The Future of Digital Advertising

The IAB Annual Leadership Meeting is always a fascinating look at what will happen in the industry going forward, and where the digital media industry sees its biggest threats. In previous years, the threats have included the dearth of dollars going to online ads, and the problem of ads that aren’t visible. Time has taken care of the ad dollar problem, and the visibility problem was solved by the Media Ratings Council’s viewability standards. Both of those were easier to solve than this year’s threat: the potential collapse of advertising as a business model for publishers.

You could see it in the choice of topics for the annual Town Halls, at which the members attending the conference traditionally argue about what positions to take toward upcoming trends. This year’s Town Halls dealt with programmatic, mobile, fraud, and ad blocking. How can you respond to four issues that, taken together, represent the near death of a business model?

Programmatic has always been seen as a potential threat , because as the buying and selling of ads becomes automated, taking the relationships out of the sales process, CPMs for publishers have gone down. Nearly every legacy publisher has had to adapt to revenue declines, and many have been escorted out of business already.

Mobile is a problem largely because of the potential privacy invasions that accompany following a consumer into more private aspects of her life. Data limits and screen real estate accommodations further complicate things for the advertiser.

But the focus on fraud is more surprising, because it has been going on for years and it was in no one’s interest to do anything about it until now, when it represents an $8 billion loss to the industry and the people who pay the bills (brands) have begun to catch on. The effort to clean up the digital supply chain began last year with the launch of the Trustworthy Accountability Group, a certifying body that aims to drive fraudulent players out of the marketplace.

And the fourth focus, ad blocking, is one for which the industry really has no solution, because it is controlled by neither advertisers nor publishers– but by consumers who are sick of slow loading web pages, online retargeting, and unwelcome interruptions. The ad blocking genie has left the bottle, because last year was the first year non-geeks began to understand it.

if you take those four problems and shake them up in a bag with the lack of runway left for many venture-backed ad tech companies you get a recipe in which only the strong survive. As a company that long ago became sustainable, we are happy to watch the action from the sidelines and keep developing user-led ad formats for our publisher partners.

Metrics Will Change Again

In the beginning, there was the CTR. It seems like so long ago (actually a scant two decades), but online advertising started by measuring click through rates. Never mind that those rates fell precipitously over the years as advertising proliferated. It took a long time to figure out how, or if, we could measure the ROI on digital advertising by using something other than CTRs. In those early years, the supply side only got paid on CTRs. Some in the industry realized that they could hire people to click on ads. Thus the first online advertising scams were born.

We should have known from the start  that CTRs were a ridiculous metric.  Never mind the bots that clicked on ads, or the fraudulent “click farms.”  Even with a clean supply chain, CTRs weren’t a good metric. After all, if an agency or a brand submitted an unmemorable ad, how could that have been the fault of the publisher on whose site the ad ran? It took more than a decade to bring that conundrum to light, and to agree that CTRs were only valid for performance advertising, and digital had “graduated” to more than just performance advertising; it was also useful for brand advertising.

So we moved as an industry from one lousy metric to another: impressions. The rise of programmatic and RTB gave media planners the ability to buy “impressions” at scale. Now it became a question of how many people were “exposed” to the brand. The thirst for impressions, however, did more harm than good, as publishers redesigned their sites to handle as many impressions as they could. For a long time, buyers didn’t even know what they were buying; they bought blind, to the potential detriment of their brands, and they bought impressions that weren’t even viewable.

But it gets worse. In the thirst for impressions, we lost the sense of advertising’s true intent: to convince a customer to buy a product or service from a brand. Even viewable impressions don’t help measure this return on investment. You and I instinctively know that just because we saw an ad, we might still not buy the product. We might be counted as an impression, but we might not be the target, or we might not have the need, or the funds.

Despite all the metrics we’ve tried over the years, we still haven’t solved the problem of predicting which consumer is going to make a purchase. The newest suggestion for a metric is engagement. But how do we measure that?  Cross-channel campaigns are held out as the answer: keep hitting the same consumer with a brand message everywhere she goes.

This metric is too novel to be judged right now, but because of new EU privacy laws, the increasing use of ad blockers, and the impatience of consumers with being tracked, we hesitate to say it will work any better than the metrics before it.

Let’s quit overthinking this stuff.  It’s time we were honest with the consumer, told our story well, and went back to the store to wait. The consumer is in control.

 

Video Takes Over the Internet

The week of Christmas, while everyone was partying, Facebook released a slew of new features designed to make it the largest hosting platform in the world for video.  Facebook has been catching up to YouTube for a while, but the new features, which include a “Click for more” offering on the desktop, and live streaming by brands from their brand pages, should both drive more revenue and avoid making users furious at brands live streaming in their news feeds.

Here’s how the new features work, according to Digital Media Insider:

‘Click for More’ on desktop:

  • Facebook is testing a call-to-action button for its desktop users. Clicking anywhere on the video will take users to another window, which will show a larger version of the video as a part of a carousel of related videos.
  • Ads will be intermittently shown between videos, which will autoplay unless users select otherwise.
  • By taking users to a separate window, Facebook is ensuring that users who engage with the button aren’t distracted by the Newsfeed. This will likely increase the number of videos Facebook’s users view, which will have an effect on the click-through-rates and impression rates of its videos.
  • The feature is likely trying to act as a precursor to Facebook’s upcoming standalone video portal, which is expected to launch in 2016.

Live streaming for brands:

  • Facebook is allowing verified brands on its Pages site to live stream to their pages. Page users tap a “Publish” button and select “Live Video” at which point the video will begin after a brief opportunity for an introduction.
  • Facebook Pages will offer metrics so brands can follow how many viewers are tuned in. For the moment live streaming will only be available on Facebook for iOS.

Earlier this year, Facebook said that they expects video to effectively take over the social network in the next couple of years. Considering the rapid increase in both the number of videos published to the site and the daily views that the site experiences, this is a plausible statement.

What surprises us is the playing of intermittent ads, and the autoplay of video. both of which have been shown by industry group surveys to anger users. However, someone who actually goes to a brand page intending to watch a live stream is probably a far better targeted lead than somebody reading her news feed interrupted by a live stream ad.

Streaming video, permitted (for now) only on verified brand pages, will also give an advantage to advertisers with large enough budgets to warrant being verified, Small businesses on Facebook are still out of luck.

ZEDO Among the First to Go Through TAG Certification

The distance between publisher and advertiser in any transaction, which has widened significantly with the growth of ad tech, is about to grow smaller again. There are several reasons for this, among them the move to private platforms and away from exchanges, the growth of more sophisticated buyers and sellers, and the perception among consumers that trackers violate privacy and slow page load times without delivering any value.

Yet another of the reasons may well be the cross-industry Trustworthy Accountability Initiative, which has spun off into its own entity, and is hard at work on ways to clean up the online media industry supply chain. Several previous standards are being rolled into the work of TAG, including the Inventory Quality Guidelines and the Open RTB standards. TAG has already begun to take companies through a process to become a trusted partner and receive a TAG seal of approval. To begin the process, a company must register, and must self-attest to intellectual property (anti-privacy) and transparent reporting practices.Eventually, self-attestation will give way to their party attestation.

ZEDO, always an early adopter, is deep into this process.

A company that has made it through the process will be given a TAG ID in a database, identifying it as a trustworthy partner with which to do business. Google has apparently already begun to pass these TAG IDs back and forth during transactions.

In addition to the TAG ID, each transaction between a buyer and seller will also receive an ID through which the particular transaction can be identified and reported. This will determine payment.

There has been a bit of confusion so far between the company’s TAG ID, which is permanent, and its Payment IDs, which will vary by transaction.

Remember, all of this has to happen in real tine, without causing noticeable slowdowns in the transactions, especially on mobile. This is why some of the middlemen between buyers and sellers will have to go away.

By next year, look for many companies to lay down the law, as Group M has already done, and refuse to trade with anyone who isn’t certified. The industry hopes to weed out the bad apples this way, before consumers get more annoyed than they already seem to be,

Computers Enter the Living Room — by Phone

We saw our first prediction of computers coming to the living room at the Consumer Electronics Show in 1996. Microsoft and Intel thought that the way to get the PC into every home was to make it a media server, and they collaborated on Windows Media Center on Pentium chip boxes. The vision: everyone would have a computer in the living room hooked up to the big screen, and that’s how we would view media in the future.

That vision was roundly resisted by ordinary people who saw the beige and gray PC boxes and towers as too ugly for the living room. And besides, computers were still much slower than the TV, which came on instantly and never crashed.

Nearly 20 years later, that vision has totally skipped the living room and  morphed into “TV anywhere,” a state in which viewers watch TV in the living room, all right, but it is increasingly being cast from mobile phones and tablets via Chromecast or Airplay. Being near a big screen isn’t essential to viewing content, and if we turn on the TV at all it’s often just to take images off our phones and look at them on a larger screen. We don’t care about TV schedules, nor do we think of the TV as the source of our only content. Increasingly, people are  watching TV either time-shifted or with the TV serving as a dumb display for the content from the mobile phone.

Much of today’s TV watching is “Over the Top,” streamed from online by people who have never connected to cable or satellite in the first place or who have “cut the cord.” This creates an interesting conundrum for advertisers. If viewers fast forward through ads using a DVR or watch something else on a mobile device while the ads play, what does this mean for TV advertising, which was for many years the most effective way to reach people?

About five years ago we predicted that rich media advertising could make online advertising as effective as TV advertising, and we set out to develop the products to do that. Admittedly we haven’t been alone, but if you think about it, our “outstream” format (which we had named inArticle before the industry landed on the term “outstream”) and our high impact formats have been instrumental in moving ad dollars from TV to online and now to mobile.

So in this season of making predictions, we think it’s safe to predict that with all the emphasis on data and metrics accompanying the shift from TV to mobile, we will soon be completely convinced by data that video advertising beats TV for marketers.

 

 

 

Notifications Penetrate the Lock Screen

The battle to win the attention of mobile customers will be won and lost in the notification space. Before checking our Facebook news feeds, in the future we will check our notifications on the divice of our choice. So as I said in an earlier blog post, the future Facebook News Feed is the notification feed.

 Therefore app makers have an interest in pushing out as many notifications as they can get away with in order to capture as much engagement as possible from their users. However, anyone who has installed dozens of apps knows that  bombardment by constant notifications can cause disengagement instead:  turning off  the notification stream entirely becomes the user’s only refuge. Thus app and platform developers are struggling to find out what level of notification (chime, ping, lit up home screen) users will tolerate.

One of the deciding factors is whether the information is relevant to the user. Relevance often depends on the context — that is, relevant to the time, place, and headspace the customer is in. Knowing that, during the recent Paris terrorist attacks, the NBC-owned Breaking News app issued three levels of notifications: the first went to people in the geographically determined neighborhood of the attacks, the second was an emerging news story to a broader audience, and the last was a global alert.

An app called The Breaking News app turns the traditional publisher reader relationship around by bring an alert directly to an intended recipient rather than to a mass audience. Its goal is to deliver the most relevant information to someone at the time they need it. It isn’t looking to rack up page views.

“Did we target this person with something new they need to know right now,” said Cory Bergman, co-founder and gm of the app. “By really focusing on marrying speed and relevancy, the higher the open rate becomes, the more relevant the notification, the more visitors we get to the app. There’s notification fatigue, and the more straightforward we are, the more loyal they are to us.

A similar theory is behind Facebook’s new Notify app, which launched recently. Notify offers users a choice of  publisher pages and topics to follow, and sends notifications when something new is uploaded. For sites that publish often during the day, users can choose the most popular story or the story of the day. Allowing people to choose what they would like to see makes them sign up for more notifications and visit sites more often. Facebook is doing a revenue share with the publishers who are on Notify.

In the early days of the internet, A company named Pointcast tried a primitive form of push notifications to the desktop, only to find that users thought them obtrusive and ignored them. After a highly touted launch, Pointcast went down in flames. If notifications are over used and not relevant, there is a risk that the whole notification space will also go down in flames!

Ten Top Trends in Digital Advertising for 2016

It’s fun at the end of every year to predict what will happen the following year, especially in an industry so prone to change as the online media industry. But this year, because consumers have announced that they’ll have a say in next year’s trends by turning on their ad blockers, some upcoming changes are less difficult to predict correctly than usual.  Assuming the publishing industry isn’t suicidal, for example:

1)publishers will take seriously the wishes of consumers to have less intrusive advertising by planning more native content campaigns with brands and selling fewer display ads at higher CPMS;

2)the creative department (or agency) will assume more importance than it has had in the past decade, because media buyers are coming to the conclusion that it’s not only a numbers game — it really matters what message is delivered to which customers. The most sophisticated brands are doing very customized creative based on information gleaned from their own databases so customers don’t receive irrelevant ads. Example: if you live in Florida, you won’t get the ad about how the car handles in ice and snow; you’ll get the one about its powerful air conditioning system;

3)Brands will expend more energy and money producing content consumers might actually want to watch and engage with, rather than just buying impressions for reach and frequency.  In fact, frequency caps will probably go down, as advertisers strive not to irritate consumers, and reach will be deeper, and not as wide;

4)Autoplay video with the audio turned on will probably go away, as will non-skippable preroll and other formats that irritate consumers such as pop- unders and interstitials. Advertising that blocks content from a site visitor will also go away;

5)Millennials and IT professionals, the most tech savvy segments of the online audience, will have to be reached with native advertising, in-app advertising, and direct mail, because these consumers are the heaviest users of ad blockers and will probably not willingly turn them off once they’re on;

6) As a result, native formats and contextual targeting will be the “new new thing,” which means the one thing that can’t go away is data. Both publishers and brands should invest heavily in their own databases, because trackers are also being blocked along with ads. Cookies have fallen out of favor;

7)As an industry, we shot ourselves in the foot over the past five years seeking scale, scale, scale. That meant we made many more consumers angry than those whose needs we satisfied. In 2016,  in order to wean consumers off their ad blockers, we’re going to have to make the user experience of the mobile web  better.  By better, we mean faster page load times for mobile browsing, which means using technologies like Google’s new AMP framework. It means buying ads on premium sites that have reduced their inventory to make their pages deliver a better user experience, and paying more per CPM. And it means reaching more of the RIGHT people, although fewer people overall;

8) In 2016, we will probably see a true supply and demand market, in which the supply is no longer infinite as advertisers refuse to pay for traffic generated by bots and publishers streamline their pages. Group M’s dictum that it will only pay for ads in which the experience is initiated by the user and the “chosen” ad is 100% in view, 50% completed, with the audio on for the entire time will take hold. This is a tough standard to meet, but MediaCom’s Steve Carbone argues that anything less than 100% viewable in any other medium would be considered a “make good.”

9) Ad exchanges will continue to struggle as agencies leave them for private marketplaces.

10) A plethora of working groups and industry committees will be convened to flesh out the new standards.

Happy Holidays and Happy Ever-changing New Year.

 

For Mobile Apps, Video is the Only Viable Format

Given the problems most mobile app developers have getting their apps noticed in the App stores, it’s no wonder that they are trying to figure out other ways to monetize than advertising. More likely than not, they’re considering a form of m-commerce. Even Snapchat, which certainly has a large enough user base to draw the big advertisers, is experimenting with charging people to re-play a snap.

Much of mobile advertising up to now has been display-based download advertising — trying to get a user to download a specific app. With this formula for monetization through  advertising, the more popular apps would help the newbies get found, and the newbies would be a revenue stream for the big boys. But now, because of a shift from apps with lots of features to “thin” apps, combined with limited screen real estate, there’s just not much room for mobile advertising, and it isn’t working particularly well. If my futurist friends are correct, apps will continue to be thin for a while, driven by smart watches and Apple’s new tvOS, which doesn’t download an app to the set top box until it is needed.

The need to find alternative means of making money is why most of the chat apps already make it possible for you to send someone money, make a VOIP call, order food, or get customer service from a merchant right inside the app. Apps like WeChat and Facebook Messenger are already about taking transaction fees from commerce streams. And this despite the fact that Facebook turns out to be the company that has done the best at figuring out mobile: 78% of its ad revenues came from mobile this year, and its revenues are up.

The big companies are at different stages in figuring this out. Foursquare and Facebook split their apps last year, and are now re-inflating their new offerings with more tightly integrated  features. Amazon, however, is a little behind this power curve: today alone I had to download Amazon Prime Now to get 1-hour deliver, and another app, Amazon video, to stream the pilot episode of a TV show.

It’s difficult to see how brands are going to capitalize on this new app strategy, unless they’re Facebook, Google, Amazon or TenCent.

Fortunately, most of this doom and gloom for mobile applies only to display. Video ads, inserted in stream, are still highly effective and well-tolerated. In fact, apps that are not video services will have to adopt formats like our inArticle, whose usage grows exponentially month over month, just to stay in the ball game.

 

 

 

Formats Become Important in Native Advertising

As an industry, we’re still having trouble figuring out how to define native advertising, although we all know that it is trending and we all want to grab the most revenue we can from this trend. However, hopping on this trend requires almost an about face on the part of publishers. At first, publishers thought native was the same thing as “advertorial,” — advertising formatted and dressed up to look like editorial. They hated it and looked down on it, and fought for the Chinese wall between the advertising side and the publishing side. But ads you cannot tell apart from editorial is only part of native.

It’s the most familiar part, however, so let’s dispense with it first.  In this context, native can  be sponsored content, which is usually written by the editorial staff of the publication and paid for by a brand, or branded content, which is actually produced by the brand itself or its agency.   Many publications, including the New York Times, Forbes, and Vice, have developed or acquired in-house agencies to produce branded or sponsored content.

This is a huge opportunity for publishers. Now they can be more than creators of content, they can be the creators of ads that support their other content. Which gives them more editorial control than if they simply accepted ads submitted by brands or their outside agencies. It can raise the quality of the creative that appears on their sites, and be more acceptable to their visitors. In June, AOL opened Partner Studio, an in-house creative shop, and Huffpo, owned my AOL, has had one of its own for a while. Rather than being dismissed, native ads created by the in-house agencies of publishers are now being seen as desirable.

Thus a market shifts under our very noses. And here’s why:

Advertisers in the U.S. are expected to spend $4.3 billion this year on so-called “native” ads that emphasize an ad’s editorial-like content and, in some cases, disguise the spots to look like unpaid placements, according to eMarketer. That’s a 34% increase from what brands are projected to have spent on native ads last year.

But there’s another part of native, and it one that applies mostly to mobile. In this definition, “native” is a non-interruptive ad that follows the same format as the site whose feed the visitor is reading. In the future, this will become the most important element of native, because it has to be acceptable to a user on a mobile device. These native ads will appear not only on publisher sites, but on platforms like Facebook, SnapChat and Twitter — platforms where users are accustomed to seeing a certain kind of content, for example photos, videos, or disappearing content and don’t want to be interrupted by an ad in a non-native format.

We think the definition of native as a matter of format as well as content will become more and more important as advertising shifts primarily to mobile devices. We’re developing and experimenting with mobile native formats on an almost weekly basis to test what’s acceptable to visitors and get the best response for advertisers and rising CPMs for publishers.