne example, as Larry Downes wrote in the Washington Post: She mentioned Kohl’s department store twice in her video — and that video was viewed more than 150 million times in one day. In turn, the company’s app leaped to the top of the charts in the iOS App Store. If user-generated video can redefine advertising in such a way, expect more videos with branded content.
And when it comes to messaging apps, that means commerce communication is officially entering the fold. “Messaging apps are continuously becoming the second home screen,” Meeker said during her presentation. If the best way to connect with Millennials — now representing 27% of the population, with a spending power that’s going to rise — is on messenging apps, then that’s the natural destination for advertisers. The rise of voice-recognition software on these apps also means that the commercial applications can’t be ignored. Perhaps dictating the purchase of a product via speech on a messaging app may not be far off.
Global Internet Growth is Slowing — Except for India Global Internet growth is slowing, except for India, where user growth is actually accelerating at 40%. India has now surpassed the U.S. to become the second most connected population after China. With more Indians purchasing mobile phones — which will be the entry point for the majority of Indians accessing the Internet — the potential for publishers and advertisers in this space is huge.
India then serves as an interesting case study through which marketers can better understand how to target new Internet users. As Meeker discussed during her presentation, new Internet users are becoming increasingly harder to find because they come from poorer, developing countries, where the cost of a smartphone is a significant portion of a person’s income. The cost of a smartphone in India is relatively low compared to other countries, however, so it would behoove advertisers to capitalize on this market potential.
One in three podcast listeners expect to increase their podcast consumption over the next six months, following a similar increase in their behavior in the past six months. The results were revealed as part of comScore’s first study dedicated to podcasting, commissioned by audio on-demand network Wondery.
Significantly, among all forms of advertising on mobile devices, podcasts create the highest improvement in perception. And among all forms of digital advertising, podcast ads are considered the least intrusive.
Key findings include:
Over two-thirds of online Americans aged 18-49 are aware of podcasting and nearly one in five listen to podcasts at least once a month.
Incidence of podcast listening is highest among males aged 18-34, at 30%, who spend an average of more than 11 hours per month listening.
About half of podcast consumption is done via mobile devices.
Podcast listeners like the educational and entertainment value of the experience, and report an increase in positive emotions after listening to an episode.
Two-thirds of podcast listeners say they have engaged in various research and/or purchase related behaviors as a result of advertising exposure from podcasts.
More than half of non-podcast listeners say they would be interested in listening if they knew where and how to find podcast episodes.
The study was commissioned between March and April of 2016 among over 2,000 respondents in the US aged 18-49. Full results are available upon request at wondery.com/contact-us.
New York Times President and CEO, Mark Thompson addressed the IAB Ad Blocking Summit, held June 6, 2016 in New York City. In his talk, An Update from The New York Times on Its Approach to Ad Blocking, Thompson took a hard look at the factors contributing to the rise of ad blocking and urged the entire industry to take responsibility for fostering a climate in which digital advertising degrades the user experience and fuels the adoption of ad blockers. Through the lens of The New York Times experience, Thompson provided insights into productive and proactive steps that digital content companies – and the entire industry – can take to address ad blocking.
Below is the full text of the talk he delivered:
Mark Thompson, President & Chief Executive Officer, The New York Times Company
Thanks Randall [Randall Rothenberg. President and CEO of the IAB].
I want to make five points this morning. The first is that we have to clean up our own act as an industry.
To a significant extent, the root cause of digital ad-blocking is digital ads and the way many websites deploy them on their sites.
Too many ads. Intrusive and distracting ads. Ads which slow page-load to a crawl, or are slow to load in and of themselves. Boring and uncreative ads, which no user can possibly enjoy viewing. ‘Relevance’ –if it means endlessly retargeting users with ads for something they searched for and bought or lost interest in weeks ago. The pervasive and indiscriminate tracking and sharing of user data.
We’re not all equally guilty. At The New York Times, we’ve kept the number of display ads on the page low. We’ve worked hard with our advertising partners to develop campaigns that are creative and compelling. We’ve developed new units and ideas – like Flex Frames which we launched last year as Mobile Moments on smartphone and which we’ll extend to all platforms this September.
But we shouldn’t kid ourselves. If a user installs an ad-blocker because of unacceptable ad experiences somewhere else then, guilty or not, we still face the challenge of persuading them to uninstall it or, more plausibly, to whitelist us so that their ad blocker allows our ads to load. Our first task as an industry is get rid of the bad experiences which make that whole tricky process necessary.
And our second is to develop and promote digital advertising whose originality and quality engages and delights users and, because of that, also delivers real results for advertisers.
In a world of phones and feeds, marketers need to think like programmers rather than as traditional advertisers, not trying to steal attention which is directed at something else, but offering consumers content which actually has value to them, in the right context and user-experience.
Our branded content business at The Times is all about that – creating and distributing high quality programming for marketers. It didn’t exist in 2013. It delivered more than $13m of revenue in 2014, and $34 million in 2015. We expect it to grow very substantially again in 2016.
For us, branded content does not mean fake journalism trying to pass itself off as genuine newsroom output. It’s work like the animated virtual reality film we made for GE for the launch of our VR app and the distribution of a million Google cardboards. High quality content well worth consuming in its own right.
And it’s not just about branded content; we’re also focusing quite a bit of energy on making display advertising better. Fewer, faster ads, delivered at the pace of mobile and more compelling at the point of discovery, where the user first sees the ad. Clearly labeled but an integral part of the main news feed, on both the phone and the desktop. Bigger, punchier units that provide a better canvas for creativity.
Third, we must do a much better job of explaining our business model – and the connection between advertising revenue and high quality content – to our users.
Let me talk about The New York Times first, then turn to digital publishing as a whole.
At The Times we have two big revenue streams in both print and digital: subscription and advertising. In print, where we make around $1 billion of revenue a year, the proportion is currently about 60/40, with $600 million coming from home delivery subscription and newsstand sales, and $400 million from print advertising. In digital, at present it’s more or less 50/50.
Our digital news subscription business is the largest and most successful in the world and it’s still growing rapidly. In the first quarter of 2016, we added 67,000 net new subscriptions – that’s more than we did in any of the three previous years. Our model is accelerating, in other words.
But delivering national and international journalism to the quality to which The Times aspires and our users expect means massive investment. We believe we can grow our digital subscription business until we have many times the current number of subscription relationships, which across print, digital, news and crosswords stands at around two and a half million. We do not believe that we will ever be able to sustain Times journalism or The New York Times as a flourishing business without an advertising business of real scale.
We need to spell this out clearly to our users. The journalism they enjoy costs real money and needs to be paid for. Advertising is a vital part of the revenue mix.
Everyone knows and accepts that physical newspapers cost money to produce and that someone who steals a copy of a newspaper from a newsstand is a thief. That’s not a word I’d use of those who install ad blockers – the Internet has left many people with the erroneous impression that digital high quality content doesn’t cost anything to produce – but there are some awkward facts to be faced.
If you consume great journalism without making any contribution towards paying for the journalists and the editors and photographers and videographers and graphics artists and engineers, and if enough people follow your example, that journalism will either be diluted or restricted to the relatively small number of people who have the willingness and ability to buy a subscription. And not just you but everyone will be impoverished as a result.
We want our journalism to be widely available and for non-subscribers as well as subscribers to be able to sample large amounts of it. Of the around 110 million people who come to us each month, more than 107 million are not subscribers. If ad blocking becomes ubiquitous, that kind of free reach will no longer make economic sense.
We believe in the civic value of our journalism and we want it to be widely read across America and the world, but not if that undermines our ability to continue to produce it.
No one who refuses to contribute to the creation of high quality journalism has the right to consume it. We are not there yet but, if we judge that it will strengthen the long-term prospects of that journalism to prevent non-subscribers who employ ad blockers and refuse to whitelist us from reading it, we’ll do it.
But if this is a real issue for us, consider those publishers who do not have a digital subscription model and who are entirely reliant on digital advertising, to replace falling print revenues in the case of legacy companies, and for the whole of their revenue in the case of digital ones.
I don’t need to tell anyone here that digital advertising is going through a wider disruption with the astonishingly rapid switch of consumption to smartphone, the decline of standard web rotational display, the power of the major social and search platforms and so on. My friend Shane Smith talked recently about a likely bloodbath among advertising-dependent publishers this year. I’m British and I find the word ‘bloodbath’ a shade melodramatic – especially from a Canadian – but I agree with Shane’s analysis.
This is why proportionate but meaningful industry-wide action on ad blocking is so important.
So put my first three points together and think of them as a potential new agreement between publishers and users. We have a responsibility to work with advertisers to deliver rich, enjoyable, valuable ad experiences, and to use and pass on data about their visits to our sites fairly and transparently. They have a responsibility to contribute to the economic sustainability of quality content creation.
In the end, free riding will not just damage us and the wider public realm. It will damage them.
Let’s now turn to my fourth point, which is a practical one. There is early but encouraging evidence that a significant proportion of users will respond to clear messaging about ad blocking and the threat it poses to quality content.
And that point is grounded in a basic idea that has become a requirement of digital business: when you empower your customers by providing them with choice, good things can happen.
Over the past few months, as part of a wider program of experiments and surveys, we’ve tested both dismissible and undismissible messages about ad blocking. Both sets of messages sought to explain to users who had installed an ad blocker the connection between advertising revenue and the journalism they wanted to consume.
With the dismissible messages, the user could click and close the message and go on to read the story they had come to The Times for in the first place. undismissible messages prevented users who got them from reading the journalism at all, unless they agreed to whitelist us in their ad blocker.
We tested both dismissible and undismissible messages with non-subscribers. You won’t be surprised to hear that, at least in these limited tests, undismissible messages were much more effective than dismissible ones. Indeed, more than 40% of those who encountered the undismissible message agreed to whitelist The Times.
Times subscribers are already making a significant contribution to the funding of our journalism, so we think of them very differently. We did not put undismissible messages in front of these valued paying customers. But we did try dismissible messages – and no fewer than 30% of the ad blocker-using subscribers we tested agreed to whitelist The New York Times.
We’re still testing and analyzing, but even at this early stage we have confidence that – if we decide to move in this direction – we will be able to convince many of those who use ad blockers to whitelist us so that ads still load on The New York Times site. It may be that, in both cases, the percentages of those agreeing to whitelist would grow over time – though we also recognize that some ad blocking non-subscribers, who are repeatedly confronted with such messages but who are unwilling to whitelist, might give up using our site altogether.
That would be a pity, but neither they nor we can have it both ways. It’s not fair to continue to consume something you’re not prepared to support in any way. As for us, in principle we don’t want to stop anyone from sampling Times journalism, but we also have to accept that someone who won’t subscribe or look at ads doesn’t help us succeed in any way at all.
But we do want to offer all of our users as much choice as we can, and we recognize that there are some users – both subscribers and current non-subscribers – who would prefer to have an ad-free experience.
So we are also exploring the possibility of offering a higher tier digital subscription offer which would allow users to enjoy Times journalism without seeing advertisements, while still making a fair contribution towards its creation.
My fifth and final point is that – although we recognize some of the frustrations that have led users to adopt ad blockers – there are technologies and practices associating with ad blocking which are unfair and deceptive. We intend to push back against them and we want to encourage the rest of the industry to do the same.
We are particularly troubled by the business model of some of the largest ad blockers who whitelist advertising in return for payment, thus effectively requiring digital publishers to pay in order to receive advertisements to their own users – including advertisements which are, by anyone’s definition, non-invasive.
The largest entity engaged in this practice is the private limited company Eyeo, which owns both the leading desktop ad blocker, Adblock Plus, and the so-called Acceptable Ads whitelist, which seeks a 30% of revenue from any firm that generates more than 10 million unblocked ad impressions a month as a result of appearing on its whitelist.
This is a manifestly unsavory business practice. Ad blockers often portray themselves as an answer to unsatisfactory digital advertising experiences. But Eyeo wasn’t founded by concerned citizens. It was founded by a digital ad veteran and represents the most cynical, most money-grasping end of the old unreformed digital ad business. We need to expose Eyeo, Adblock Plus and the Acceptable Ads whitelist, so that the public can see them for what they are.
Unlike most of the other ad blockers in the marketplace, Eyeo is not attempting to limit tagging to protect privacy – they permit trackers to pay to be included in their Acceptable Ads programs.
Eyeo’s secondary line of business has been to license the “Acceptable Ads” whitelist to other ad blockers, including some smaller mobile ad blockers. The second largest ad blocker, Ad Block, which was sold in October to and unknown buyer, also uses Eyeo’s Acceptable Ads list.
We want to encourage other publishers and counterparts throughout the industry, and the organizations which represent us, to be trenchant in publicly confronting ad blockers who engage in these coercive and misleading business practices. Recently, we have joined with other publishers in the NAA in filing a complaint with the FTC to investigate certain deceptive practices of ad blockers.
It is not just publishers who are vulnerable to these trade practices, and we encourage our partners across the industry to seek out opportunities to oppose them.
Five points then:
We have to clean up our own act as an industry.
We must develop digital advertising which is valuable and a pleasure to consume.
We must make sure our users understand the link between ad revenue and high quality content.
There is evidence that many users will respond to the right messages about ad blocking.
We must fight the unacceptable and deceptive business practices associated with some ad blockers.
Ad blocking is undeniably a challenge – I wouldn’t have said what I have this morning if it wasn’t – but let me finish by putting it into perspective.
We’re still certain that digital advertising will play a critical and positive role in our future success. As you’ve heard, we’re pivoting our ad business towards less intrusive, leaner, inline display; branded content; bold new smartphone executions, video, virtual reality and other kinds of visual storytelling. We believe that right now we’re offering our users the best digital advertising experiences in the history of digital publishing.
We’re already seeing tangible results – revenue from smartphone advertising, for instance, grew 149% year over year in the first quarter of the year – but the best is still to come.
So let’s take firm action on ad blocking. But let’s also unlock the full creative and economic potential of our ability to bring great content, great users and great creative advertisers together. Thank you.
Americans assigned a value of nearly $1,200 per year to the array of free, ad-supported services and content currently available to them online, according to a survey conducted by Zogby Analytics. Unsurprisingly, the majority (more than 85%) prefer an ad-supported internet model instead of paying for online content, and three-quarters said they would reduce their online activities “a great deal” if they had to pay for those services and content. At the same time, almost as many say (72.8%) that free internet content such as news, weather, email and blogs is very important.
Commissioned by the Digital Advertising Alliance (DAA), the Zogby Analytics poll of 1,004 adults sought to better understand the aggregate value that Americans perceive in the major types of services and content made available free to consumers because of advertising. Respondents were asked to estimate how much people would have to pay for 17 different types of online services and content, ranging from e-mail to video and weather, if they were offered only on a subscription basis rather than for free with ads.
Among the survey’s key findings:
Consumers assigned an aggregate value of $99.77 per month to a package of 17 major types of ad-supported services and content.
Eighty% of respondents said they had found ads useful in finding new products, researching a purchase, or assisting with the shopping process.
The types of advertising that consumers had found most useful were movies/TV shows (43%), technology/devices (37%), clothing (36%), local restaurants (34%), groceries (33%), phone/internet services (32%), and travel (30%).
Zogby Analytics was commissioned by Digital Advertising Alliance to conduct an online survey of 1004 adults in the US. The survey was conducted from April 19-20, 2016. Based on a confidence interval of 95%, the margin of error is +/- 3.2%age points.
According a recent report in the New York Times, the majority of new online advertising revenue—85%—will go to two companies: Google and Facebook. While these companies have consumer-facing services, the reason they dominate the digital advertising ecosystem is because of the technology and algorithms they employ as third parties. Third parties collect data about consumers yet have no direct relationship with them. In addition, those people usually have no idea that their data is being collected.
When you consider that direct response ads represent nearly two thirds of digital advertising and these companies only get paid when consumers click on ads it’s no wonder we see the digital experience dominated by annoying, intrusive, and crappy ads.
And how are consumers reacting to this situation? As TRUSTe has noted, clearing cookies is still the primary method employed by consumers to protect their privacy. However, clearing cookies has detrimental effects to the user experience such as requiring consumers to log in every time they revisit a site which then makes the stalking, creepy ads come back even more. Yet they still clear cookies because it’s one of the main tools they know about to prevent being tracked. In this dysfunctional dynamic, big data is being used to drive down costs of serving targeted ads rather than drive up relevance to the consumer.
A few years ago, consumers started activating their Do Not Track (DNT) signals in an effort to express a choice, even though there was no industry standard yet. As Doc Searls plotted out, the number of DNT signals declined at the same time that the number of consumers with ad blockers started climbing. It’s not a coincidence – consumers have been looking for easy ways to express choice. If this continues, publishers won’t be able to fund quality content like this piece about the early season slide of the Yankees.
It’s interesting that our members are having some success asking consumers to turn off their ad blockers in order to access the content they love. The conversation goes something like this:
Website owner: Hi loyal reader, would you pretty please turn off your ad blocker or whitelist this site? We need advertising revenue to pay for quality journalism.
About 40% of consumers: Sure! I love you guys.
The remaining 60% of consumers: Meh. I’m gonna go look elsewhere for that story about Trump. I really, really hate those annoying ads on those other crappy sites I visit.
My take on this is that consumers understand premium experiences and are willing to view advertising in exchange. But, the value proposition gets out of whack when there’s no transparency for the consumer and the experience is poor.
Meanwhile, advertisers aren’t happy either. As the ANA pointed out, $7.2 billion was lost to fraud last year. They’ve been paying for ads that aren’t even viewable. There are also huge concerns about the inability to fully document where all of their digital advertising dollars are going. In short, there’s a lack of transparency and trust for advertisers. Sound familiar?
So, how does our industry find its footing again? We’ve got to be more clear with consumers about the value proposition and provide them with easy ways to express choice over ubiquitous data collection. By putting consumers first, we also force the issue on ad fraud, viewability and accountability. Every company involved in the digital advertising supply chain would have to justify how it’s adding to the overall value proposition. They would need to “put in more value” than they “take out” – the best way to build trust.
The FCC recently proposed privacy rules for broadband providers that aim to give consumers more control. The problem is that this only applies to ISPs – not all of the other entities that relentlessly track consumers around the web. And, government regulation often becomes outdated very quickly – market solutions or real industry self-regulation are far more able to adapt to new business models and practices. Maybe the FCC proceeding will lead to a new conversation within industry.
With the growing market of Internet of Things, immersive experiences and connected world we live in, the strains on trust between advertisers, consumers and publishers are only going to get worse. We need to find the right balance of providing consumers with transparency and real choices. Consumers are looking for a better experience. Advertisers are demanding fairness. And, I would like to live in a world where I can read all about how badly the Yankees are playing.
You have done the hard part of growing an audience. You have fully functional teams to sell direct to advertisers. And you even built an in-house ad-server yourself (or duct-taped a shrink-wrapped banner ad-server) that works fine (for today). It manages your manual direct-sold deals (IOs & RFPs) reasonably well. With all of these pieces ostensibly in place, you now want to build a solid programmatic revenue strategy and execute for long-term health of your business.
The first question is, “what constitutes a solid programmatic strategy?” Let us assume you are happy with what you do on direct-sold deals; there are two things that stand-out: independence and control. You choose which advertisers you want to work with, at what rates, which users to show ads, and how many times to show ads in which geographies—all the while having full data transparency that enable you to make further optimizations. For companies passionate about user-experience, independence and control are great consideration metrics for your programmatic strategy as well.
The common myth you hear is “let’s just sign up with few SSPs and exchanges and call it a day”. Wrong! (Though it is a good start.) Signing up one/few SSPs/Exchanges/Ad-Networks and putting them behind a rotation logic is only dipping your toes into the world of programmatic. This post will guide you through and highlight few core components required in order for you to develop a robust programmatic yield strategy. Many of which might be things you didn’t even know you needed.
First, some quick Programmatic 101: Programmatic is a term thrown around to refer to various forms of bringing in ad revenue from advertisers, vendor/partners and it also describes the style of integration with those partners to reach your audience. And, for better or worse, it is a crowded programmatic vendor ecosystem.
Programmatic Partner Types: DSPs, SSPs, Ad Networks
Integration Styles: OpenRTB API Standard, Vendor-specific APIs, JS tags, SDKs
Pro Tip: Always, always, always ask your partners to give you their API specifications so you can integrate them server-to-server. Adding JS and SDKs will bloat your apps. Engineers hate adding SDK/JS and (even more importantly) your users will hate it too when the additional code slows their experience.
Noe that, for the purposes of this discussion, we are leaving out automation part (do-it-yourself for advertisers) aspect of programmatic. This is achieved through Self-Serve UIs built by your team (think buying Google ads using ads.google.com) or a third party (think buying Google ads using Marin Software).
Following are technical modules that make for a robust programmatic yield/mediation system to manage your programmatic partners:
OpenRTB Engine: Ability to broadcast to multiple DSPs using the OpenRTB protocol that an ad opportunity exists in your site/app.
Server-Side Integration Engine: Many Exchanges, SSPs and Ad Networks might themselves connect with DSPs to bring ads. These partners do not use OpenRTB but instead have their own custom APIs to connect with your audience. Ability to conform to their custom specifications and making ad-calls from server side. This is the right way to integrate partners that favor Header Bidding also. The goal is evaluate all partners equally in real-time without the overhead of client side code bloat.
Data Aggregation Engine: Some partners don’t prove eCPM data in real-time, so you need the ability to pull it from their dashboards as frequently as possible. An overall ability to pull data via APIs and screen-scraping from every partner. If you are getting ad revenue from Facebook, Google or Twitter; you need to make them play nice (compete at same time versus getting “first look”) because perhaps their tools are biased to their ads?
Automated Inventory Allocation Engine: Using #3 Data from partners, building price models and trends to automatically adjust your priority; this is also known as the waterfall of which partner should be called at what point.
Audience Rules & Targeting Engine: A lot of partners specialize in providing ad dollars for certain set of your audience (geography, gender, interests). It is best to target those partners for that audience and reduce noise everywhere else. Also remember that your team needs precise and granular controls like you have for direct-sold deals. Examples – what if you wanted to send 1st party data to Partner A and not to Partner B? Or say you wanted to monetize only certain segments of your users (who spend less than X minutes in a month) vs everyone? Or you want to roll out a policy to show maximum of only 2 ads to users in a specific country?
Bidding Patterns/Price Predictions Engine: Advanced insights and recommendations based on bidding patterns/trends tied to your inventory (physical placement and at an audience level)
Holistic Yield Optimization / Reverse Auction Engine: This is a very important module. Ranking partners at a global level does not do any help. You need to optimize partners at an audience level. Doing this will enable you to get the best out of each of them. Ability to take price information from OpenRTB (DSPs), custom APIs (SSPs/Exchanges) and price predictions (Ad Networks) overlaid with forecasting insights to determine the best partner for every user and every ad opportunity in real-time. Modules from #3 to #6 feed into this engine.
A/B testing Framework: Ability to easily test new revenue partners against one-another using #5 Audience Rules Engine. Engineers hate adding tags, SDKs for every new partner. Neither the business teams should wait for engineering resources to test every new partner. It should be as simple as flipping ON/OFF switch.
Creative Library: Full creative assets of ads that ran on your audience with full transparency from all partners (DSPs, SSPs and Ad Networks). All stored in one place forever. You can block them or better use it as a sales intelligence tool to form direct relationships with those advertisers.
Cookie/User Sync Engine: ability to sync cookies/User IDs with chosen partners, so they can pay higher when they have advertisers who are looking for a specific audience that you have.
Quality Control Engine: Natural Language Processing and Textual Analysis to block ads and advertisers that will hurt user-experience when shown to your users.
Think about it: How did you build your audience? You did not sign-up with a few middlemen and rotate your trust, hoping they will do all the work. Instead, you owned the process. You worked with engineers, product owners and business teams to build stuff to grow your audience. You may have hired a few contractors/middlemen to help you along the way. You likely used open-source software (e.g. Redis, Django, Android, React, SugarCRM etc) wherever possible. And finally you licensed software (e.g. AWS/Data Centers, New Relic, CloudFlare, SalesForce) for areas that are important to your business but are not your core strengths.
Monetization, whether direct or programmatic is the same: You need to own your future. Either build it yourself or find a tech partner you can license it from because you need to invest the same level of energy as you did in building that hard-won audience.
Satish Polisetti is cofounder of AdsNative. He previously worked at mobile advertising startups Amobee and MdotM and received a Mayfield Fund fellowship in 2010.
There’s a toenail fungus photo in my morning news.
And it looks like it’s an ad for some questionable toenail-fungus-treating multi-level-marketing scheme.
Yeech. How did that get on there? Pass the ad blocker already.
Forget tracking protection, forget new standards for responsible advertising, forget all that. Gross infected body parts and MLM ads before I have even had my coffee? Burn all this stuff down.
Terrible ads are a big reason why tracking protection seems like an incomplete solution to the problems of web advertising. Web users don’t just block ads because people are good applied behavioral economists, seeking signal and filtering noise. A lot of web ads are just deceptive, annoying, gross, or all three. (Oh, right, some of them carry malware, too.)
Even if we could somehow combine the efficiency and depth of the web medium with the signaling power of print or TV, won’t web ads still be crap? And won’t people still block them?
It doesn’t have to be that way.
Publisher standards
Print ads are less crappy than web ads. Why can’t publishers enforce better standards on the web? How can a newspaper have memorable, well-designed ads in print, while the ads on the web site have users looking for the computer sanitizer?
It’s hard for publishers to enforce standards when an original content site is in direct competition with bottom-feeder and fraud sites that claim to reach the same audience. And that competition is enabled by third-party tracking. As Aram Zucker-Scharff mentions in an interview on the Poynter Institute site, the number of third-party trackers on a site grows as new advertising deals bring new trackers along with them. All those third-party pixels and scripts—and a news site might have 50 to 70 of them—cause slowness and obvious user experience problems. But the deeper problem, data leakage, is harder to pick out. Any of those third parties could be leaking audience data into the dark corners of the Lumascape until it re-emerges, attached to a low-value or fraudulent site that can claim to reach the same audience as the original publisher.
Publishers can try to pin down their third parties with contractual restrictions, but it’s prohibitively expensive for a publisher to figure out what any one tracker is up to. You know that sign at the corner store, “only two high school students in the store at a time”? If the storekeeper lets 50-70 kids in, he can’t see who shoplifted the Snickers bar. The news site is in the same situation on third parties. Because any one publisher has contact with so many intermediaries, only the perpetrators can see where data is leaking.
A security point of view
Information security is hard. When you have to maintain software, you fix a bug when you can see that there’s a bug. You don’t wait until someone starts exploiting it. The earlier you fix it, the less it costs.
News sites work this way for some issues. If you found a bug in your site’s content management system that would allow a remote user to log in as “editor” and change stories, you would fix it. Even if you had no evidence that random people were logging in, it’s not worth taking the chance. Because it’s so hard to catch data leakage in the act, it makes sense to apply the same bug-fixing principle. When there is an emergent bug in the combination of your site and the user’s browser that allows for data leakage, then it is more effective to proactively limit it than to try to follow audience data through multiple third parties.
We find that more targeting increases competition and reduces the websites’ profits, but yet in equilibrium websites choose maximum targeting as they cannot credibly commit to low targeting. [emphasis added] A privacy protection policy can be beneficial for both consumers and websites.
. . .
If websites could coordinate on targeting, proposition 1 suggests that they might want to agree to keep targeting to a minimum. However, we next show that individually, websites win by increasing the accuracy of targeting over that of their competitors, so that in the non- cooperative equilibrium, maximal targeting results.
When publishers lack market power, they have to play a game that’s rigged against them.
Changing the game
So how to turn web advertising from a race to the bottom into a sustainable revenue source, like print or TV ads? How can the web work better for high-reputation brands that depend on costly signaling?
C.H.E.D.D.A.R is a basic set of technical choices that make web ads work in a signal-carrying way, and restore market power to news sites.
Some of the work has to happen on the user side, but tracking protection for users can start paying off for sites immediately. Every time a user gets protected from third-party tracking, a little bit of competing, problematic ad inventory goes away. For example, if a chain restaurant wants to advertise to people in your town, today they have a choice: support local content, or pay intermediaries who follow local users to low-value sites. When the users get protected from tracking, opportunities to reach them by tracking tend to go away, and market power returns to the local news site.
And users see a benefit when a site has market power, because the site can afford to enforce ad standards. (and pay copy editors, but that’s another story.)
Service journalism
Users are already concerned and confused about web ads. That’s an opportunity. The more that someone learns about how web advertising works, the more that he or she is motivated to get protected. A high-reputation publisher can win by getting users safely protected from tracking, and not caught up in publisher-hostile schemes such as paid whitelisting, ad injection, and fake ad blockers.
Here is a great start, on the New York Times site. Read the whole thing:
The next step is to make it more interactive. Use web analytics to pick out a reader who is
valuable as an audience member
vulnerable to third-party tracking
using a browser for which you know a good protection tool
and give that reader a nice “click here to get protected” button that goes to your tool of choice. There is JavaScript to do this.
Tracking protection for users means fewer ad impressions available at bottom-feeder and fraud sites, which means more market power for news sites, which means sites gain the ability to enforce standards. Put it all together, and no more toenail fungus ads before breakfast.
Don Marti (@dmarti) is a contributor of code and documentation to the aloodo.org project, a low-friction way for sites and brands to reclaim the value of online advertising from fraud and ad blocking. He serves as a strategic adviser for Mozilla, and is the former editor of Linux Journal. Don is the subject of an out-of-date Wikipedia article which he will not edit himself, but wishes that someone would.
Defy Media undertook a study to explore the complete “video diet” for today’s youth. They sought to understand the role of video in youths’ everyday lives, how each source—be it digital, terrestrial, paid, free, new or old—is used, and if advertising impacts use of any particular sources.
For this research , Defy Media partnered with Hunter Qualitative and Kelton Global. From greater Chicago, Raleigh-Durham, and Seattle, they selected 54 youth ages 13-24 years to complete 14-day journals chronicling the videos watched daily and supplying opinions and information on their habits. They then interviewed 27 of these youth in-person—eighteen ages 13-17 in “buddy pairs” and nine ages 19-24 individually. Finally, they followed with an online survey of 1,300 youth ages 13-24 representative of the U.S. population by age, gender, ethnicity/race, and parental education.
The resulting Defy Media Acumen Report “Youth Video Diet” found that video is not just about entertainment. Given its broad content offerings and on-the-go accessibility, video satisfies needs beyond amusement and passing the time. Video is educational, stress-relieving, and helps keeps youth connected.
Unsurprisingly, Defy Media’s research confirms that that youth don’t like watching ads any more than adults do. However, they did discover that “not all advertising leaves an unpleasant aftertaste.”
The report looks at several areas of digital video consumption patterns among young people including:
The most popular channels for video consumption: YouTube and Netflix top the list.
Social video consumption habits, with digital celebs dominating social video viewing.
What times dominate video consumption, as well as time spent on free and fee content.
Reasons youth watch videos—from offsetting boredom to how-too tips and mood lifting.
Youth’s perception of advertising and the need to pay for video: They don’t like it, but there are strategies that can help make it palatable.
Header bidding has been top of mind for premium publishers over the past year. Many publishers have adopted the marketing strategy and are seeing significant revenue gains, but due to a lack of education in the market, multiple publishers are unsure if it is right for their business, or they are implementing header bidding without the right expectations.
PubMatic has released new white paper titles, “Lessons Learned in Header Bidding,” that explores how publishers can experience success with header bidding—to drive advertising sales—and what role technology partners play in the pre- and post- implementation phases. We see header bidding as a key part in the ad decisioning evolution paving the way for new innovations, such as wrapper tags (see more in Lesson 6).
Here the five lessons learned, along with a bonus lesson in wrapper solutions.
Understand if Header Bidding is Right for You: Take a quick questionnaire to see if header bidding makes sense for your organization.
Heed Expectations and Understand the Potential Pitfalls: Before jumping into header bidding, learn about possible challenges that might arise and how to address those challenges.
Set Both Short- and Long-Term Expectations in Header Bidding: Learn about typical short- and long-term goals in header bidding and define what success means to your organization.
Define Who is in Charge and of What: Learn about the roles and responsibilities needed to effectively implement header bidding, on both the publisher and technology partner side.
Test, Test… and Then Test Again: Learn how to optimize header bidding setups to achieve success. In header bidding, testing is everything.
Prepare for Wrapper Solutions in 2016: Thinking about what’s next, all publishers (even those without header bidding) should understand what wrapper tag solutions mean to the digital advertising industry.
