Ad Industry Insiders See Lack of Trust as Big Obstacle

Somehow we missed that moment at ANA when former MediaCom CEO Jon Mandell startled the ad industry by calling out his industry colleagues as self-serving rogues:

“Media agencies aren’t living up to their fiduciary duties to clients and ‘cross the line of acceptable conduct in a partnership,’ Mr. Mandel said. ’They are not transparent about their actions. They recommend or implement media that is off strategy or off target if it works for their financial gain.’

Rebates,’kickbacks,’ and other incentives for agencies that are at least potentially adverse to client interests are happening virtually everywhere in the U.S. media landscape, including TV, he said. Mr. Mandel said the practice has migrated from cash incentives to free Inventory, which agencies may then deal back to clients in scatter buys or sell via ‘dark pools’ that are either traded programmatically or liquidated in barter transactions.”

No wonder the first panel at this year’s AdAge Digital Conference was titled “Elephants in the Room,”  and took a frank,sometimes  scathing look at the big problems in the industry, the biggest of which turns out not to be ad blocking, but conflict of interest on the part of agency trade desks.

“Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?” Mr. Mandel said. He said that advertising spending broadly has long stayed within a narrow band of 1% to 1.25% of gross domestic product globally. “So if agencies are growing at a higher-than-GDP basis, the money is coming from somewhere.”

Somewhere along the way, the trust relationship between agencies and their clients has eroded.Global brands have learned to ask the right questions of their agencies, but transparency about how trading desks make money is important if smaller advertisers are to be protected from predatory treatment by their own agencies. The two major industry associations, AAAA and ANA,  can’t even agree on what constitutes transparency, but AAAA is acting guilty and taking the responsibility for creating greater visibility into kickbacks and arbitrage.

Moreover, agency trading desks are driving media prices down, to the detriment of the publishing industry, Without passing the savings on to their own clients. Once they have banked the inventory on their books, they can no longer be objective in what they tell their clients to buy; they’re guilty of conflict of interest. In this new market, in which agencies are both buyers and sellers, they seem to have lost sight of the fact that advertisers need healthy publishers, and driving ad rates to the floor helps neither side.

Not to mention the consumer, who, pummeled by cheap ads that are neither useful nor relevant, responds by downloading an ad blocker.

This lack of trust extends even beyond agencies and their clients,  to consumers themselves. Consumers who have been enduring pop ups, pop unders, page takeovers and non-skippable video ads have become increasingly intolerant of an industry they see as violating their privacy for no good reason.

Most of the speakers agreed that advertising has divorced efficiency from effectiveness, sacrificing storytelling for data. As a result, marketers are not only being undermined by consumers with ad blockers, but by themselves, because bad ads mean consumers don’t feel passionate about brands anymore.

Compared to the enormity of the kickbacks and arbitrage scandals, the other issues on the table, like visibility and  fraud, seemed inconsequential.  Neither of them is being solved, but at least MOAT and Integral Ad Sciences are working on a metric for viewability and the Trustworthy Accountability Group has taken on fraud.

 

 

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.

 

SXSW: Buzzfeed Releases Ad Platform for its Social Streams

Since its launch in  2006, Buzzfeed has always been one of the most innovative digital publishers, and it has been rewarded accordingly with enormous economic success.  Founded by former Huffpo co-founder Jonah Peretti, whose expertise is in making content go viral, Buzzfeed’s technological edge came from learning what content was likely to be shared among readers and optimizing  the Buzzfeed site using that knowledge. Speaking at SXSW Interactive last year, Peretti explained that his product was created for the “bored in line and bored at work” segment of the population, who would share content they found interesting with their friends, upping the platforms visitor counts.

But even in the short space -for a couple of years, things have changed in digital publishing, and last year Buzzfeed began publishing some of its content directly to social platforms like Facebook.The rationale? Meet the audience where it already goes, rather than force it to go to the Buzzfeed site.

While that might be a good strategy for Buzzfeed’s content, what are the ramifications for its advertisers?

Well, it appears that the advertisers can now follow Buzzfeed across its social platforms.

During a keynote at South by Southwest Interactive, BuzzFeed’s marketing chief Frank Cooper unveiled a beta test of an ad format dubbed Swarm. It allows advertisers to run campaigns simultaneously across all of his company’s Web and mobile properties and six of its social platforms: Snapchat Discover, Vine, YouTube, Facebook, Instagram and Tumblr.

While this appears to be a big win for Buzzfeed advertisers, it doesn’t come without problems for brands who are trying to figure out what they’re spending money on and whether they’re’ getting a big enough ROI. Since many social platforms don’t track what people are talking about the way Buzzfeed does, it will be tough for brands to measure what this social reach is worth and decide what to pay for it.

Another problem?  All these social platforms have different audiences, and running the same ad formats or ad copy across the board may simply not work, and adapting the ads could prove costly to brands who are already running their own cross-channel campaigns.

Like many innovations, this one may take a while to prove its utility.

 

The Right of a Consumer to Privacy on the iPhone

As the Apple debate continues to spark reaction, we can’t help but wonder what effect this case will have on the advertising ecosystem. If you haven’t been keeping up, the US government has ordered Apple (through court order) to create a small piece of software that will override the strong encryption of a phone used by one of the San Bernardino shooters. The phone, owned by the man’s employer, had been backed up to the cloud fairly recently, and that information had already been made available to the government. What the government wanted was simply some recent information.

Apple refused. Last Friday it filed a brief with the court challenging the order, saying that

 “This is not a case about one isolated iPhone,” writes Apple attorney Marc Zwillinger in today’s brief. “Rather, this case is about the Department of Justice and the FBI seeking through the courts a dangerous power that Congress and the American people have withheld: the ability to force companies like Apple to undermine the basic security and privacy interests of hundreds of millions of individuals around the globe.”

Read the Wired article if you are interested in more detail. For us, the major questions have to do with the global impact of this order on Apple, and the effect of “hacking” the iPhone on the already fragile mobile advertising ecosystem in which we participate.

There are many countries in the world where trust in government is not presumed. Many of those countries have hundreds of millions of people who have come on line trusting privacy; they’re not sophisticated computer users. Part of Apple’s success in some emerging markets has been its emphasis on privacy and security. Apple has declared that creating the software to help the government risks that piece of code getting out in the wild and being abused. Apple also believes that if it gives in the US government, it will have not a leg to stand on when other, less representative governments demand access to an individual’s phone.

Most important to those of us in the industry, consumers are already furious over tracking and stalking and unwelcome use of their data. This, rather than ads per se is the number one reason people install ad blockers when they install them. The industry is fighting hard to keep the trust of consumers, and to make mobile advertising acceptable.

Hearing that personal information on iPhones, even though it is encrypted, can be hacked, would entirely undermine the future of our industry. That’s why other tech companies like Google and Amazon have jumped on to support Apple and write briefs on its side in the court case. For one or two terrorists it’s a little dangerous to destroy an entire ecosystem.

 

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.

 

The Future of Digital Advertising

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

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

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

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

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

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

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

Video Takes Over the Internet

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

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

‘Click for More’ on desktop:

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

Live streaming for brands:

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

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

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

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

ZEDO Among the First to Go Through TAG Certification

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

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

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

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

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

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

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

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

ZEDO Rolls Out Quick Innovation Platform Strategy

Over the past year, we’ve launched a new platform strategy, largely in response to customer requests for a trustworthy supply chain, timely innovation, and higher ROI for their online ad spend. We are finding that our strategy of an end-to-end platform is working well, and we plan to dramatically expand development of new formats and expand sales to many new countries next year.

This will be exciting and provide new opportunities to all  our team members, especially in mobile, because many emerging markets will leapfrog the desktop altogether.

As a reminder, ZEDO’s strategy is to build three technologies: Publisher Ad Server – ZEDO Exchange and ZINC Platform for Agency Trading Desks to buy from. These three platforms are connected end-to-end. So if the ATD trafficks an ad into the ZINC Platform it goes into the ZEDO Exchange account (formerly ZAN), then into many publisher ad server accounts and then onto the webpage.

Thus, the creative goes through ZEDO technology from end to end.There are many advantages to this strategy.First, it makes the supply chain clean and trustworthy for the buyer, because malware cannot get in. Another advantage, both to buyers and sellers, of this strategy is that ZEDO is uniquely placed in the industry to innovate.

As we continually come up with new formats, which we may start calling Innovations instead of formats to better explain our strategy, we have to add them to all three technologies – and since all three are in our control we can add them quickly. This gives us a huge advantage over our competitors.

For example, a DSP  can only bid on whatever AdX or Pubmatic sends them bid requests for. If they have an idea of a new format, they would have to convince AdX and Pubmatic and then various publisher ad servers to support it.

It is  often slow and difficult to find new ideas for Innovations and then to build them: convincing several third party companies to agree and then build would be a huge multi-year exercise for our competitors like Turn, in this example. So the ZEDO end to end strategy uniquely allows ZEDO to win in advertising innovation. And the innovoation we focus on is to create “fundamentally better advertising.”

It has always been our mission to create fundamentally better advertising.

As this is a winning strategy in a changing online advertising landscape, we will roll it out very quickly over the next two years, launching  ZINC across the world.