How the Blockchain Might Help Advertising

The media industry is still a long way from realizing the dream of digital advertising: the ability to target customers and know whether the targeting or the messaging worked.  Although many metrics exist for measuring the effectiveness of digital ads, we still don’t now which ones are the best.
Wrap into that some industry specific problems like fraud and viewability, and you get a somewhat disturbing picture, one that makes brands reluctant to pour large dollars into digital. And yet, the largest demographic today is millennials, and they are digital natives. We’re just not going to reach them any other way than digital, and within digital, mobile, and within mobile, video.
So print is gone as a tool, as is desktop. Display is not far behind. The most promising forms of advertising today (and we say today because things change rapidly) are in-app ads, native ads, and incentivized ads.
At the same time these changes have been happening, the industry has been plagued with an epidemic of bots and click fraud. Because there isn’t much transparency during the online auction process through which ads are now bought and sold, advertisers have had problems finding out where  or even if their ads have appeared.
This has led to a new emphasis on contextual advertising: the ability to target ads based on where target customers might already be.
Blockchain might also help here, because blockchain transactions are both transparent and encrypted. Unfortunately, not enough is known about how blockchain could be used, so we’re just in the pilot stage. One problem with current blockchain implementations, such as those used in cryptocurrency, is the inability of today’s blockchains like Ethereum to handle transactions at the speed with which ads are currently served. We’re assuming this will be solved in the future, as it is a technology problem.
More important is the issue of customer experience. Taken by the ability to reach millions of people, advertisers decided they wanted to reach audiences “at scale” all the time, regardless of the wishes of those audiences. It has taken the better part of two decades for the industry to realize that — just like with print or TV–less is more. Loading up pages or streams with advertising has led to a boycott of advertising altogether by the 25% of consumers who run ad blockers.
In surveys of people who do run ad blockers, to them the most offensive part of digital advertising isn’t the actual ad, but the tracking of information and the sale of that information to third parties (data brokers). A common statement from about five years ago, “the value is in the data” overlooks how the provider of the data, the consumer, might feel about how her data is being used. This oversight has led to what Doc Searls calls the greatest consumer boycott in history — the boycott of digital advertising.
For consumers to trust advertising again, they have to be assured that their data will not be bought and sold against their will. This is the objective of the GDPR (General Data Protection Regulation). While the GDPR nominally applies only to Europe, because of the global possibilities that come with digital advertising it has engendered compliance in companies that are not headquartered in Europe but may have European customers, like Facebook and Amazon.
Ideally, data privacy will one day be coded into a blockchain that guarantees each consumer the right and ability to control her own data and decide when to make it available. Companies like Digi.Me are already giving consumers the ability to control and share data at will, and when the blockchain matures, we will finally have a totally trustworthy advertising ecosystem again.

 

 

IAB Rolls Out Blockchain Pilots

We’ve been around since before the dot com bust, which gives us the authority to predict the future (just kidding). But one thing we know, because it has been more a reality than a prediction in the past, is that the IAB under Randall Rothenberg is a powerful industry group that can drive change in our industry in the direction it chooses.

The last two big changes involved visibility metrics, and verification metrics. Now IAB Tech Lab is moving the industry in the direction of the block chain.

The blockchain, a technology that really isn’t new but became prominent when Bitcoin, a cryptocurrency built on its technology, briefly became a “store of value” last year. When we say store of value, we mean people began to invest in Bitcoin  the way they invest in gold or the stock market.

Although Bitcoin crashed, blockchain remains as an interesting option for the advertising industry because it is an “immutable, distributed ledger or record of transactions between a network of participants. The entries in the ledger are governed by pre-defined rules and validated by the network. The network can be public like bitcoin or private with only select participants.” IAB says there are benefits to the blockchain for advertising:

What are the benefits of blockchain in the media and advertising space?

  • Given the complex nature of the digital advertising supply chain, blockchain technology can offer greater efficiency, reliable and high-quality data.

  • Blockchains can create a more efficient medium by which two or more completely anonymous or semi-anonymous parties can complete various types of transactions potentially at a low cost.

  • Since blockchains are decentralized peer-to-peer networks, there is no single point of failure and no single access point for malicious hackers. Thus, it enhances safety and security for data.

  • This ability to keep a fully verifiable and immutable ledger or database that is available to all members of the blockchain provides a layer of trust and transparency that isn’t always available within media and advertising processes.

  • While blockchain will not cure all of ad tech’s problems, it can be beneficial in situations where there is censorship and both sides of the supply chain (i.e. publisher and advertiser) are disadvantaged by not having access to that information.

Here’s what is being tried, according to CMO Australia:

Members actively involved in the IAB program include FusionSeven, Kochava Labs, Lucidity and MetaX, with each piloting emerging blockchain-based offerings with supply chain partners including advertisers, agencies, DSPs, exchanges, publishers and technology vendors.

 

As an example, IAB said Lucidity’s ‘Layer 2’ infrastructure protocol is being used in a pilot to verify ad impressions and improve programmatic supply chain transparency through a decentralised, shared and unbreakable shared ledger. This will be followed by other pilots looking into fee transparency, digital publisher signatures and audience verification.

Another company not involved in the IAB Tech Lab’s group is Brave, creators of the browser that pays publications through its own cryptocurrency, the Brave Attention Token (BAT).

There’s almost no way that the blockchain will turn out to be completely useless to advertising, since  the entire purpose of Ethereum’s technology was to create smart contracts. However, unless it can scale in speed, you won’t see it in ad tech any time soon to do things like serve up ad calls.

ZINC Formats and Services Still Available

A ZINC customer called us this morning and expressed surprise and concern that our outstream offerings might no longer be available. We hurried to reassure him that we were just changing the brand name and that the same formats he wanted to buy would be available from the ZEDO site under the ZEDO name.

We are making some updates to the ZEDO site to reflect this new positioning, and we will be shutting down the ZINC Twitter and Facebook accounts after we make the announcement.

The reason for this should be obvious: five years ago when we launched ZINC it was because we didn’t want our publisher partners to think we were abandoning them. We thought they’d be confused. There were so many acronyms: were we an SSP, or a DSP? Well, we were and are both.

Five years later, things have changed in the industry, and it is no longer unusual to serve both sides of the digital advertising ecosystem. Also, in that intervening time we became a secure platform.

Rest assured, nothing has changed except the way we go to market, which I hope will become less confusing as we develop the single brand.

For more information, get in touch with adsales@zedo. com.

ZINCx Merges with ZEDO: Will Operate as ZEDO

We are pleased to say that we are merging our ZINCbyZEDO brand back into ZEDO. As of August 1, 2018 both divisions will operate as ZEDO.com and the ZINC site will shut down.

We launched the ZINCbyZEDO brand five years ago to sell high impact formats to agencies and brands. In our first blog posts on the ZINCx.com site, we told everyone that 2014 was going to be the year mobile video ad spend would grow. We knew mobile would be different, and that it would require some special ad formats.

At the time, it was difficult to message the direction in which we were headed: to create and market the kinds of ads our publisher partners would need as consumers shifted to mobile. So we decided, rightly or wrongly, that the simplest thing to do would be to create another brand on the advertising side of the business to avoid confusion with our publisher partners, who knew us as an ad server.

Back then, serving both side of the ecosystem was not being done, and that’s why we had trouble positioning our capabilities. Your company was either a DSP or a SSP. The industry was just a gobbledygook of acronyms categorized by the now legendary LumaScape.

What a difference five years makes! Our company, in response to industry trends, evolved into a private, proprietary platform on which either buyers or sellers could transact. We shifted our focus to avoiding ad fraud and malware by creating a sort of closed loop between our publisher partners and our agency contacts.

But the truth is that ZINCbyZEDO was a middleman in the transaction between brand and publisher. Now that greater transparency is possible, we are eliminating ourselves as a middleman so a greater percentage of the advertising dollar actually goes to the publisher.

We are also taking steps to make sure that we’re not holding any brand customer data, or sharing it in potential violation of GDPR. Some larger companies have spent millions of dollars to make sure they comply. That’s out of our price range. It’s simpler and more authentic simply to retire the ZINC brand and continue our original mission to be a revenue-enhancing partner for publishers.

We’re not letting people go, we’re just shifting them around within the company. We are, however, slowly making some updates to the ZEDO site to reflect this new positioning, and we will be shutting down the ZINC Twitter and Facebook accounts after we make this announcement.

The digital media industry is a wild ride, as are most businesses as technology continues to advance and consumers continue to make choices. After nineteen years, we know that the way to ride this horse is not to fight it, but to work with it, and that’s what this new move means to us.

 

 

Context Becomes More Important in Flight to Quality

After content, context is now king. One of the reasons Facebook and Google advertising  have captured so much of the digital ad market is that they, especially Google, are able to target ads according to keywords. AdSense and Facebook use different methodologies, but they’re both known for their precise targeting. They have glaring weaknesses, however, especially as more and more digital advertising is video.

With video ads it is still a major problem is that so many ads run without context, even though they may be closely “targeted” to a demographic or a geography. They still run without context, because we don’t quite have the tools yet –nor the will– to provide video context totally programmatically.  Especially on YouTube there are many instances where we’re increasingly seeing pre-roll and mid-roll that has nothing to do with what the audience is actually wanting to see. This is not a plea for the old TV practices of selling sweetened cereal to youthful audiences, but a heads up to brands who care about “delighting” rather than alienating their customers.

A golden age is coming for contextual advertising, as a result of two things: 1) the realization on the part of brands that they’re threatened by Amazon and other services, and 2) the propensity of younger audiences to require corporations to reveal their values. To encourage brand loyalty, marketers will have to do what they should have been doing all along: buying travel ads on travel sites. sports ads on sports sites.

If you throw in the effects of GDPR, as a potential third motivator, we believe it is becoming increasingly important to brands to understand where their ads are appearing, as well as who the publications’s audience is. If I’m looking to fix my truck and I’m about to watch a video about suspension problems, I might be a millennial  in the midwest and white, but ads for sports, hot dogs, or video games are merely an interruption. Let me just watch how this guy replaces his front suspension so I can do the same thing to my truck.

What if I could see an ad for the right car parts,  for local mechanics, or even for new trucks? This is called contextual advertising, and back in the day when more ads were sold direct, as a media buyer I could be sure I was getting  that kind of context. As an advertiser, that would give me much greater potential ROI. It would also fix that feeling most consumers have that they’d just as soon skip the irrelevant ad as soon as possible.

We’re making an appeal to the digital ad industry to think before buying and selling ads programmatically without context. One of the reasons consumers no longer tolerate advertising its its lack of relevance to the moment they are in. And that doesn’t have to be the case. With all the tools we have at our disposal — artificial intelligence, mounds of first party data, and great programmatic services, there’s no reason why we can’t do better. Both publishers and consumers deserve that.

Luma Partners: The Match.com for Ad Tech

AdExchanger’s podcast last week had an interview with Luma Partners’ founder Terry Kawaja. You probably know a little about him  because of his famously crowded Lumascape slide, which features all the old-time ad tech companies that got a piece of the action between advertiser and publisher in the media buying business. You may notice that many of the companies on that slide are gone.  And their demise has probably enriched Kawaja,who seems preternaturally able to spot trends. In ad tech he was able to see a wave of consolidation coming in and ride it from the earliest days, as both a supporter of entrepreneurs who loves to advise them and position them for the best outcomes and a strategic advisor to larger companies threatened with disruption. He learned that these transactions work best when they’re a win-win for both sides when he worked on two other industry consolidations, radio and telecom, before going out on his own to found Luma.

Typically, investment bankers work in the background when they buy and sell companies, but Kawaja has not escaped a certain notoriety,  because he has advised on the majority of ad tech mergers and acquisitions, as the industry continues to mature and consolidate.  Terry personally has advised on the Oracle Moat acquisition, Singtel’s purchase of Turn, Criteo’s acquisition of HookLogic, Adobe’s of Demdex, Neustar’s swooping up Aggregate Knowledge, and Google buying both Admeld and Invite Media. Over half the 44 deals Luma completed were ones in which they asked the buyer what its major strategy was, given the trends in the market, and what capabilities it would need to accomplish that strategy. Then, drawing on expertise developed from talking to all the entrepreneurs in the space, Luma is able to match the startup to the enterprise strategy.

New industries always spawn many startups, most of which don’t make it. Of the ones who do, most are sold to provide an exit for the founders. Here in digital, because there were so many companies formed,  Terry knew the inevitable wave of consolidation would be longer.  And nobody else really wanted to advise media companies. The combination of massive fragmentation and high growth made most merger advisors run in the opposite direction.

There’s an old adage is that it’s better to be bought than sold, but the clients of Luma Partners are both bought and sold, because Kawaja does something more like  strategic matchmaking than simple mergers and acquisitions. He spends a lot of time with the buyers, not just the sellers, to figure out what they want to accomplish. Usually the sellers desire an exit to a stronger partner so they can continue to grow, whereas the buyers are looking to acquire a missing piece of an end-to-end offering. That’s certainly true of Oracle, which made most of its digital media acquisitions like MOAT and BlueKai because it was looking to transition all of its business to the cloud, and its existing database products were all on-premise. To rebuild all their legacy products would have cost Oracle a window of opportunity that it couldn’t afford to miss, so it acquired companies that were already digital.

In 2018, consolidation continues, albeit not as quickly.  One reason is that GDPR has created uncertainty, which gives people pause. But another is that the entire media and telco world is awash in deals — about 300 of them. That’s a tectonic plate shift that needs to be resolved before people return to thinking about what capabilities they need from the digital world.

Perhaps ominously, there are also fewer independent companies. But just you wait: the blockchain is coming.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What’s Left for Agencies?

Poor Cannes. This year the parties were way overshadowed by the no-longer-unspoken fear that the agencies we’re most familiar with now may not exist in the future. After all, what can their business models be if everything is automated and media buying has gone in-house?

A sign of that fear were the programming initiatives around artificial intelligence, which half the conference feels would save advertising and half felt would destroy it.

Another sign was Martin Sorrell’s new company.

London-listed S4 Capital, the new company, is being built on the shell of Denniston Capital and named for four generations of Sorrell’s family. Sorrell said he has raised about $67 million for the new venture, which plans to be an “international communication services business focused on growth.”  Sorrell noted he hoped “not to be frenemies” with Google, Facebook and Amazon and that S4 Captial will be structured differently than WPP, though he did not go into detail.

“We are starting at ground zero,” Sorrell said, promising “grand ambition” and end deals with the “highest companies.” S4 capital will be “more creative, more agile, less bureaucratic … I still get the feeling that that our industry is stuck in the past and we need to move into the future.”

Listening to Sorrell, you would think the days of the agency were over, since it will be displaced by his movement into the future. But he’s always been a big talker, and when he says communications services he’s just using code for agency. And that’s because he knows as well as anyone else what the core competency of an agency is.

It’s simple. Agencies have to return to being the brand strategists that connect the company to the consumer. They go back to being what they were in the Mad Men age, the people with the secret creative sauce.

This is a differentiator that is very difficult to destroy, although during the past two decades agencies have done everything possible to undermine their own value proposition, including putting themselves out there as data experts, arbitraging their clients’ media buys, and downright lying to their customers.

There’s a role for an agency trying to do the right thing, because inside companies, there is very little time or energy to undertake really memorable campaigns. However, Sir Martin, who presided over so many of those lies in his previous incarnation, may not be the person to lead it.

 

Advertising in the Post-Advertising Era

As usual, we’ve been thinking about advertising, and about its future.  To help us grapple with the days ahead, we’ve read two very interesting pieces this week. One  is from a book called Frenemies by longtime media journalist Ken Auletta who has written “Annals of Communication” for the New Yorker since 1992.  Auletta’s book is about the disruption of the ad business by all the new technologies that have affected it during the past two decades. His thesis is that advertising won’t go away, because it is necessary for consumers to get information about products and services, and subscriptions can’t reach all of the people who need to know. Auletta reminds us that both Clinton and Obama agree that consumers are strapped, having not gotten wage increases in over a decade.

Thus advertising, he contends, is still necessary to feed the free or nearly free content that we all want to see.

 In a non-state-dominated economy, advertising is the bridge between seller and buyer. It would seem an obvious statement, but I’ve found it bears repeating. And that bridge is teetering, jolted by consumers annoyed by intrusive ads yet dependent on them for “free” or subsidized media. In this sense, consumers are frenemies.

Because he begins from this premise, Auletta can spend most of his book talking about what’s happening to the agency business. He calls frenemies the brands who are taking their work in house, the consulting firms like Deloitte that now run their own digital agencies, tech firms that buy and sell media, and the usual competitors who now have to deal with each other because few brands have a single “agency of record” anymore. He can also focus on some of the colorful characters in today’s agency world like Martin Sorrell and Gary Vaynerchuk.

On the other hand, media marketing guy Andre Redelinghuys takes a far more pessimistic view of the future of advertising, because he believes the need for advertising is dependent on a need for distribution that can be met in ways not possible previously.

Terms like ‘Disneyflix’ and ‘Apple Prime’ essentially describe how the most powerful global brand owners are coming to terms with the new rules of engagement. This is not just another story of new versus old, it’s a fundamental shift in the natural order of consumerism. Brands have traditionally been prized, while distribution has been more commoditized. The ‘must have’ things held the power. But if the pipes into people’s lives have become more powerful than the products that go through them, then we’re in the beginning of a new era. and the change is just beginning.

In his view, “pipes” into the home, car or phone now have all the power, and consumers no longer value brands — they value convenience. Ordering household goods from Alexa is one of his big examples. as is using a Nespresso machine and ordering whatever pods fit the machine rather than choosing a coffee brand.

Brands have always fought for a place in consumers’ hearts, and then relied on their loyalty for repeat business. Pipes are structural relationships that don’t rely on such fickle factors. They are built on more vertically integrated distribution channels and behave more like utilities — a way into people’s homes and lives attached to an account.

Amazon is the ultimate pipe. Their entire value is that they bring things to you — the things can change as necessary: movies, pickles, sneakers. They own the interface, the invisible moving parts, and the household. They understand your preferences intimately and have become arbiters of choice in many homes.

I’d argue here that Amazon is also a brand, in the same way Facebook is a pipe, and that the “convenience” of pipes is constantly being weighed against the sacrifice of privacy we make for the convenience. Thus, Facebook lost some brand equity through Cambridge Analytica, and who knows what inevitable mishap can befall Amazon, whose personal assistant already send private conversations to one family’s contacts.

I’d also argue that while things have changed, we are still feeling our way around the post-advertising world.

Cannes Lions: Are They Even Relevant This Year?

This is the week of the Cannes Lions Awards, the Oscars for the ad industry. Early reports say it is a smaller, more serious awards festival this year, perhaps because it had become too overrun with tech companies to feel creative anymore, and perhaps because the advertising industry is too  engaged in navel gazing for clues about its own continued existence to spend $20,000 an executive to send the large delegations of previous years.

Sir Martin Sorrell will be there talking to author Ken Auletta as previously planned, although Sorrell has, we think, had a #metoo moment this year and has stepped down from GroupM.  Preliminary reports say there are also fewer branded  yachts, and especially fewer ad tech yachts.

Behind the scenes, outside Cannes the industry soldiers, on trying to solve its problems, which are multiple. Viewability was a problem we were supposed to have solved five years ago. Only at the same time we tried to attack that problem we were also worried about ad fraud, malware, and scale.  Nobody wants to believe that to prevent everything else we have to let go of scale. But we probably do. Remember three years ago at the IAB Leadership Summit when attendees were literally running between town halls on each of these multiple subjects?

None of these worries have gone away, and advertisers are losing patience with ad tech. Perhaps one of the reasons brands have pulled back on their participation in Cannes is that the combination of angry consumers, unviewed ads and the spectre of regulation has made advertising more of an infrastructure business than a creative business. Who cares what brand or agency made the best ad last year when that ad probably wasn’t viewed? There’s more important knitting to be minded.

Because advertisers have wised up about the cost to their bottom lines of unviewed ads, exchanges have had to change their business models to eat the cost of those ads. Their solution to this problem is to run campaigns on private exchanges guaranteeing viewability. But then what happens to scale?

These concerns appear to us to be the canaries in the coal mine. Far more important is the larger movement away from brands entirely. For example, the online merchant Brandless offers everything from dishes to popcorn at prices listed proudly as $3.00. The Brandless site talks about the “brand tax” consumers pay for name brand merchandise.

Brandless is only one of the seismic shifts happening to advertisers. Generic brands have steadily gained power. Another, larger threat is Amazon. At first, Amazon cooperated with brands, offering them Dash buttons and other methods that made it easier to re-order your favorite laundry soap. However, Dash buttons have given way to Amazon Basics, a competitor to Brandless that can be ordered from Alexa.

It’s too early to tell whether millennials, as they gain spending power, will develop any brand loyalty at all to consumer products. A study last year pointed out that 51% of them had no brand loyalty. When they do like brands, they tend to favor Apple and Nike, not Tide.

 

 

 

What Are Acceptable Ads?

Of all the industry initiatives around making the online ad industry more friendly to users, only Eyeo, the German company behind Ad Block Plus, has spent the last few years doing research on people who download ad blockers, especially their own. The rest of the industry organizations are basically guessing what users will tolerate based on what they’d like to promote. What Ad Block Plus found through a Google survey  conducted in January is that 18% of Americans use an ad blocker on the desktop, and so do 20% of Europeans. But 83% of those running an ad blocker would be happy to see ads that don’t interfere with their user experience.

It’s impossible to write about this too often, since it doesn’t ever seem to sink in, but the root of the ad blocking problem isn’t ads. It’s user experience, and most of the deterioration of UX is due to data collection and tracking. It’s mind boggling how many trackers are on most publisher sites, for everything from analytics to data collection. This tracking is what users hate. It steals their privacy, hijacks their user experience, and shows them only disrespect.

On the other hand, users also hate paying for content, especially young people who have grown up in a world where web content has largely been free. Although sites like the New York Times have grown their subscriber bases admirably, they jury is still out on whether sites like Bloomberg and Wired will garner enough subscribers to make their pay walls “pay.”

And the people who download ad blockers are generally young, well-educated, employed with higher than average incomes, and comfortable with completing their purchases online. In short, they’re a demographic many advertisers would want to reach.

AdBlock Plus has figured out a way to reach them: by respecting their preferences.

Face facts: compelling sites with quality content are not free to run. Advertising used to cover the cost of these sites until publishers lost the battle to protect their visitors’ experience to programmatic advertising. No one knew in advance this would happen.

But Ad Block Plus has now come up with suggested ad formats that do not destroy the user experience, and ad-blocking users have willingly consented to see them. 92% of their users have said they’ll participate in a program through an exchange that can make ad-blocking visitors available to premium brands under special circumstances.

Will this work? Well, for publishers it is tempting because it allows them to monetize their ad-blocking users. And agencies will probably salivate because the exchange gives them access to more than 150,000,000 new users in the most desirable demographic. EMarketer said that 41% of millennials used ad blockers in 2017. Being able to reach them with ads they’ve agreed to let through is quite desirable.

The key is going to be to keep to the rigid rules of Acceptable Ads, which emphasize position, transparency, and size. It’s a cop out to say that time will tell, but Ad Block Plus is only just out of its closed beta with the Acceptable Ads Exchange, so we can’t say much else yet.