Digital Video Grows, But Upsets Duopoly

We like research, especially when it aligns with our own corporate strategy. We invested heavily in digital video several years ago, and have been waiting for the market to catch up. Now, apparently, it has, but in a very lopsided way

Pivotal Research Group LLC is an equity research firm that provides research on media, communications, advertising, Internet, and most other major industry sectors to hedge funds and other major Wall Street players. Its major purpose is to identify industry trends and events. It  recently issued a report based on its analysis of Nielsen’s August 2018 data, showing that over the summer, digital media content consumption continued to grow steadily, with double digit percentage gains in August that mirrored the growth reported earlier in the year.   Consumption of digital content on PCs, tablets and mobile handsets  grew 15% to 34 billion person-hours.

This should mean marketers are happy, but actually they don’t know what to make of the rapid changes in the industry. We went back to the source of the research, Nielsen.  According to the Nielsen CMO Report,

There has never been a more dynamic and challenging time to be a marketer. Since the advent of the internet, fueled by available high-speed broadband and ignited by the proliferation of smartphones, marketers have more access to consumers than ever before. We are awash in data and should be living in a nirvana of actionable insights. The reality, however, seems disconnected from this promise. Over the last 18 months, some of the largest and most influential advertisers in the world have spoken up about their concerns with digital advertising, calling the supply chain “broken” and pointing to high incidence of fraud and lack of brand safety. Subscription video on demand (“SVOD”) services are decreasing reach of traditional marketing mediums like TV and radio. The launch of GDPR in the European Union and related privacy challenges have added complexity to the collection and management of consumer data. Combine this with changing consumer preferences and zero-based budgeting and it’s clear that the job of the CMO has become a more delicate and dangerous catwalk. At Nielsen, our job is to provide the science behind what’s next. 

Digital ad spend has eclipsed traditional channels and we expect that trend to continue. When forecasting the next 12 months, 82% of respondents expect to increase their digital media spend as a percentage of their total advertising budget. By comparison, only 30% of respondents plan to invest more in traditional media channels in the near term.

Google gets the lion’s share of digital media viewing, because of YouTube. It alone showed 20% gains and accounts for 18% of all digital content consumption. If you took out YouTube from the results, they’d only be 12%. Google’s YouTube, Google and Waze combined to account for 32.8% of digital media consumption, up from 29.4% in August 2017. Google-related properties accounted for 56% of the growth in overall consumption of digital content.

Facebook, as you might suspect, is having problems. Even with the inclusion of Messenger, Instagram and WhatsApp, it was down to 14.3% of all digital consumption in August 2018 from 16.9% in August 2017 and 18.5% in August 2016. Pivotal says while the number of core Facebook users was up 7.2%, the average time per person was down 6.7%. Total company-wide usage decline was 13.0%. And now several Direct to Consumer brands, specifically Glossier, which had used Instagram to reach customers, are building their own platforms.

After Google and Facebook, Verizon properties were the third-largest platform of digital content time spent. Including Yahoo, AOL and Tumblr (but excluding MSN inventory), Verizon had a 3.2% share of digital media content consumption against 3.5% in August 2017. No real growth here. Same with Amazon. Looking at all activity — including Twitch and Audible — it was at a 1.8% share against  2.1% in August 2017. Snap is more difficult to judge, because it grew monthly users by 20%, but time on the site fell 23%

 

So, as we predicted, the duopoly may be running out of steam, but digital video is not.

New York Ad Week Reveals Facebook’s Problems

New York Advertising Week was very revealing, both about the state of the industry in general (existential angst), and about Facebook’s problems in particular. I predict by next year there not only won’t be a duopoly–that’s well on the way because of Oath and Amazon–but will be a considerably more open marketplace.

Facebook has begun selling video ads through a program called In-Stream Reserve. Similar to YouTube’s Google Preferred program, In-Stream Reserve puts a velvet rope around Facebook’s most prized video inventory and sells it as a standalone package. However, what Facebook considers prized programming may not match with advertisers’ expectations, especially among TV ad buyers who are accustomed to buying individual programs on linear TV and may be unfamiliar with Facebook shows like “Fear Pong” and “Truth or Drink,” which along with MaxNoSleeves are also part of In-Stream Reserve.

When Facebook pitched the program as a test earlier this year, it asked advertisers to commit to spend $750,000 over three months. The price tag has since dropped to roughly $250,000 over three months, according to two agency execs with knowledge of the matter. A Facebook spokesperson declined to comment on pricing.

And from Casey Newton’s newsletter, another problem:

“One, my people are mad at Facebook for requesting that they register as political advertisers in order to promote their gay cabaret shows. Eli Rosenberg reports in the Washington Post:
The Washington Post found dozens of advertisements mentioning LGBT themes and words that the company blocked for supposedly being political, according to a public database Facebook keeps.
The rejections, the majority of which Facebook told The Post were in error, underscore the company’s challenges in regulating the massive amount of information flowing through its service, an issue that burst into the fore after the disclosure that Russian-state actors used advertisements on Facebook to sow discord during the 2016 U.S. election. But they also touch on a deeper tension as the company seeks to better regulate political uses of its platform. Though Facebook has taken pains to appear neutral, the censorship of LGBT ads, however inadvertent, points to the company’s difficulty in finding a middle ground in a tense national climate where policy increasingly hinges on fundamental questions about race and identity.
It’s too much to say that these ads were “censored.” Registering as a political advertiser is certainly a hassle; it involves the US Mail. But Facebook didn’t reject the ads so much as it requested more information about the advertiser — which, as the Post notes, the company later admitted that it did in error. Securing the platform means hassling lots of people, some of whom will be hassled unfairly. “
All this serves to convince me that next year will be a better year. And as Will Smith said, “nothing is more valuable than your gut. The metrics are there just to train your gut.” I trust my gut about the state of the ad business all the time, and we’re still here.

Criteria for Acceptable Mobile Ads Released

Nothing is black and white. While it is true that 25% of users block online advertising, surveys conducted by Eyeo, the makers of Ad Block Plus, have revealed that there are some ads even users of ad blockers don’t mind. That led to Eyeo setting up a “white list” of companies that agreed to run only the acceptable formats. While this action was dismissed by the most vocal anti-advertising people as “pay to play,” time has passed, the industry has moved on, people are beginning to realize how much it would cost to subscribe to everything they wanted to consume, and an uneasy peace reigns as the number of new people installing ad blockers dwindles.

To make its peace with the industry, Eyeo also formed an Acceptable Ads Committee, consisting of representatives from the publishing, advertising, and ad tech communities. Eyeo then spun the committee out as an independent entity, and that group of representatives has now released a list of criteria for Mobile Acceptable Ads. ZEDO has been represented on this committee since its inception/

Mobile-specific Acceptable Ads Criteria

Placement Requirements

  • Static ad types (e.g. 6×1 banner and 1×1 tile ad without animations) are allowed to be placed anywhere on the mobile page. For an example of a 6×1 ad, this time placed on top of the content, please see thishere is an example of a 1×1 ad unit.
  • Small ads (6×1 banner or smaller) are allowed to be placed as a sticky ad on the bottom of the screen. Other formats are not allowed to stick. For an example of a 6×1 sticky ad unit, please see this.
  • Large ad types (e.g. “native” tile ads) are only allowed to be placed under the primary content on any page. For an example of this type of ad unit please see this.

Size

Ads shown on mobile screens are bound to the following size restrictions:

  • Ads implemented on the scrollable portion of the webpage, before or inside the primary content of the page, may not occupy in total more than 50 percent of the visible portion of the webpage.
  • Ads implemented as a “sticky ad” have a maximum height restriction of 75px or 15% of the screen height. All sticky ads must include a close button or some other easily-identifiable closing mechanism.
  • Ads placed below the primary content may not exceed the height of 100% of the screen height (i.e. the ad may not be more than one “full scroll” height).

Animations

Animations are allowed for the 6×1 ad type when placed as a “sticky” ad on the bottom of the screen. Animations have to comply with the LEAN standard for animations.

Next year, the committee is going to work on standards for mobile video. This is not easy work, because we have to run everything by our audience. Feedback from this round was generated by conducting a survey in partnership with Hubspot. Our conclusion is that we need a larger sample so we can get even more feedback on the tolerance of users who run ad blockers to mobile ads.

In other news, people who haven’t been as willing to work with ad-blocking users have develped other ways to reach those users, and Eyeo has invested in AI technology to help its customers better spot “native” ads that aren’t easy to distinguish from actual content.

AI and Blockchain Dominate DMexco (But Not Reality)

We withdrew from doing business in Europe temporarily until GDPR sorts itself out, so we didn’t feel the need to attend DMexco.  However, the people who did reported back that it was a more heavily European-market focused conference, and like Cannes, a bit smaller. As usual, following it on Twitter gave us an overview, and since we have deep technology chops we were able to understand that most of the presentations were about the future, and not about the present. Neither AI nor blockchain are ready for prime time.

The most common current use of artificial intelligence outside marketing is for predictive analytics in industry. It is used in factories, where connected devices have produced a kind of industrial “internet of things.’ Thus present day AI can tell us when a machine will need maintenance, based on historical data. But most consumers are not machines, and AI is still not in a position to predict big changes in consumer sentiment, such as the fall-off in demand for soda. Large trends in consumer sentiment have caught marketers unaware, if all they’re using is data from AI. So AI is still somewhat backward facing rather than forward facing. That’s why IBM Watson still does not make 100% accurate medical diagnoses.

For example, there were a dozen presentations on AI, including Deutschebank’s, despite the fact that most people in advertising don’t now how best to use it.  The most heavily used AI applications require vast datasets, and when companies say they are using AI to target customers at every stage of the customer journey, what can they possibly mean in the context of GDPR? Moreover, AI cannot yet tell us what customers want, since the action of an individual is fine-grained. At best, it can tell us what classes of consumers want.

Eventually, AI will be used to identify targeted ad buys, but it is not quite there yet. 

The classic example of programmatic advertising is SEM advertising on channels like Google (AdWords), Facebook, and Twitter. Companies like PredictiveBid and Israel-based Albert have decided to put a significant amount of their focus on programmatic advertising specifically.

Programmatic ads bring a tremendous amount of efficiency to bear on the “inventory” of website and app viewers. Platforms like Google and Facebook have set the standard for both efficient and effective advertising – and it can be supposed that these systems will become more and more user-friendly in terms of allowing non-technical marketers to start, run, and measure campaigns on line

Yes, but! What we’ve been hearing more and more lately from marketers is that Facebook ads, despite the granularity of their targeting, do not convert.  We said this years ago:-)

Where AI is actually useful today is in improving search,.especially for smaller ecommerce sites. Obviously Amazon and Google have their own search, and those heavily use AI.

Closely related to search is recommendation, and if you watch Netflix or shop at Amazon you can understand that although recommendation engines have been around for a long time, and are depended on by consumers, they’re far from perfect.

Another area for exploration is text-to-speech or voice. There are a number of possibilities for AI here, from digital assistants to conversational commerce.

But if you went to DMexco wondering what you could put into practice today, there was probably precious little.

 

 

 

New Game: Consent String Fraud

Well, that didn’t take long. GDPR went into effect at the end of May, and as we all return from summer holidays we are already the victims of consent string fraud. I guess fraudsters don’t vacation. They spent the summer generating fake consent string numbers.

Digiday has already run its “WTF is a Consent String” piece, which signifies that the term has already entered the ad tech lexicon. You’re probably still applying your mosquito repellant, so here’s what it means:

A consent string, also referred to as a “daisybit,” is a series of numbers added to an ad bid request, which identifies the consent status of an ad tech vendor. That means whether or not they have a user’s consent to use their data in order to serve them personalized advertising — a stipulation now needed under the General Data Protection Regulation. The Interactive Advertising Bureau Europe has assigned a consent string to every vendor that has signed up to its global vendor list.

Of course Google does not use IAB’s consent scheme framework and has developed its own analogue for companies that use its Funding Choices platform. That makes things even more complicated.

The difficulties in achieving compliance have led many smaller vendors to write off Europe as a market until things settle out and they know how onerous the enforcement will be.

But those are the good guys. As always, the fraudsters are undeterred and while you were trying to spend quality time with the kids they were designing fraudulent GDPR consent strings.

Some ad tech vendors have already identified fake consent strings , which means they may have inadvertently served personalized ads to users who have not given their consent. This has the potential to become an escalating crisis, since once a user has decided not to give consent, she’s not expecting to have her data misused and her privacy violated.

In the nearly 20 years we’ve been in ad tech, we have seen this game of whack-a-mole over and over again. The good guys try to fix the ecosystem, and the bad guys quickly catch up and pass them. One form of fraud gives way to another.

We long ago decided to be one of the good guys, and we’re not bitter. If you are interested in compliance, Prebid.org has you covered with its GDPR Compliance Module. Prebid.org is an independent organization designed to ensure and promote fair, transparent, and efficient header bidding across the industry. Funded by dues-paying members, it manages the open source projects Prebid.js, Prebid Mobile, Prebid Server, Prebid Video, Prebid Native, and others.

The problem is that these open source industry resources, along with Github, are also accessible to people who are out to mess with the system, so now we have to develop a way to spot and expel fraudulent consent strings.

Sometimes I wish consumers understood even a little bit about how hard those of us in the industry work at combatting fraud.

 

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.

 

 

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.