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.

 

 

 

 

 

 

Forget GDPR: Mobile Ad Spend Will Continue to Grow

As usual, the digital advertising world is about to change. Several factors have caused this next round, and only a minor one is GDPR, which proves to be something we can all get over by checking another bunch of boxes to say we accept cookies.

But companies have invested quite a big in getting ready for GDPR, and they’re not going to let that go to waste, so here are the ways advertising will change again:

1)Some publications are going to re-ignite direct sales, in the name of transparency and brand safety. Although programmatic will continue to grow, we’re already seeing the return of the I/O, which was a staple of the industry. To guard against misplaced advertising, I/Os specify context. This may seem very old school, but there’s benefit in having ads placed next to relevant content. Facebook and Google already know this.

2)Some players are experimenting with the block chain. There are at least three solutions that experiment with the blockchain. The first is the Brave browser and the Basic Attention Token (BAT) a way of paying content providers micropayments for traffic. No one is under the illusion that this will replace advertising, but it may co-exist nicely with fewer ads. There is also a startup called KindAds, a blockchain platform that wants to decentralize online advertising process by connecting advertisers directly to publishers to remove the intermediary service of ad networks.

And  there’s AdEx, which is attempting to boil the ocean.

AdEx is a blockchain-based ad exchange that seeks to minimize advertising fraud by providing a platform for advertisers to connect with publishers. AdEx also wants to solve the problems around lack of consumer consent, privacy concerns, and data misuse. For one, users get a dashboard where they can choose the kinds of ads they want to see, the firm uses blockchain technology to anonymize user data, it creates a data trail to verify clicks/views in ad campaigns

3)Industry groups are promoting transparency. IAB, the industry’s self-regulating body, has released a framework for acceptable ads, as has the Acceptable Ads Exchange initiative of Ad Block Plus, and several other trade associations. The goal of these efforts is to show consumers the industry can and will self-regulate.

In the meantime, we can be sure digital advertising growth will continue, because Mary Meeker has identified a $7B delta between the growth of time spent by consumers on mobile devices, up 29% since last year and growth of mobile ad spend, which is only up 26%.

 

Digiday Video Summit Reflects Industry Changes

The Digiday Video Summit took place the same week the standards of data privacy totally changed, and as a result it was a meeting of video publishing executives wondering what their next strategies would be and sponsors from the world of “monetization,” “advertising,” and “mobile targeting” who knew even less about the future trying to help them. It was truly a conference of the blind leading the blind, because there were precious few of the people who pay the bills — brands and agencies–in attendance. Those people are focused on the larger question of how they can use their customer data.

As a result, we heard several publishers say they are not going to launch in Europe until after GDPR shakes itself out. Others without a big business on the continent have decided to withdraw completely. In Europe, the Digiday Video Summit will be even more fraught, because it takes place there on June 5.

Whenever there’s change, there’s opportunity. We think the future lies in several different directions, some of which are being discussed at the Summit, others not so much:

Original content

There’s still a market for original video content, if it is good. Netflix and Hulu are testimony to that. And although they subsist on subscriptions rather than on advertising, Hulu at least is going to try allowing subscribers who don’t pay the ad-free premium to download their programs along with ads.

It’s interesting that no one has yet tried what Leo laPorte and Twit.tv have been doing for a decade now, which is  live TV content downloadable as podcasts, supported by advertising. Leo long ago decided that he was going to trade quality programming for scale, and like many podcasts he mostly does his own ad reads. Most podcasts are content to be audio only, and they go for a different audience than the video podcasts. We predict more niche video programming, which will find its own audience without much targeting, because the audience is already interested in the content. It seems so simple to run brand ads against specific video content, but we think the agencies and brands haven’t washed their hands of data dependence yet. It will happen. It will have to.

Branded Content

Branded content is a tricky one. If it’s really good, like Red Bull, it can foster deep engagement. But it’s important to have the right brand and a totally immersive experience. Many agencies have focused too much on data and metrics the past decade, at the expense of great creative.

Content Based on Videogames

Some of the speakers at the summit did talk about how video content could be generated from videogames and attract viewers who have been playing those games.

LCI

This is a new one, and so big that it already has its own acronym. It stands for Limited Commercial Interruptions, and it means fewer ads but higher ad prices. TruTV has been doing this since its rebrand in 2016, with great success. Its viewers spend more “tune time” and their revenues have gone up. Their audience is Millennials with incomes averaging $70,000 — a very desirable demographic.

Like every digital media conference we’ve ever attended, this one made ample use of the words “wild ride,” “rollercoaster,” and a one I had never heard before, “calamitous.” Nevertheless, the conference was pricey and the room was full. Things can’t be that bad.

 

Good Advertising Still Works

Joshua Topolsky, founder and CEO of “The Outline,” has decided to go against the prevailing trend of paywalls and subscriptions. Because many publications are afraid of what will happen to their advertising dollars as a result of GDPR and the trend toward ad blockers, they’ve all gone like sheep to the subscription model over the past year or so. But we’ve written before in these pages that there is an upper limit on the subscription model, which is bounded by the reader’s time and income. Even wealthy people do not want to spend all their money on subscriptions.

So Topolsky, who is also a co-founder of “The Verge” and previously worked at “Engadget” as editor, raised $5 million to launch an ad-supported site, but one that is very different than other publications in its space.  He wanted a site that people actually read, with ads that actually worked. It’s a little like Back to the Future. In exchange, he gave up an emphasis on scale. “To be big would be simple,” Topolsky told Peter Kafka on the Recode Media podcast, “it’s very easy to get traffic. I could write a bunch of Avengers Infinity War posts, and get all the traffic I want.”

His point is that most sites are optimized to go for clicks, so even a site like NorthJersey.com will have those Avengers stories, even though they have nothing to do with NorthJersey and attract the wrong traffic. Then advertisers on those sites are disappointed, because their ads don’t work. “Bad traffic is easy. “What is difficult is to get the right people to the right story. There’s a higher value to that.”

What happens when Topolsky goes to the advertising world and tells them “I don’t have big traffic, I have smart traffic” when the usual advertisers are looking for reach?

In his opinion, advertisers have realized that what has been sold to them as the magic solution –i.e. big audiences on Facebook and Google–bought programmatically, has now been exposed as less than ideal for a multitude of reasons. While there is still a scale play for people like Buzzfeed, “The Outline” strives to differentiate itself on engagement. As an example, Topolsky says his site gets more views on custom content than sites with four times the amount of traffic. He has also said in the past that his click through rates are 25% higher than the industry standard.

“Not every advertiser will advertise with us, but some good ones will. Smart brands who want to speak to audiences directly, like Cadillac and MacAllan like us.” The custom content gets seen and is engaged with partly because it is more visible (there are fewer ads) and because it’s smart. Also Topolsky targets his stories carefully to his audience, mostly urban, mostly Millennial, mostly well off.

MacAllan used “The Outline” to tell its brand story for a $300 a bottle scotch. There are only a few million people who will pay that much for a bottle of alcohol, and niche products work for niche sites.

“The Outline” has just closed an up round for its niche site, and that’s a signal that investors think things are going well. “What we’re doing is not normal for sure,” Topolsky admits.”But it’s working. People are interested in advertising with us. We’re the twelve seat cool restaurant, not the chain, and that’s the long term plan.”

Time to Re-Examine Google’s Ad Server?

After more than two years of saying very little about its preparations for GDPR, Google has now made several changes that reveal how things will change for the rest of the ecosystem. During a call with the IAB Europe GDPR Transparency and Consent Steering Committee, Google disclosed that it has a new tool in beta with some DFP and AdSense customers called Funding Choices.  Funding Choices limits the partners a publisher can share consent with to a dozen.

This is a similar consent tool to other Consent Management Platforms like Admiral and Sourcepoint. A full list of IAB-registered CMPs is here.

The Google consent interface greets site visitors with a request to use data to tailor advertising, with equally prominent “no” and “yes” buttons. If a reader declines to be tracked, he or she sees a notice saying the ads will be less relevant and asking to “agree” or go back to the previous page. According to a source, one research study on this type of opt-out mechanism led to opt-out rates of more than 70%.

Google’s and other consent-gathering solutions are basically a series of pop-up notifications that provide a mechanism for publishers to provide clear disclosure and consent in accordance with data regulations.

As a company that began its life as an ad server, we have been struggling to find out whether we play at all in this full-employment scheme for lawyers, since we do not hold data or sell it. The situation is made more fluid because publishers do not have to accept the Google solution, and large publishers like Axel Springer have developed their own CMP technology.

Another announcement made by Google last week seems to have made  multi-touch attribution attribution much more difficult, because as of May 25 google will no longer provide DoubleClick IDs for data from its had server and DSP, or Cookie IDs and IP addresses from its exchange.

According to Martin Kihn, Research Vice President for Gartner,

Without these IDs, exported DCM log files can’t be used to determine true reach and frequency or to build MTA models, which are by definition user-level. MTA is not the only way to measure the true impact of ads but is theoretically the most accurate and provides by far the most detailed results.

Of course marketers are scrambling. But didn’t everyone in the industry expect this? This, after all, is the objective of GDPR, to preserve the consumer’s privacy.  The consumer does not care about the accuracy of Multi Touch Attribution customer campaigns, and for Google especially there is no other alternative. Google doesn’t really have to care about its ad-serving business (DFP), which it acquired over a decade ago and which is responsible for a very small part of Google’s revenue.

And it’s not as though a company the size of Google can slip under the radar of the GDPR, because it has already been fined and I’m guessing that other than Facebook, Google’s going to be under the greatest scrutiny by GDPR enforcers.

Remember, not everybody has to use Google as an ad server.

 

 

Hulu to Allow Ad-Supported Downloads

Last week’s post, “Advertising isn’t Going Anywhere,”  was written a couple of days before Hulu revealed at its NewFront presentation that it was going to allow downloads, and they’d be ad-supported for all of the Hulu users who are on the free plan. My main point was that people can only afford a limited number of subscriptions — far fewer than they’d want. So it’s great for the consumer in several ways that an aggregator like Hulu will have downloading with the ads remaining in the downloads. Hulu has 20 million subscribers, most of whom are on their ad supported plan.

Hulu had a lot of updates at its NewFront/Upfront presentation this morning, but among the most interesting for me was that Hulu will offer downloading of its content, but with ads included. Since the vast majority of Hulu’s 20 million+ subscribers are on the ad-supported plan, this means Hulu is going to be breaking some new ground in downloading, relative to its ad-free SVOD peers Netflix and Amazon, both of which have been offering downloading for a while.

Hulu has lagged its peers by not enabling downloading, but its new feature, whose specific launch date was only identified as “during the 2018-2019 upfront season,” will differentiate itself immediately by having ads included. As we all know, Netflix and Amazon have sucked an enormous amount of ad-supported viewing hours out of the ecosystem, with downloading on these services becoming a bigger contributor. By including ads, Hulu directly addresses this, allowing advertisers to at last follow viewers into their offline viewing experiences. Hulu’s light load of ads, which are unskippable, only enhances the value proposition to advertisers….

Given the rise of ad-free SVOD, more advertisers will struggle to reach their millennial audience targets with 100% brand safety and viewability, making Hulu a prime option. Hulu has also been very smart about scooping up rights to popular library content to augment its still limited (though rapidly expanding) slate of originals, led of course by “The Handmaid’s Tale” which was renewed for season 3.

So if you want to download and view Hulu content, the only way you can do it without ads is to pay for the highest level of subscription, which is Hulu with No Commercials. This is going to create a problem for millennials, who are big Hulu watchers and do not like to sit through ads or pay for subscriptions.  I think it’s a safe bet that, unless the ads become terribly onerous, the convenience of being able to watch such a large variety of popular shows on demand will outweigh the indignity of sitting through an ad. This is a recommendation for the ad industry: don’t kill the goose that lays the golden eggs. If this works, we may see other sites introducing ad supported downloads as well.

Advertising isn’t Going Anywhere

Lately almost every quality publisher is experimenting with paywalls and subscription services.  They are now viewed as a panacea against the need to handle consumer data, and a hedge against the increasing use of ad blockers.

Of course subscriptions to newspapers and magazines were available back in the days of print, too. So why did print publications also run advertising?

One simple reason: subscriptions cannot support most publishers, unless they are in a niche category without a competitor. The Information, a technology business publication aimed at wealthy investors, falls into this category. But most publications do not. Even the Wall Street Journal, the leading financial publication and one that many people WILL pay for, cannot get by  on subscription revenue alone. Nor can the leading news sites like the New York Times and the Washington Post  support themselves solely by instituting paywalls.

Why not? Because the average middle class consumer, who has been reached in the past through advertising, cannot afford to subscribe to everything she needs to read, see, and hear. We live in the Information Age, and very few of us can afford to ignore the need to stay abreast of a very rapidly changing world.

She’d like to get the national and world news from a reliable source, so she visits the New York Times. But finding it too biased, she must also often visit the Washington Post.  Neither of them covers news from her hometown, so she reads her local news site. And since she’s a homeowner, she reads a lifestyle publication. Or a fashion magazine. Or Consumer Reports.

To save money, she cut the cord on cable TV a year ago, so for entertainment she relies on Amazon Prime video and Netflix. But some shows are only on Hulu. Her husband subscribes to ESPN. He’s also a reader of Bloomberg and Wired, and they just instituted paywalls, too.

And then there’s Spotify.

At the end of the year, she and her husband look at their iTunes bill and their credit card bills and realize that they have spent over $2000 on subscriptions to both video and text sites. They blew right through their budget. So they decide to cancel their subscriptions to save money.

Eventually they trade off the need for privacy and gravitate to sites where they can get news and entertainment free, just by tolerating a few ads. In the mean time, publications that have instituted paywalls find that they are experiencing a great deal of churn among their subscribers, leading to unpredictable revenue projections. Despite their paywalls, they must also run some, although perhaps not quite as many, ads.

And that’s how the great paywall experiment plays itself out. Advertising isn’t going anywhere.

 

 

 

Can Ads Work Without Targeting?

We’ve grown fond of thinking that we need data, data, and more data to have ads that work. That data bias has driven the creativity right out of the industry, and with it the consumer’s tolerance for advertising in general. And yet, many ads used to succeed and even still do, without targeting customers through data mining. These are the ads consumers didn’t mind, and they’re the ones that will survive GDPR, Facebook, and all the other horror stories about digital advertising.

“Old school” ads worked by simply raising awareness. Many pharmaceutical ads still work this way. They are usually bought in mass media, which pretty much targets everyone. And the message is something like “if you suffer from X, ask your doctor about Y.” Some of them, like one prize-winning ad for Vytorin, a cholesterol-lowering drug, gave even more detailed information to tell viewers that high cholesterol was due partly to genetics and partly to what you eat. But it was still information.

Some travel ads also simply give information. “Vacation on the beach for only $599 a week.” An ad like this makes almost anyone aware that this advertiser is offering a sale or a good value on a beach vacation. Airlines and hotels often advertise this way during slow seasons.

Yet other ads try to persuade. Occasionally, the persuasion is pretty overt. But ads can also signal things about products and services without being overtly persuasive. For example, SuperBowl ads very seldom try to persuade game-watchers of anything. However, they signal that the company that buys an ad is financially able to afford it, and thus is more trustworthy than some upstart brand. Or, if the brand is buying an ad for the first time, the signal is that there’s a new disruptive company in town, taking over from the incumbents.

Another way ads can work without targeting is by making promises. “If you buy this product, you will look like/feel like/live like the person seen in the ad.” Some of the promises are explicit, like automobile ads that promise a 100,000 warranty, and some are implicit, like the promises made by anti-aging products or skin creams.

A good brand knows that when it makes a promise, it has to keep that promise, or the brand will lose its good reputation. When an airline says its flights are 99% on time, it had better be able to support that promise, or we will soon see the end of the brand’s primacy in the consumer’s mind.

The last way ads can work without data-driven targeting is through context: in other words, by being placed around content that aligns with the brand’s philosophy, the consumer’s interest, or the type of publication. The best example of this is New Yorker ads, which contain a preponderance of luxury items and items that appeal to intelligent, educated people. These are audience-based ads, and they are not designed for a specific customer, but rather for a specific audience.

We have long attempted to persuade the industry that all this data can cloud, rather than clarify, the goals of an advertising campaign, and we are happy to see the industry coming around to this. We can have a very healthy advertising industry without over-using consumer data and violating consumer privacy rights.

 

Header Bidding Wins

Just as publishers were beginning to see increased revenues from the 2016 hack called “header bidding,” Google decided to get into the game. For a while, header bidding was a way around Google’s almost total control of real time bidding auctions. But now Google has released its own solution called Exchange Bidding to all publishers who use Doubleclick for Publishers. AdExchanger writes,

Exchange Bidding relies on server-to-server connections, which are faster than the page tags some header bidding solutions rely on, and lower latency improves ad viewability, and thus yield.

It’s also faster to install, with Exchange Bidding essentially a plug-and-play product compared to heavy development and collaboration required of publishers in header-bidding integrations. 

Meredith, an Exchange Bidding beta partner, said it joined because its pages loaded faster and because it consolidated exchange reporting within Google, which reduced measurement discrepancies with advertisers, Chip Schenck, the media conglomerate’s VP of programmatic sales and strategy, told AdExchanger last year.

 

Exchange Bidding, however, can’t be used by buyers who have preferred or guaranteed rates. The new product is only available right now for display ads, although it is useful for mobile web and in-app ads. If you are a publisher who relies on video inventory, this is not for you.

We were one of the first to offer header bidding, and that was about two years ago. Before that, Google  had a near monopoly on the auction market. According to an article in last summer’s Ad Age,  header bidding really shook Google up, and it began offering its own product as a test.  But it immediately ran into resistance, because it was trying to charge a 5% cut for the service. That’s been reconsidered, but in the meantime both Amazon and Facebook have begun to offer their own form of header bidding, forcing Google to play fair.

We think this is good for the industry as a whole, because Google’s monopoly turned out to be costly for publishers. What’s also good for the industry is the convergence among all the once high-flying ad tech companies, who charged publishers for services that did not add value.

This call comes just in time, because eMarketer predicts that 83% of digital spend will transact programmatically by 2019, and by 2020 digital spend will exceed all other forms of advertising spend combined.

The next thing we have to do on behalf of publishers is step up the filtering of non-human traffic and traffic to fake sites, and that is increasingly becoming a priority, especially through the widespread industry adoption of ads.txt.

We’re getting increasingly skillful at weeding out the negatives in our industry and focusing on providing a clean marketplace for digital publishers and demand side players to interact.