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.

 

 

 

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.

 

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.

 

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.

 

 

 

 

 

 

Video Replacing TV as the Top of the Funnel

Seldom is there an industry read with which we disagree more than Ben Thompson’s recent writing on his blog Stratechery. In it, he says that “digital advertising is becoming a rather simple proposition: Facebook, Google, or don’t bother.” We don’t agree. While display may have commoditized, video has not, and TV advertisers moving over to online video are choosing to go broader, and to buy from ZINC>

 

Thompson talks about the advertising world of the past, in which newspapers, radio and television found their niches in the advertising spend, which has always been about 1.2% of our economic activity. Each existed at a different point in what used to be called “the funnel” from suspect to prospect to customer:

photo courtesy of Ben Thompson, Stratechery

photo courtesy of Ben Thompson, Stratechery

TV and radio were particularly effective at building awareness — making customers aware that your product existed — and also at building brand affinity — the subconscious preference for your product over a competing product at the moment of purchase. Newspapers, meanwhile, were useful when it came to “consideration”: helping consumers decide to buy the product they were now aware of (coupons were very useful here). Finally, brand managers spent a lot of time and money on their relationships with retailers to help pull consumers through the funnel to conversion, with the vague hope that said consumers would prove to be loyal.

It has always been difficult to manage the top of the funnel through digital advertising, because it is less measurable than performance advertising. That’s why RTB took off first, and brand advertising was so slow to be accepted. However, we now have some very good formats for brand awareness, and some very good cross-channel campaigns. Video has made a huge difference for brand advertisers, and “out stream” advertising has made another. Native provides a third.

Because of the size of their reach, Thompson argues, platforms like Facebook’s and Google’s, which can guide an advertiser through different parts of the funnel by means of their own offerings, will capture the advertising market once and for all: “Google is promising… awareness via properties like YouTube, consideration via DoubleClick, and conversion via AdSense.” And thus it makes no sense to go anywhere else, and every smaller platform, from LinkedIn, to Yelp, to Twitter, will lose.

While Thompson uses this thesis as a way to account for the recent stock market performance of LinkedIn and Twitter, it really doesn’t account for all the publishers in our premium network, who have leveraged inView and inArticle on their own sites to achieve better returns than the bigger platforms. They know that from a cost/benefit perspective, bigger does not always mean better in terms of investment return.

Ultimately, advertisers care about the return on their advertising dollar, and if they are trying to reach special audiences, they’ll spend far more trying to do that through Facebook and Google than they will through targeting niche sites where those visitors spend most of their time.

 

 

 

 

FTC Guidelines on Native Advertising Could be Confusing

Demand for native and in-app advertising is expected to grow in 2016, and we’re sure that’s a good prediction, because other parts of the advertising business will be coping with the use of ad blockers. However the FTC issued new regulations around native ads just before Christmas 2015.  Our development team is already examining the new regs and making them part of our in-app and native strategies.

“A key thread in the guidelines is that the user needs to know if content is an ad before she clicks and/or consumes content. It outlines in detail the types of placement, size, contrast and language that avoids consumer confusion.”

This is pretty tricky, because in the words of the guidelines themselves,

an act or practice is deceptive if there is a material misrepresentation or omission of information that is likely to mislead the consumer acting reasonably in the circumstances.  A misrepresentation is material if it is likely to affect consumers’ choices or conduct regarding an advertised product or the advertising for the product.

In evaluating whether an ad is deceptive, the FTC considers the net impression the ad conveys to consumers.  Because ads can communicate information through a variety of means – text, images, sounds, etc. – the FTC will look to the overall context of the interaction, not just to elements of the ad in isolation.  Put another way, both what the ad says and the format it uses to convey that information will be relevant.  Any clarifying information necessary to prevent deception must be disclosed clearly and prominently to overcome any misleading impression.

Advertisers, ad tech companies, and publishers will probably be left to figure this out for themselves by trial and error, since the deception involved in nonverbal communication and formats cannot be easily measured.

 

The only other time the FTC has issued such guidelines was in regard to search advertising, in which sponsored or paid for results must be clearly indicated.  That’s why paid ads, while they come up first in Google search results, all have the small gold square marking them as ads.

It remains to be seen what will emerge from the latest guidelines as advertisers go further into native ads.

The FTC’s native advertising guide makes it clear that while the primary responsibility lies with the advertiser, it will hold accountable “everyone who participates directly or indirectly in creating or presenting native ads,” a group that would include ad tech companies and publishers, according to AdExchanger’s coverage.

 

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.