Agencies Merging in the Face of GDPR

One of the ways agencies grow is by buying smaller agencies. In theory, that gives them access to more clients, a fresh creative staff, and a way to create scale to ward off competitors. However, mergers and acquisitions are only as good as their integrations into the mother ship.  According to an article in AdExchanger,

There were 398 acquisitions in 2016 with a total investment of $14 billion.  The Big Six – WPP, Dentsu, Havas, Publicis, IPG and Omnicom – were responsible for 89 acquisitions, at a value of more than $3.3 billion.

Figures through September showed 291 acquisitions this year. And in this game of agency supermarket sweep, many of the targets come from the data, digital and programmatic aisle.

This could prove tragic in the long run. The good news is that at long last agencies seem to understand that digital, data and programmatic are capabilities they need to have. But they are one step behind in the race to the future. As a result of coming new data privacy regulations, such as the European GDPR (Global Data Privacy Regulations), many marketers have data at the forefront of their minds, but for the wrong reasons. They know they are going have difficulty using it the way they did in the past, because now the consumer will be in control of her data.

What the big agencies really should be doing is studying up on those regulations and coming to grips with the limits that will be placed on the use of data in the future. Agencies are usually headed by people who may know the creative side of the house but don’t keep very good tabs on data. There will be an amazing culture clash when the data-driven geeks arrive in the house. There will be equally big problems because programmatic itself is coming under scrutiny for brand safety issues and ad fraud. So far, the geeks and the creatives have been kept separate, in separate companies. If they come together under one roof, that holding company will have to tighten its controls to make sure that the data flowing through its acquisitions is in compliance with the new regulations, or the fines will be significant.

So what the agencies will need now is a new cadre of management familiar with aspects of the business that have been lumped into a separate bucket called “martech.” And they will probably have to beef up their compliance departments as well.

In the rush to integrate acquisitions and learn more about how to manage data, guess what will get short shrift again? True creative, the kind that makes advertising users want to see.

Instream, Outstream We All Like Video Stream

A little more than four years ago, ZEDO had a global product development meeting to come up with ideas for mobile video. At the time, things were just shifting to mobile, and the ad dollars weren’t quite there yet. The customers, however, were spending more and more time on mobile devices, and the future could be clearly predicted by publishers, who were seeing more and more or their traffic come from smart phones and tablets. Our partner, The Economist, had asked us for a way to run video ads on text pages.

The conversation in the room at that meeting quickly moved around to the differences between phones and tablets, and what consumers would “tolerate” on a device they wore on their person all day. Somehow, the phone seemed a radical departure from any other online device because of this intimate connection with its user.

Our product team showed some of us in marketing an ad unit they were calling “In Article video” because it was a large video ad format that could be shown on a text-based site, and it was a complete departure from the only available video ad format at the time, which was pre-roll. There was a shortage of available pre-roll, and marketers were searching for other places to use their existing TV creative.We thought the format was very effective, and would drive user engagement, because at the time users were just beginning their love affair with video on the phone.Mobile video was still something of a novelty.

We decided at that meeting to call our offering “In Article Video,” because it ran in the article, appearing only when the user scrolled down to see it. When we tested it, the viewability of the unit was over 70%.  We knew we had found the answer to filling advertisers’ need for something beyond pre-roll.

In the first year, we sold this format as In Article, but then the industry began to call it outstream, and soon we had at least one copycat who popularized the name “Outstream.” While this made no sense to us as a name, we had no choice but to adopt it.

One of the claims we have always made about Instream/Outstream video formats is that they are a form of “native,” meaning they don’t take the viewer away from the mobile stream of news or articles she is already reading. However, the industry decided to make it difficult for us with that definition as well: native can now also mean branded or sponsored content. Native has come to mean advertorial, and nothing to do with format or feed.

I’ll take a minute to argue here that every time the industry chooses a confusing term for an ad format, it makes that format more difficult to gain adoption. We have had to deal with the confusion around Outstream and then the confusion around the meaning of native, and we believe that has held back the adoption of both ideas.

The good news is that 77% of marketers have not hear of either Outstream or Instream video, so we’ve got a large addressable market to go after next year with our publisher partners.

 

 

Facebook’s Problems Illuminate Dangers of Scale

As if all the new blockchain companies trying to fix digital ad transactions weren’t enough, we will certainly face more scrutiny in the buying and selling of ads since it was revealed that a Russian troll bank connected to the Kremlin propaganda machine bought $100,000 worth of ads on Facebook during the last election. This was admitted by Facebook, which probably means it’s the tip of the iceberg. Underneath is an iceberg that could harm Facebook if the election revelations are looked at as part of  a pattern that includes Facebook’s recent gaffe with data reporting.

That gaffe, reported by CNBC,  was discovered by a Pivotal analyst,

Facebook’s Ads Manager claims a potential reach of 41 million 18- to 24-year olds and 60 million 25- to 34-year olds in the United States, whereas U.S. census data shows that last year there were a total of 31 million people between the ages of 18 and 24, and 45 million in the 25-34 age group, the analyst said.

“While Facebook’s measurement issues won’t necessarily deter advertisers from spending money with Facebook, they will help traditional TV sellers justify existing budget shares and could restrain Facebook’s growth in video ad sales on the margins,” said research analyst Brian Wieser, who maintains a “sell” rating on the stock with a price target of $140 for year-end 2017.

While the incorrect reporting of data is something Facebook itself has to fix, the propaganda problem is more difficult to address.

There is a lot of hand-wringing going on in our government and in our newspapers wondering how the Russian ad buy could have happened. But we in the industry know exactly how it could happen: Facebook Ads Manager. Anyone with a credit card  and a Facebook account can use Ads Manager, and several people making relatively unnoticeable buys of about $10,000 each could easily have the benefit of Facebook’s super-targeting abilities to hit very specific people with very appropriate messages that would resonate enough to cause them to change their behavior patterns or — we wonder — their votes.

Thus, the same specificity that brands love can be perverted by political organizations to manipulate minds.

How should we think about this?

In Europe, the GDPR addresses some, but not all of this by giving consumers more control over their data. However, we haven’t yet seen any expert analysis of how this would apply to Facebook, which is not a conventional publisher. In fact, Facebook has been reluctant to think of itself as a media company at all. In the face of these recent discoveries, that’s one thing we think will have to change. We may see the return of the ugly word “platisher” as we in the industry try to address these concerns.

 

Equifax, Malware, and the UntrustworthySupply Chain

As if Equifax hasn’t lost enough trust from the first hack, last week it had to disclose that it suffered a second breach, which was called by most reporters a second hack. But apparently last week wasn’t a second hack at all, but a different problem. . Ars Technica wrote:

 A key part of Equifax’s website has been redirecting users to malware for an unknown period of time, a security researcher discovered this week. A video posted by independent security analyst Randy Abrams  showed an Equifax webpage redirecting to a fake Adobe Flash download prompt that installs adware. The infected Equifax page, which the company took offline after discovering the problem, is used to access and update one’s credit report, meaning that many people have likely visited it in the weeks since Equifax disclosed a data breach affecting more than 145 million Americans.

But the new incident was not a second hack – Equifax told MC that the malicious redirect came from a vendor’s faulty code. “The issue involves a third-party vendor that Equifax uses to collect website performance data, and that vendor’s code running on an Equifax website was serving malicious content,” a spokeswoman said. “Since we learned of the issue, the vendor’s code was removed from the webpage and we have taken the webpage offline to conduct further analysis.” Equifax appears to use a disreputable third-party ad provider, Iron Source, which is known for facilitating “malvertising,” the process of implanting malware on victims’ machines through the ads they visit.

So a third party vendor did it? Iron Source, which has a reputation for allowing malvertising. Not according to a person from Malwarebytes, a service used to detect malware. This person said it’s incorrect to call this a hack or attribute it to ads. In fact, the third party script was a web analytics component, and not ad code. But the third-party script itself was leveraged to load a domain serving as “ad rotator.”

Apparently, that’s is an issue with 3rd party scripts and any site that was using that particular one was at risk.  The ad rotator delivered very low quality redirects, suggesting that these were not even targeted ads.

While malvertising remains quite common, compromised analytics tags are less so. What could the takeaways be from this incident?

Our biggest takeaway is that you have to know every single step in your supply chain, and every partners must be certified and trusted. There are far too many unknown intermediaries in digital transactions for us to feel comfortable about our visitors’ data, and we have to limit the number of those for safety’s sake.

That’s why we have a private platform where this cannot happen. We have weeded out low quality sites, we have only quality inventory, only high quality partners, and no one else enters the supply chain once we set up a buy. This must be the way the entire industry operates in the future. If we don’t let the bad apples in, they can’t corrupt our supply chain or compromise the data of any of our partners.

 

Publishers Speak Out at Advertising Week

It seems as if the biggest takeaway from Advertising Week is that the Financial Times announced it has been ripped off by ad fraud, even though it doesn’t sell its own video ads programmatically. And it was a big loss.  The fraud happened entirely outside the magazine’s control,  which only served to underline the lack of trust in the supply chain surfacing again this year. Although a couple of new organizations have formed to solve the problem of fraud in the media supply chain, not much appears to have changed.

Here’s what happened:

The Financial Times found display ads against inventory masquerading as FT.com on 10 separate ad exchanges and video ads on 15 exchanges — the publisher doesn’t even sell video ads programmatically — with 300 accounts selling inventory purporting to be the FT’s. The equivalent of a month’s supply of bona fide FT.com video inventory was fraudulently appearing in a single day. The FT estimates the value of the fraudulent inventory to be $1.3 million (£1 million) a month.

This is called domain spoofing, and it’s the main problem of using open exchanges. The Financial Times had to write to the exchanges involved and ask them to remove the fraudulent inventory. Then it had to write to agencies and their clients telling them not to source inventory from anywhere but Google AdX or TrustX, through which FT sells its display.

“The scale of the fraud we found is jaw-dropping,” said Anthony Hitchings, the FT’s digital advertising operations director. “The industry continues to waste marketing budgets on what is essentially organized crime.”

This is why we developed a totally secure private exchange a couple of years ago.  When we handle transactions end to end, we know where every ad is at any given time, and we can also track its response. We have never understood why the industry tolerates wasting marketing budgets as it has in the past, although we hope this is (slowly) changing.

How can we tell it is changing? Agencies holding companies are reporting poor financial results. That’s because brands are now far more careful about entrusting their budgets to trading desks that engage in arbitrage. Who knew that one of the biggest ways agencies made money was by buying media in bulk and not passing on the savings to their clients? We thought that only happened in the world of late night TV and informercial companies.

The other important media announcement out of Advertising Week was the re-branding of Advertising Age Magazine as AdAge, and the promise to guide this industry through a disruption the publisher admits is under way. We’re a bit suspicious of the publisher’s new recognition that

Everything is a brand. Everything is an ad for itself. So our coverage needs to reflect the broader culture beyond the weeds of our industry. We’ll still get into those weeds, but we’ll also explore the flowers. And we’ll do it with a tone that’s inviting, accessible, wry, witty and sharp.

This leads us to believe that Ad Age is going to be less an industry publication than a cultural publication, and we wonder how its core audience, advertising and brand professionals, will respond to that.

 

Native and Mobile Ads Draw High CPMs

The advertising landscape continues to shift. This time the news appears to be good for the publishers. MediaRadar’s newest study on advertising trends in 2016 and Q1 2017, which came out at the beginning of the summer, revealed that high CPM ad placements are on the rise (whew!), especially if they’re mobile or native; niche and enthusiast sites still flourish in print (along with regional titles,) and native ad placements have grown 74% in Q1 year over year.

Native ad formats have grown the most and command the highest CPMs. While many forms of native advertising are still frowned on,  the demand for native has nearly tripled since 2015. That’s partly because native ad formats typically escape ad blockers, but also because consumers don’t mind reading or viewing something that’s truly informational and isn’t interruptive. Native ads are predominantly  brand ads, and the further good news is that digital advertising has finally arrived at a point where it’s not all remnant inventory, performance ads, and low CPMs. This will allow digital advertising to be effective at points nearer the top of the funnel.(If there is still a funnel at all). For now, native seems to outperform more traditional ad units.

As for print advertising, it still hasn’t gone away, although spend did decline 8% year over year. While general interest titles are languishing, niche and regional publications appear to be on the rise. And many advertisers have begun to target smaller volumes of engaged users over sheer reach.

This seems counterintuitive to us, but we’ve observed it ourselves: programmatic buying has declined. In fact it’s down 12%, and we think it’s because media planners are tired of not knowing where their ads are going to be seen. Brand safety is one of the problems, and the other is viewability.  Viewability is the new currency for advertisers and it’s tough to track viewability accurately with programmatic buying. Brands really need to buy programmatically, however, because it’s far less effortful, especially for large buys. We think the market will settle somewhere around programmatic direct, which allows far more control than simple programmatic.

If the current market trends continue, publishers should see increases in revenues, brands should see growing effectiveness of ad spend, and consumers should be less annoyed by formats that offer little else than interruption.

 

 

 

 

 

European Privacy Rules Should Not Kill Free Media

Randall Rothenberg, CEO of the Interactive Advertising Bureau, one of our largest digital media industry groups, is on the warpath again. This time he is afraid that a new proposed rule in the GDPR (General Data Privacy Regulation), which takes effect in May of next year, will eventually kill  the ad supported free media ecosystem that has been in place for the entire existence of newspapers.

Buried in pages of amendments to the European Union’s latest privacy proposal, the ePrivacy Regulation, members of the European Parliament recently recommended language that would strip European publishers of the right to monetize their content through advertising, eviscerating the basic business model that has supported journalism for more than 200 years. The new directive would require publishers to grant everyone access to their digital sites, even to users who block their ads, effectively creating a shoplifting entitlement for consumers of news, social media, email services, or entertainment.

The language specifically says

“No user shall be denied access to any [online service] or functionality, regardless of whether this service is remunerated or not, on grounds that he or she has not given his or her consent […] to the processing of personal information and/or the use of storage capabilities of his or her [device].”

In practice, it means this: The basic functionality of the internet, which is built on data exchanges between a user’s computer and publishers’ servers, can no longer be used for the delivery of advertising unless the consumer agrees to receive the ads – but the publisher must deliver content to that consumer regardless.

Rothenberg refers to this proposed regulation as about to enable behavior akin to shoplifting or turnstile-jumping. Moreover, he says that since 76% of internet media is supported by advertising, much of the world’s free media would inevitably disappear, leaving us essentially without all the freedom of the press that the internet enabled for the past twenty years.

Rothenberg is paid to advocated on behalf of the internet advertising business model, and we all realize that, but here is an exceptionally good point that he makes about mobile advertising and how its demise would affect democratic values:

The impact in the mobile environment, where the majority of mobile applications depend on advertising revenue to survive, would be just as devastating. With few consumers willing and able to pay the additional taxes, the majority of the online content they enjoy today could disappear forever – at exactly the time authoritarian governments around the world are attempting to seize more control of the news and entertainment media.

While some might argue that Rothenberg’s latest rant is overstated, we think  this is a very unusual period in the history of the world’s democracies, and it makes sense to advocate strongly for free, ad-supported media  –as long as it is not overly intrusive and provides value to consumers.  That’s the key point that Rothenberg forgets to make, but is never far from our minds. To earn consumers’ attention, we have to provide fundamentally better advertising. And that, paired with free media, can preserve the array of voices in the digital media landscape that contribute to the preservation of both human rights and democratic values.

 

Fixing the News Business (For Now)

Jeff Jarvis, former founding editor of Entertainment Weekly and creator of Buzz Machine, and now professor of Journalism at CUNY,  has written a very profound article on how to save newspapers. The article is relevant not only to newspapers, but also to any publication that seeks to maintain its life in the current digital environment. In this environment, there is competition for attention, and an almost infinite supply of news, both fake and real, and entertainment.

As an experienced partner to publishers (since 1999), we would like to recommend that they think about some of the points Jarvis makes in his article. He begins by setting the stage:

The burning house sits on the foundation of media’s old business model, which is built on volume: reach and frequency in mass media terms, unique users and clicks online. This house is doomed to commoditization as the abundance and competition the internet spawns drive the price of the scarcity we once controlled — media time and space — toward zero. Yet this is the model that still makes us our money and so, just to survive and perchance to invest in an alternative future and home, we must still feed that fire with cats, Kardashians, and every new trick we can find, from programmatic ads and so-called content-recommendation engines (which commoditize media yet further) to native advertising (which, when it fools our readers, only depletes the seed corn that is our trust and brand). We know where this ends: in ashes.

Well, we all know that. Now what do we do about it? Jarvis says we have to build our businesses on value over volume, and we must develop relationships that go deep into communities. And by communities he means not just localities, but affinity groups and other self-identifying niches and segments — perhaps parents, perhaps, transgender young adults, perhaps cancer patients. The key here is self-identifying.

This means not buying data, but developing our own — first party data that comes from talking to our current customers, subscribers, visitors, and finding out more of what they want. For some publishers, this is more difficult than it would seem. As publishers, we’re used to putting out content and assuming we can target the audience from outside. We can target, for instance, Hispanics. But Hispanics don’t necessarily define themselves as Hispanics; they have characteristics that cut across the obvious label.

Note well that in each of these situations, we must shift from media-centric products — our newspaper, our content, our home page, our comments — to public-centric services: a place for people to come together with residents of their town; a place where seniors can find the right adult development for them; continuing alerts about developments in an issue a high-school parent cares about; a means of connecting with others who are concerned about filthy park to get it fixed; and so on. I am not talking about personalizing the serving of the content we already have (though that would be a good and necessary start). I am talking instead about building new products to serve specific constituencies in new ways.

And what do we do to solve this?

Start with advertising. At the most basic level, if you are making products and services that are more useful, engaging, relevant, and valuable to people, then you will get greater loyalty, engagement, and usage, and even under the old, CPM-based advertising business, you will have more ad inventory. More important, knowing about people’s interests and needs — at an individual level — will enable you to sell higher-value and highly targeted advertising.

The only way we can fight media’s commoditization at the hands of programmatic and retargeting advertising and the large platforms is by gathering our own first-party data. And the best way to gather that data is not by forcing our users to give it to us through registration, by inferring it through demographics, or by sneakily compiling data from privacy-pillaging services such as Acxiom.

This is your decision, publishers. What kind of publication do you want to be?

How to Make User Experience Better on Digital Sites

Ad blocking is not the end of the world for ad-supported digital content. In fact, it’s just forcing all of us to do better. It’s as if we received an industry-wide wakeup call while there was smoke but not yet an outright fire.

A combination of better ad formats and different KPIs for advertisers can save the current situation from getting worse, and can even repair the damage already done. ZEDO is always working on behalf of publisher partners to find ways to monetize and protect the viability of free digital content. We have representatives at the major industry groups, and a constant stream of input into industry developments.

For example, a recent Digiday webinar we attended on publishers and ad blockers shared the emerging best practices of premium publishers, which are really all over the place as they struggle to keep ahead of industry changes.  These publishers make frequent changes and perform lots of A/B testing to find out how to respond to consumer demand.

There is general agreement that asking consumers to turn off ad blockers only works a small percentage of the time. And charging for content only works in the case of very high value financial information.

But here is the good news: several publishers have simply used a technology to turn ads on for consumers who have installed ad blockers, and their page views have not gone down. They only turn on a small number of ads, and they’re careful how the place the ads and they try to serve ads that are truly engaging. This has told them that consumers often install ad blockers and forget they’ve done it, and don’t mind when the ads return. As long as the ads are not overwhelming. Further research has demonstrated that when people install ad blockers they do it to avoid tracking and slow page load times rather than to avoid ads per se.

We think that programmatic came in too quickly, making it too easy for publishers to stuff their sites with ads that cheapened the user experience. And users, who couldn’t get through a slow-loading site loaded with ads, bailed in droves, either by not visiting the site again or by installing ad blockers or both.

This is easy to fix. Don’t measure the old outdated stuff: how many ads served, how many ads seen. Measure engagement, which may be more difficult, but will ultimately produce the right rewards. We know we’ve ruined display advertising, so let’s not overuse video either. And let’s not think that all digital advertising is for direct sales; let’s make sure our sites are places where advertisers can place a brand ad and receive value. A smaller number of ads in engaging formats,  strategically placed and served to the right customers, can co-exist quite nicely with ad blockers.

 

 

 

 

If You Care About Security, Come to ZEDO

We have taken security very seriously lately on the ZEDO ad server. In fact, we have three major concerns for our customers and partners:

  1. resisting all the fraud, malware, and piracy problems that have plagued the industry since it began, and offering our customers a clean supply chain.
  2. Making sure our technologies load quickly and do not slow page load times for publisher partners
  3. Ascertaining the brand safety of the sites where our ZINC ads appear.

Every month we roll out technical updates that contribute to these goals.

This month:  for page load times, we are migrating to Gecko ad tags, to allow our publishers to run two of our innovative formats simultaneously .  Gecko is an ad serving tag that is designed to have seamless capability to serve different formats and innovations.  It can be configured to serve one or more ad formats per page view, such as a standard 300×250, a 728×90 InView panorama and an InArticle video for one tag call.

For brand safety, we have partnered with AmplifyReach.  We have started the process of categorizing Page URLs of various sites from our inventory pool into first level IAB categories. We also store brand safety score for each URL as identified by AmplifyReach.  We are learning every day how to make our inventory safer for advertisers.

We have added the capability to monetize secure sites. We saw that a number of publishers from our inventory pool going secure had increased lately, and if we get a request from a secure site, we send a secure flag in the BID request to all the DSPs. Because non-secure scripts cannot run on secure sites (the browser returns an error) this flag is important. By passing this flag DSPs know that they have to send down secure Ad Code if they bid and win.

We continue fighting the good fight to protect advertisers while increasing revenue for publishers. This has become a very complex endeavor, but advertisers are cutting the number of sites they will appear on and publishers have begun enforcing greater security as well. Vendors who cannot bring adequate security and brand safety to the table will be cut from both premium inventory and ads from quality brands.

For years we have been predicting that things in the digital advertising industry will improve so everybody gets better results, and we think this year it is finally happening. This will be good to everybody. The premium publishers will make more money, and the advertisers will get better results.