Facebook Moves Toward Ads in Messenger

“I don’t think ads are the right way to monetize messaging,” said Mark Zuckerberg on an analyst call two years ago.  But that was in reference to What’sApp, which he bought. On Messenger, which he built, he apparently does plan to run ads eventually .

Fortunately for the 800 million of us who use Messenger every day, it will involve a bit of work for brands to begin to advertise. First they will have to get us to engage with them. I’m guessing this would have happened more surreptitiously if a document Facebook sent to its largest advertisers hadn’t been leaked. In the document, Facebook revealed that it would only allow brands to send messages to people who had already communicated with the brand.

That’s not very different from the way Pages works; if a user posts on a page, the brand is “allowed” to communicate back. And last March, Facebook began to allow brands to give customers receipts for e-commerce purchases through Messenger, as well as to provide customer service. The camel’s nose has gone way under the tent.

But here is what’s been happening in the background, according to Tech Crunch:

Over the following months, Facebook enhanced chat capabilities for businesses by letting them show a big “Send Message” or “Contact Us” button on their Page, create saved replies, show a badge that grades them on how fast they respond, and reply to wall posts with private messages.

Facebook also recently introduced “Click To Message” News Feed ads that let businesses pay to get people to chat with them. Plus, it’s been secretly testing a chat bot platform that allows developers to create e-commerce experiences and personal assistants within Messenger.

 

There seems to be a realization here that messaging will be the new operating system for mobile, and that consumers want to be able to do as much through their messaging apps as possible. The market leader here is WeChat, the dominant player in China, which allows users to send cash, make calls,hail cabs and make purchases. As of last summer, ten million apps had been built for the platform.

Facebook has responded: 

Earlier this year, Facebook rolled out a bunch of new features for its Messenger platform. In March, Facebook announced Messenger Platform — which lets developers build more functionality and features directly into the Messenger app (being able to track your packages in-app, for example, or embedding media and GIFs into your messages).

In addition, you can now send your friends real money, make free voice calls, and effectively use Facebook as a mapping service from inside its Messenger app.

So Facebook has been making it easier and easier for brands and users to have a conversation, in preparation for the day when it will launch ads in Messenger. You will start to receive them, and you may never know why.

 

 

Malvertising Raises Questions About Ad Blocking

ota-2015-logoA recent Buzzfeed article totals up the recent loss of jobs in digital media as publications struggle to adjust to new market forces. Because of the dominance of Facebook and Snapchat, media organizations that once hoped to make it at scale have cut back to pursue niches, which we believe is the best strategy for the present. But even niche publications have to contend with malvertising and poor delivery of ads to mobile devices.

However, other headwinds are also hitting the publishing industry. On Medium this week Rob Leathern, long-time digital advertising critic, wrote that crummy ads (he used other language) cost iPhone users $8 billion in data charges last year.

We ran across 7 websites for 3 minutes, and loaded 1712 URLs on average, whereas the top 10 blockers on average needed just 493 calls to render all the content and images on these sites -> this means that advertising technology accounts for 71% (1,228 hidden items loaded) what loads on your mobile phone in an average web session! I think that’s just crazy, and hard to justify for the small amount of advertising revenue most sites are making off of us.

Focus on the last sentence. Consumers are spending the money for data, advertisers are paying for ads, but publishers are still not making any money. Fortunately, mobile consumers are still not blocking ads in the numbers desktop consumers are, and we can fix this problem if we hurry.

We’ve been heavily involved in the Online Trust Association (OTA) for years, and we are working on the Advertising Integrity Committee this year.  This morning the organization sent around an article about a massive malware infestation in the Netherlands:

As of Monday, at least 288 websites had been infected with malvertising, exposing millions to poisoned ads.

One example of how far its tentacles have reached: the campaign has hit Nu.nl, the most-visited Dutch-language news portal.

Nu.nl alone is estimated to have scored more than 50 million visitors in March, according to Tech Week Europe.

Other affected sites include eBay-style service Marktplaats.nl and well-known news and culture sites, according to Fox-IT.

The campaign originated in an advertising platform used by the affected sites

OTA is worried that consumers might respond to this by blocking ads, which the organization does not feel is a suitable solution, because most ad blocking software is itself untrustworthy. Most of it has white lists or allow lists that do not block advertising and are increasingly being used by consumers as ad vectors.

In our own case, we have created a private buying platform for our publishers that does not admit malware and is very closely monitored to refuse to serve questionable sites.  Working with both the Interactive Advertising Bureau (IAB) and the OTA, we’re engaged in being as much a part of the solution as we can.  We can only do our best to lure back angry consumers.

How to Increase Ad Effectiveness: Start with the RFP

The most contentious part of programmatic advertising since its inception has been who controls it. As a traditional publisher ad server we had to deal with that early on. Our publishers exposed their inventory, and advertisers bid on it. Our job was to get the publishers the highest CTRs. That’s what advertisers said they wanted — clicks.

But advertisers weren’t getting the results they wanted, and at the same time publishers were fighting falling ad prices, so about a year ago advertisers took control, telling the publishers they wanted “first look,” and demanding it. Since advertisers pay the bills, this made a good deal of sense. Why shouldn’t the advertiser decide who they want to reach and ask for that inventory from the publisher, rather than buying a package determined by a publisher API?

That was the end of programmatic, and the beginning of something called header bidding, which is jargon for a “sneak peek” at the publishers’ inventory. Now header bidding seems to have taken over from programmatic direct, which can be seen as only a first step in giving brands more control over what they buy. Brands now want to buy engagement and brand equity, It’s supposedly a different world.

But the metrics still aren’t there to measure what brands say they want.  We’re moving from a world in which digital advertising focused on direct response to one in which we focus on brand recognition and awareness. That’s what all the RFPs say. Yet what is measured? Metrics and clicks.  Even viewability, the newer standard, doesn’t get close to measuring whether an ad is effective for building brand. Until the brands change what they want to measure, the publishers are stuck meeting irrelevant KPIs that are more suitable for performance advertising than building brand equity.

How can we fix this?

First, advertisers who pay the bills must decide what their brand goals truly are and make those clear in the RFP:

What audience do I want to reach?

Am I reaching it at the right time and in the right place?

Am I telling a good story?

Then they should measure according to KPIs like these:

Did my story elicit a positive response and good engagement?

Did it help the consumer make the right buying decision?

If this were what brands were truly measuring, publishers could then align their inventory and packaging to these goals and forget about impressions and CTRs. Viewability would, of course, still be critical, but other metrics, like video completion rates, time spent on a page, or even demographics might influence whether a publisher felt a campaign fulfilled the advertisers’ goals.

Right now, advertisers are still sending out RFPs that drive publishers in the wrong directions, and then wondering why sites are full of “clickbait” headlines and crummy content designed to attract impressions and irritate visitors.

 

 

 

Ad Industry Insiders See Lack of Trust as Big Obstacle

Somehow we missed that moment at ANA when former MediaCom CEO Jon Mandell startled the ad industry by calling out his industry colleagues as self-serving rogues:

“Media agencies aren’t living up to their fiduciary duties to clients and ‘cross the line of acceptable conduct in a partnership,’ Mr. Mandel said. ’They are not transparent about their actions. They recommend or implement media that is off strategy or off target if it works for their financial gain.’

Rebates,’kickbacks,’ and other incentives for agencies that are at least potentially adverse to client interests are happening virtually everywhere in the U.S. media landscape, including TV, he said. Mr. Mandel said the practice has migrated from cash incentives to free Inventory, which agencies may then deal back to clients in scatter buys or sell via ‘dark pools’ that are either traded programmatically or liquidated in barter transactions.”

No wonder the first panel at this year’s AdAge Digital Conference was titled “Elephants in the Room,”  and took a frank,sometimes  scathing look at the big problems in the industry, the biggest of which turns out not to be ad blocking, but conflict of interest on the part of agency trade desks.

“Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?” Mr. Mandel said. He said that advertising spending broadly has long stayed within a narrow band of 1% to 1.25% of gross domestic product globally. “So if agencies are growing at a higher-than-GDP basis, the money is coming from somewhere.”

Somewhere along the way, the trust relationship between agencies and their clients has eroded.Global brands have learned to ask the right questions of their agencies, but transparency about how trading desks make money is important if smaller advertisers are to be protected from predatory treatment by their own agencies. The two major industry associations, AAAA and ANA,  can’t even agree on what constitutes transparency, but AAAA is acting guilty and taking the responsibility for creating greater visibility into kickbacks and arbitrage.

Moreover, agency trading desks are driving media prices down, to the detriment of the publishing industry, Without passing the savings on to their own clients. Once they have banked the inventory on their books, they can no longer be objective in what they tell their clients to buy; they’re guilty of conflict of interest. In this new market, in which agencies are both buyers and sellers, they seem to have lost sight of the fact that advertisers need healthy publishers, and driving ad rates to the floor helps neither side.

Not to mention the consumer, who, pummeled by cheap ads that are neither useful nor relevant, responds by downloading an ad blocker.

This lack of trust extends even beyond agencies and their clients,  to consumers themselves. Consumers who have been enduring pop ups, pop unders, page takeovers and non-skippable video ads have become increasingly intolerant of an industry they see as violating their privacy for no good reason.

Most of the speakers agreed that advertising has divorced efficiency from effectiveness, sacrificing storytelling for data. As a result, marketers are not only being undermined by consumers with ad blockers, but by themselves, because bad ads mean consumers don’t feel passionate about brands anymore.

Compared to the enormity of the kickbacks and arbitrage scandals, the other issues on the table, like visibility and  fraud, seemed inconsequential.  Neither of them is being solved, but at least MOAT and Integral Ad Sciences are working on a metric for viewability and the Trustworthy Accountability Group has taken on fraud.

 

 

IAB’s Fee Transparency Calculator Will be Revealing

Last week the ad tech industry, which has been hit lately with layoffs, lack of funding, and consolidation, got another shock when the IAB released its programmatic fee transparency calculator , dealing a body blow to the obfuscation that has made it impossible for media buyers to calculate how much of their ad budgets actually made it to the publisher. Wary advertisers who guessed they were paying an “ad tech” tax will now be able to calculate how much they’re paying in fees to every intermediary in the buying process.

When programmatic buying and selling took over the advertising industry, which wasn’t so long ago, an entirely new group of startup companies emerged to help both buyers and sellers automate their processes. As you might expect, there were very few media buyers that were experienced in buying through real time bidding, especially when it came to something that wasn’t performance or wasn’t remnant. As a consequence, the first couple of years saw media buyers essentially buying blind — not knowing where their ads appeared (indeed, if they appeared), whether they were brand safe, or whether they reached the intended audience.

Programmatic buying pretty much drove prices down to the floor for digital publishers, too, because they had no way of “proving” that their inventory was premium.  So premium sites were later to adopt programmatic — until the industry invented “programmatic premium.”

The problem of efficiency took a while to solve, but the industry did get it solved. However, the cost to solve it turns out to be higher than anyone wants to pay, as multiple intermediaries each take a piece of the dollars that pass between advertiser and publisher.

Amid all the other turmoil in the advertising industry around issues like fraud, viewability and ad blockers, calls for greater transparency into the buying process grew louder, and an IAB Programmatic Working Group came up with the fee calculator, a first-of-its-kind tool that advertisers, agencies, and publishers can use to analyze the costs of ad technologies and services that are commonly applied within programmatic executions. Better understanding of the fees each party incurs should allow for greater pricing transparency across the supply chain.

The tool asks users to input planning rates and budgets by channel, and then select the ad technologies that are being applied. Once that information is entered, the calculator tabulates the overall cost of the ad technology layers and their percentage share of the effective CPM.

The following ad technology layers are default fields included in the calculator, with the option of adding additional technologies/services based on individual buyer or seller implementations: 

  • Ad serving
  • Campaign management
  • Data/targeting
  • DMP technology
  • DSP technology
  • Pre-bid evaluation
  • Post-bid evaluation
  • Verification platform

Fortunately for our customers, we recently built an end-to-end private buying platform that allows them to bypass these intermediaries,  not only saving money but also lowering the risks of malware, spyware, and fraud.

 

Digital Advertising Issues Still Plague Large Brands

The extent to which big advertisers have become dissatisfied with both their ROI and their agency relationships can be easily discerned by observing the formation of several cross-industry task forces to solve what have become pressing problems for them.

The first, a cross-industry task force set up by the American Association of Advertising Agencies (4As)  and the Association of National Advertisers (ANA) seeks to address issues of transparency in the relationship between agencies and their clients. Agency trading desks have been marking up CPMs, and the people who are paying, the advertisers, do not have transparency into when or how much this is going on. Apparently, lack of transparency is now resulting in large enough operational losses to draw attention, although no one’s sure what the solution is just yet:

In a recent Digiday article the problem is explained this way:

Here’s how it breaks down: Traditionally, digital advertising platforms make money by marking media up somewhere between 40 percent and 60 percent. So, let’s say you bid a $3.50 CPM. As little as $1.18 of that could be going toward the actual media, but how would you know? It’s typical for the markup to be added by the exchanges, networks, and DSPs in the ad-buying chain. What’s more, when a high margin is carved out of a bid price, it limits the amount of inventory available for bidding. And if less money is being spent on actual media, the amount of available inventory shrinks, and that could be costing marketers valuable customers.

Meanwhile, marketing budgets take a hit — and it gets worse. Since black-box solutions use proprietary algorithms that providers can’t explain, you don’t know which metrics are being tracked. Who’s viewing your ads? Where are they being served? And, most importantly, why?

Unfortunately the article itself is a piece of sponsored content and advocates for a “partner” who understands media buying. But the core point is still the same: lack of transparency is hurting the entire industry.

ANA has also formed another cross-industry pact with the Alliance for Audited Media (AAM), this time  to  enlist AAM’s resources to confront today’s key digital advertising issues to ensure they operate in a more transparent and brand safe environment. This pact was announced by VP of Integrated Marketing Solutions for Bayer Consumer Care Christina Meringolo, who is also on the ANA board.

“Unfortunately, today’s online ad environment leaves many marketers suspicious and mistrustful, but it doesn’t have to be that way,” Meringolo said. “All sides of the industry have to do more – communicate more, be more transparent, be more informed and demand more of our vendors and partners.”

AAM works closely with groups like the Media Rating Council, Trustworthy Accountability Group, Interactive Advertising Bureau and Mobile Marketing Association to contribute its expertise to evolving industry standards, ad measurement guidelines and programs that promote transparency and trust among media buyers and sellers. 

Our industry has evolved from one that is noticed by few into one that controls the deployment of large budgets, and to justify the place of digital advertising in the marketing ecosystem we have to evolve into trusted and transparent partners for the brands who pay the bills.

 

SXSW: Buzzfeed Releases Ad Platform for its Social Streams

Since its launch in  2006, Buzzfeed has always been one of the most innovative digital publishers, and it has been rewarded accordingly with enormous economic success.  Founded by former Huffpo co-founder Jonah Peretti, whose expertise is in making content go viral, Buzzfeed’s technological edge came from learning what content was likely to be shared among readers and optimizing  the Buzzfeed site using that knowledge. Speaking at SXSW Interactive last year, Peretti explained that his product was created for the “bored in line and bored at work” segment of the population, who would share content they found interesting with their friends, upping the platforms visitor counts.

But even in the short space -for a couple of years, things have changed in digital publishing, and last year Buzzfeed began publishing some of its content directly to social platforms like Facebook.The rationale? Meet the audience where it already goes, rather than force it to go to the Buzzfeed site.

While that might be a good strategy for Buzzfeed’s content, what are the ramifications for its advertisers?

Well, it appears that the advertisers can now follow Buzzfeed across its social platforms.

During a keynote at South by Southwest Interactive, BuzzFeed’s marketing chief Frank Cooper unveiled a beta test of an ad format dubbed Swarm. It allows advertisers to run campaigns simultaneously across all of his company’s Web and mobile properties and six of its social platforms: Snapchat Discover, Vine, YouTube, Facebook, Instagram and Tumblr.

While this appears to be a big win for Buzzfeed advertisers, it doesn’t come without problems for brands who are trying to figure out what they’re spending money on and whether they’re’ getting a big enough ROI. Since many social platforms don’t track what people are talking about the way Buzzfeed does, it will be tough for brands to measure what this social reach is worth and decide what to pay for it.

Another problem?  All these social platforms have different audiences, and running the same ad formats or ad copy across the board may simply not work, and adapting the ads could prove costly to brands who are already running their own cross-channel campaigns.

Like many innovations, this one may take a while to prove its utility.

 

The Looming Landscape of Regulation

In the digital marketing industry, the common wisdom has been that there is a disconnect between how concerned people say they are with privacy, and how they really act online.  However, a recent presentation by David Vladeck, former director of the FTC’s Bureau of Consumer Protection, reveals that we have been delusional in our thinking about the concern of consumers for their data. They’re very concerned.  The online  media and marketing industry  thinks it is being held to a higher standard, but it is not.

According to Vladeck, Chapman University puts out an annual study about what makes Americans afraid, and the two things people fear most are corporate misuse of their data and online tracking. Opt out mechanisms are misleading, and most privacy statements turn out to be data sharing statements instead.

So it’s not a random occurrence that ad blocking has grown.  About 110 million Americans have already had their financial information exposed in the almost ubiquitous data breaches that have become a daily affair, and it’s almost impossible to trace back which breach caused any particular harm. There is no such thing as perfect security.

Perhaps the worst consequence of a data breach for a consumer is identity theft, which rises in lock step with data breaches. Identity theft is the debris of the digital economy.  Having to put up with identify theft is an enormous time and money burden to place on people, not to mention the emotional issues that arise when really personal information is exposed, as in the Ashley Madison incident or the release of patient prescriptions for Prozac.

We in the industry may not see the consequences of data breaches immediately, but they are real. Financial loss from identity theft was $25 billion in 2012, and presumably more now, and  this is based only on losses that have to be reported. We really don’t know where all the leakages occur, because although consumer facing companies are subject to data breach laws, companies that are not consumer facing are  not subject to any notification law. We only know a slice of  what’s actually happening, which is that there is a 24/7 robust market for private information.

No wonder consumers are very worried about the digital economy and the effect it is having on their lives. No wonder they have become more concerned with privacy, to the extent of blocking trackers and ads.

Vladeck says the FTC has only a slice of the nation’s economy, limited to making sure companies have adequate data security practices, and to investigating after the fact. But the agency can’t protect consumers from breaches that have already occurred. Once consumer data gets to a data brokerage, it can be legally bought and sold.

Much digital advertising is dependent on old school data brokerages such as Acxiom and Intelius. Acxiom has thousands and thousands of data points on everyone.  But companies we don’t recognize as data brokers per se, like Facebook and Oracle, also have data on millions of people that is used for marketing and advertising.  And that data, too, could one day be in the wild.

In response to consumer concerns, the FTC is calling for legislation that would call for consumers to be allowed to see what information the data brokerages have, and at the very least determine whether it is accurate.

When information is used to make consequential decisions about consumers, the consumers should have the right of correction. Most Americans don’t even know the names of the data brokers, much less how their data is used. Data brokerages are like the credit reporting agencies of marketing, underwriting, insurance, and employment. The profiling has become so dense that set of presumptions can be made about consumers that could be discriminatory.

Robustness of the data broker data allows for segmentation that sometimes gives cause for concern to civil rights advocates. Marketers can buy highly segmented lists to make offers that can’t be justified on any other basis than a discriminatory one.

Moreover, since all this profiling is done by sophisticated data mining algorithms that change based on the information that goes into them, the process can never be  transparent. If we are going to win back the confidence of consumers, we are not only going to have to change the types of ads we show them, but we may also have to give up some of the granularity of our targeting.

 

The Right of a Consumer to Privacy on the iPhone

As the Apple debate continues to spark reaction, we can’t help but wonder what effect this case will have on the advertising ecosystem. If you haven’t been keeping up, the US government has ordered Apple (through court order) to create a small piece of software that will override the strong encryption of a phone used by one of the San Bernardino shooters. The phone, owned by the man’s employer, had been backed up to the cloud fairly recently, and that information had already been made available to the government. What the government wanted was simply some recent information.

Apple refused. Last Friday it filed a brief with the court challenging the order, saying that

 “This is not a case about one isolated iPhone,” writes Apple attorney Marc Zwillinger in today’s brief. “Rather, this case is about the Department of Justice and the FBI seeking through the courts a dangerous power that Congress and the American people have withheld: the ability to force companies like Apple to undermine the basic security and privacy interests of hundreds of millions of individuals around the globe.”

Read the Wired article if you are interested in more detail. For us, the major questions have to do with the global impact of this order on Apple, and the effect of “hacking” the iPhone on the already fragile mobile advertising ecosystem in which we participate.

There are many countries in the world where trust in government is not presumed. Many of those countries have hundreds of millions of people who have come on line trusting privacy; they’re not sophisticated computer users. Part of Apple’s success in some emerging markets has been its emphasis on privacy and security. Apple has declared that creating the software to help the government risks that piece of code getting out in the wild and being abused. Apple also believes that if it gives in the US government, it will have not a leg to stand on when other, less representative governments demand access to an individual’s phone.

Most important to those of us in the industry, consumers are already furious over tracking and stalking and unwelcome use of their data. This, rather than ads per se is the number one reason people install ad blockers when they install them. The industry is fighting hard to keep the trust of consumers, and to make mobile advertising acceptable.

Hearing that personal information on iPhones, even though it is encrypted, can be hacked, would entirely undermine the future of our industry. That’s why other tech companies like Google and Amazon have jumped on to support Apple and write briefs on its side in the court case. For one or two terrorists it’s a little dangerous to destroy an entire ecosystem.

 

Content, Commodification, and Convergence

We’ve reached peak content. There are now too many good TV shows, Netflix, Amazon and Hulu shows for anyone to keep up with. There’s also a glut of multimedia content aimed only at Millennials, including such sites as Buzzfeed, Mic, and Refinery29, or focusing on fashion. Every segment, vertical or horizontal, is feeling the pinch. Too much being produced, not enough time to consume it, a commodification of the attention economy.

Something will have to give, since there are only a finite number of advertising dollars to support all the content being produced. And where are most of them going? To Google, Twitter, and Facebook, the people who have the enormous audiences. Now, more than ever, advertisers worship scale. It’s not enough to reach the 5 million readers who really like what we’re creating; to get advertising dollars publishers have to reach 100 million readers. Even Yahoo, which does reach 100 million users daily, sees its existence threatened.

For publishers, survival is going to require convergence. Google, Facebook and Twitter already symbolize on side of that convergence: convergence of the audience. Although Twitter has “only” 300 million users, that’s more than any pure play media property can claim. And Facebook, with over a billion daily actives, is the big Kahuna. Last year, with the release of its Instant Articles feature, it began to draw traffic away from, rather than refer traffic to major news sites. The trend will continue in 2016, accompanied by Google Amp pages. As consumers, we will receive news curated by companies like Apple, Google, Facebook, and even Amazon, whose Prime offering is beginning to define what video people watch.

Because Facebook is curated by an algorithm, however, it can’t satisfy all advertisers. Those who want to reach niche audiences must move in another direction. They must create unique and differentiated copy and target precisely the audience they want. Extreme sports is an example of movement in this direction, as is Glenn Beck.

It doesn’t take rocket science to predict that 2016 will be a year of both media and ad tech convergence, as sites aimed at Millennials seek to grow their audiences by acquisitions, and niche sites buy up their competitors. Tech journalism sites have already begun to combine, as last year’s purchase of Recode by Vox signaled. More of that is destined to happen, lest sites be forced to shut down like GigaOm. What will we end up with?

In a strange way, we’re going to end up where we began at the beginning of mass media. A few major networks will aggregate most of the consumer traffic. They won’t be ABC, CBS, or NBC; instead they may be Facebook, YouTube, and perhaps Twitter, Apple, or Instagram. They will certainly be mobile. And then there will be the verticals: sports, fashion, travel, finance, and tech. These will be like the old industry trades, with highly specific and differentiated content perhaps produced by brands like Red Bull, GE, or BMW.

The term “publisher” may come to mean something entirely new: a content creator who sends content to an audience aggregator. It’s going to be another fascinating ride.