Facebook Offers Publishers Another Chance at a Haircut

One thing is for sure: Facebook’s domination of both audience and of digital advertising spend has caused one set of problems after the other for publishers. Essentially Facebook, which does not like to identify itself as a media company, is trying to find ways for visitors to stay in its app rather than clicking through to a publisher site. This has frightened publishers, for obvious reasons. In fact, it has frightened them so much that they have begun to see Facebook as a true competitor rather than just a distribution channel. Every time Facebook makes a change, which is often, publishers stand to lose more advertising dollars.

To this end, many premium publishers have already gone to a subscription model to increase revenue. The New York Times allows ten free articles a month. The Economist allows three free articles a week, and the Wall Street Journal has a hard paywall. This in addition to advertising.

Now Facebook has jumped on that bandwagon as well. Facebook is going to allow people to subscribe to publications through its app. The feature will roll out by year’s end.

Although publishers have asked for this since the advent of Instant Articles, the details of how it will work and how publishers will be paid are not clear:

There are a lot of details to be worked out, including what the model would look like, what subscriber data publishers would get and how the revenue would be distributed. Facebook has moved toward a metered model, and while nothing is final, the latest proposal involves a metered model where users could read up to 10 articles for free a month before being required to subscribe. Publishers would be able to decide if each article is subject to that meter, free or behind a hard paywall, according to people familiar with the discussions.

There’s another big question: how will readers subscribe? If it’s through Instant Articles, Facebook will have to convince publishers who have already bailed on it. The move comes after many publishers, seeing no value from Instant Articles, moved toward Google’s Amp pages. The New York Times bailed early in the year, and even smaller publishers do not push all their content through IA.

Of course subscriptions could be sold through the App Store and the Google Play store, although Apple takes a 30% cut of whatever is sold through its store. And you’d expect Facebook to want a cut as well, so…

One thing is certain. Publishers who aren’t on the ball and using every technique at their disposal to maximize revenue will once again take some sort of haircut. And they’ll be spending the summer figuring out how short that haircut will be.

Let Us Help You With Video Header Bidding

Two years ago, header bidding was a hack. Because we like to be a technology innovator, we started offering it as soon as we understood the way to make it work. We were asked for it by our customers, albeit only by a few at first.

Here’s why header bidding works. In the ad serving world, most advertisers want guaranteed impressions and most publishers want decent prices for their inventory. But DFP, by conducting real time auctions with cascading prices,  simply drove prices down, which meant that advertisers might have paid less, but were not guaranteed their impressions either.

When a consumer visits a site, she’s a valuable commodity to an advertiser. So she’s served the best ads first: the ones that are bought direct.  That’s because the ad server brings those up first, because they’re the ads the brand has paid the highest price for in exchange for a guarantee they’ll be seen.

If the consumer stays long enough on the site, she exhausts the “frequency cap” (the number of times the advertiser wants her to see the same ad), and then she starts to see ads bought at auction (RTB) where many more advertisers bid to serve an ad. That produces a cascade of dropping prices for the publisher’s inventory, commonly known as a waterfall.

After a while, people learned that this system really benefitted neither the advertiser nor the publisher. So the hack was to devise an auction outside the ad server in the header of the page. It loads before anything else on the page. The publisher now has control of how much he can charge for your visit. That first impression can be the most expensive for the advertiser, but it is guaranteed.

Publishers who use it have reported 30-60% increased revenue.  For the advertiser, it means the ability to get first look at every single impression, which wasn’t possible otherwise. Advertisers were, in essence, buying blind. Now, whether they win the impression depends on how much they are willing to pay.

This has been a boon for prices in digital advertising altogether. Advertisers who buy through RTB are now on an equal footing with those who buy direct.

Because of the revenue benefits publishers are realizing from header bidding and the premium inventory now available to advertisers even through automated buys, programmatic advertising is finally coming into its own as a potential route to build a brand, and is able to shake off the reputation of being a low-quality, direct-response channel.  Many premium publishers, who only wanted to sell direct before as a way of preserving the value of their inventory are now feeling comfortable moving to programmatic buying. It didn’t take long to see the benefits of better prices combined with more streamlined workflow.

Now, header bidding is almost a standard in the industry.  We thought it might be, and that’s why we developed the methodology for doing it before everyone else.  We even know how to do video header bidding, which most people are still dreaming about!

 

Context: The Most Important Mobile Ad Attribute

Publishers have had to have a mobile strategy for quite a while now, but in the past year many have realized they have to be mobile first, or even mobile only to meet their customers. This has required a new understanding of context — how to reach those customers, understand them, and offer them services that do not offend.

This requires an understanding of context: what devices and screens their users are on, the patterns of usage, which networks they’re on, what plans they’re on, and more. In human history no other devices has presented such challenges.

For most users, mobile means apps, especially for digital media consumption.

A study by cross-device identity and advertising platform provider Drawbridge found that in just six months, from August to December of 2016, the top 15 ad-supported iOS apps grew 32.5% in monthly unique users to nearly 137 million, while the top 15 ad-supported Android apps grew five percent to 606 million monthly uniques.

In 2016, for the first time, mobile surpassed desktop as a means of consuming digital media, and equally important was the growth in mobile advertising, which also surpassed desktop.

In mobile, context takes many forms. Creators have come to realize that mobile is a new surface, and that they can’t just re-package their old content, TV ads, or display ads. Mobile can tolerate special sized vertical video, swiping in multiple directions, and geolocation. It is far more interactive than the desktop, and therefore open to bigger challenges as well as opportunities.

Publishers must be able to know whether a visitor is viewing their content on the subway, standing in a store, walking, or just waiting to know what kind of ad that person would be willing to see. As Grapeshot points out,

In the mobile sphere, the content being consumed in the moment sends powerful signals as to the context of the person consuming and interacting with it.

Contextual understanding adds a layer beyond what audience data can provide. Knowing what media are being consumed signals a person’s current state of mind, their current preferences, even their level of engagement and degree of attention.

Correctly executed, contextual advertising puts brand messages where consumers will accept and even welcome them. It also protects brands from dreadful adjacencies, such as hate speech, porn, and terrorist propaganda.

A few years ago, a startup then named Proximic tried to sell the idea of brand safety to both advertisers and publishers. It had the capacity to scan over a hundred languages in real time to find brand safe locations for ads. No one seemed to care. The company was sold to ComScore, and is now called Activation, but now Grapeshot has come along,  and using similar machine learning algorithms to target suitable ad placements.  And on mobile, the suitability of placements has become far more important.

For example, since most of consumption activity takes place in apps, it is imperative to understand the context of apps into which messaging can appear safely without either compromising brand safety or interrupting a consumer intent on an experience. Page-level understanding of what’s inside apps is still in its infancy and the industry is still using workarounds developed by verification services like MOAT.

But these are tools for the post-bid environment, and the problem won’t be solved until we find a pre-bid solution.

 

 

Publishers Survive Multiple Challenges

We’re always looking at ways publishers have found to monetize their content in this brave new world. This week, with summer already under way and advertising models still under scrutiny, we’ve looked at a number of different “solutions,” none of which could be called a category killer.

For example, Medium founder Ev Williams, who also co-founded Twitter and Blogger, has been funding the company on investor money (his own and that of friends), but had begun an effort to sell ads when he abruptly pivoted and began to sell “memberships.”

The trouble with the internet, Mr. Williams says, is that it rewards extremes. Say you’re driving down the road and see a car crash. Of course you look. Everyone looks. The internet interprets behavior like this to mean everyone is asking for car crashes, so it tries to supply them. His goal is to break this pattern. “If I learn that every time I drive down this road I’m going to see more and more car crashes,” he says, “I’m going to take a different road.”

Williams decided that the different road for Medium would be premium content for people who pay $5.00 per month. This effort has been characterized as “underwhelming” in a recent NY Times article.

Jessica Lessin, the former Wall Street Journal reporter who founded The Information, borrowed her business model from the Wall Street Journal and went even further: Lessin sells subscriptions and allows no advertising. While she has grown rather nicely,  her model involves a high enough annual subscription price that she cannot scale. Also, she’s in a vertical that people will pay for: financial information.

The only scalable new media models for big brand buyers who want scale seem to be Buzzfeed and Vox, two very different publishers. Vox does aim to compete with Google and Facebook, with a slightly different philosophy: It has 8 different vertical sites, including SBNation, Vox.com, The Verge, Recode.net, and Eater. The company is trying to build big audiences in all of those big verticals, and remains committed to distributed platforms.  To accomplish this, Vox relies on advertising, but the conversation about advertising always starts with content supplemented by native ads or branded content, rather than the “ads first, news hole with what’s left” methods of the past.

Vox is shifting to programmatic, which it views as a means to an end, a mechanism through which brands can execute at scale — not just as a remnant, low CPM business. Although many VC-backed media companies, including Buzzfeed, don’t do programmatic (yet), Vox simply views the automation platform as a way brands can buy what they want.

“Our media becomes no less valuable because it’s sold programmatically, ” says Vox VP for Revenue Operations Ryan Pauley. “In fact, it becomes more valuable; that’s how we’ve approached it.” To increase distribution for marketers, Pauley and his team created Concert, a partnership among NBCU, Conde Nast, and Vox, which leverages the ad tech Vox has created across a premium set of inventory. All three sales forces are then selling the same custom ad products. That’s how marketers can get to scale without driving the CPMs into the basement.

Advertising remains the only way to achieve scale for now, but tomorrow’s advertising industry is evolving to look very different from that of the past.

Mary Meeker Sets the Agenda

Mary Meeker’s annual Internet Trends Report has been published. The long and short of it is that half the world is now connected to the internet by mobile phone, and while mobile phone sales may be saturated and therefore slowing, mobile phone use online is still growing. Most users still have Android devices, although Apple is growing a bit. In the US, mobile phone users spend an average of three hours a day on their phones.

And with this growth in mobile device use finally comes more advertising dollars, Last year, mobile passed desktop in ad spend. But there’s still a discrepancy between the time spent on mobile devices and the number of ad dollars there — a $16 billion opportunity, says Meeker.

Unfortunately for other publishers, Google and Facebook now have 85% of the global online ad spend, up somewhat from last year.

And so is ad blocking, especially in Asia, where 58% of Indonesians and 28% of Indians (as well as 9% of Chinese) opt out of having data collected on them through advertising. The European GDPR (new privacy regulations) may also cause changes, although ad blocking in Germany is mainly on desktop.

But the biggest change from last year is in the presence of better measurement tools from the big players (Google, Facebook, and Snap), who have been pressured to ad better reporting to their offerings. For Google, product listing ads drive traffic to product pages, while contextual ads drive purchases on Facebook,  and goal-based bidding ads work best on Snap.

In addition, geo-targeted local ads drive foot traffic to retail stores.

Here are the types of ads consumers appear to like most:


Meeker says inefficient ads are rapidly being exposed by data. She says it is now possible to get the right ad to the right consumer at the right time. This may be a little futuristic, but it’s certainly what is coming.

The presentation goes on for a long time (355 slides) through gaming, and through changing user interfaces (mostly voice). She also talks about image recognition and how that will become the most important part of search.

Perhaps most important for publishers, she says on slide 50 that the line between ad, content, store, and transaction is blurring, and that the most successful publishers in the future will also be targeted stores.

We are ready with these new formats, in which you swipe up to buy or tap to book right from the ad on the site. And we know that targeted well, consumers like these ads because they’re useful.  Now is a good time to get in touch with us.

ZEDO: A Safer Way to Buy and Sell Digital Ads

I was talking to a woman on our sales team in the midwest last week, and she said “you know, in the midwest many agencies haven’t even heard of ZEDO and ZINC.” In some ways, that’s not a surprise. We’ve been around since 1999, when we were founded as an ad server for publishers, and our headquarters then was in San Francisco. We later expanded to deliver out-sourced ad operations services, yield optimization services, and pretty much anything a publisher would need to increase revenue. But we’re a solutions development company, not a marketing company.

About three years ago, we started a division called ZINC and brought to market innovative high impact ad formats as the industry changed. We were, if I remember correctly, first to market with an ad called the “Inview Slider,” an ad that only appeared when a visitor was there to see it. we followed that with an equally innovative video format designed to be displayed by publishers with sites that didn’t publish video. The “InArticle” Video was quickly picked up by the industry and re-named “outstream.”

We went on to focus on mobile, developing an entire suite of ad formats that do not anger mobile users and get better results than any of our competitors. Along the way, we moved the company to New York to signal our entry into the advertising side of the digital media ecosystem.

Once in New York, we realized we had access to a new customer: brands and agencies.

Along the way we participated in a range of industry-wide initiatives, and realized that ad fraud and brand safety were becoming paramount in the minds of industry thought leaders, so we jumped ahead once again, developing a completely private, secure, end-to-end solution  — a platform on which our customers can buy innovative formats that are served directly to our premium publisher network without the danger of supply chain corruption.

At the same time, we eliminated several former partners with whom we worked until we realized they weren’t playing the game on the up and up and their networks were fraught with bots and malware. We also severed connections with some non-quality publishers.  And last, we partnered with a company that checks all the URLs to which we serve to make sure we serve ads in a brand safe environment.

All the while, we were heads down continuing to develop new technologies, and ignoring the elaborate marketing plans other companies user to generate transactional sales. We much prefer relationship sales. We’ve just developed our first slide deck in years. We’re coming out to build additional relationships.

You will see more of us now in the media world, because we have begun reaching out in the midwest, New York, and the west coast, doing somewhat more aggressive storytelling about what we have to offer.

 

The New Fronts Felt Different This Year

The new emphasis on brand safety has done more to change the digital media landscape than anything since the rise of programmatic. It is incumbent on everyone who buys media to know where they’re buying, and on publishers to make sure a brand ad doesn’t appear in an inappropriate place, even though everything is done by algorithms. We predict that the push for brand safety will make random reach less important, and will ultimately give advertisers more knowledge of what they’ve paid for.

Already Chase has cut its buys from 400,000 sites to 5,000 (without seeing a difference in results) and Sir Martin Sorrell’s salary has been cut by a third. Not to put too fine a point on it, the days where ad exchanges could support porn, fake news, and hate sites by selling blind buys to young media buyers whose KPIs were based on numbers of impressions are over. Programmatic be damned, everyone is going to have to know their inventory on the sell side, and agencies are going to have to know what they’ve bought on behalf of a client.

This year’s digital New Fronts, according to Ad Age, were all about safety, rather than sexy. Instead of glitzy parties there was substance, and everyone will be remembering the brand revolts against YouTube and Breitbart. Ad Age’s prediction:

Even if the YouTube brand revolt isn’t explicitly mentioned, everyone from Hulu to PopSugar will take the opportunity to assure marketers that their content is high-caliber and brand-safe. Many are likely to also stress transparency, verification, third-party audits and viewability. 

Conde Nast will send a message to the industry that it needs to trade on brand safety, said Jim Norton, president of revenue and chief business officer, adding that the business has gotten away from that principle.

So many different issues plague the digital advertising industry that it’s difficult to decide what it should fix first.

There is the issue of platform control by Google and Facebook, and the struggle of smaller publishers, even the Wall Street Journal and the New York Times, to support themselves off what is left.

Then there are the issues of fraud and malvertising, and the industry’s efforts to clean up the supply chain.

And we haven’t yet talked about the unwillingness of Millennials to watch ads, or on the other hand pay for content on the web.

Follow that by the downloading of ad blockers by 25% of the population, and the rolling out of new privacy rules in the EU,

As for metrics?  The industry is still trying to decide what the best metrics are for mobile advertising, especially for mobile video.

No wonder WPP has decided to cut expenses, especially for Cannes, and to leave Sir Martin with the paltry salary of $62 million this year.

Facebook’s Day in the Sun May be Over

For publishers, Facebook is no longer the darling it once was.  To be honest, it was never a darling; it was more like a force that had to be reckoned with, as all the publishers who jumped on Instant Articles thought they knew. For them, once Instant Articles launched, it was damned if you do and damned if you don’t. Now, with display advertising largely being replaced by video, Instant Articles isn’t worth the loss of control over their own sites.

The Times is among an elite group of publishers that’s regularly tapped by Facebook to launch new products, and as such, it was one of the first batch of publishers to pilot Instant. But it stopped using Instant Articles after a test last fall that found that links back to the Times’ own site monetized better than Instant Articles, said Kinsey Wilson, evp of product and technology at the Times. People were also more likely to subscribe to the Times if they came directly to the site rather than through Facebook, he said. Thus, for the Times, IA simply isn’t worth it. Even a Facebook-dependent publisher like LittleThings, which depends on Facebook for 80 percent of its visitors, is only pushing 20 percent of its content to IA.

But what’s happening with video? Sites like Bloomberg are launching tech demo offerings that publish video to Facebook live. But like everything else Facebook, Facebook Live arrived with the promise that it would solve monetization problems, but no one knows for sure (yet) how well it works.

Mark Gurman, the expert from 9-5 Mac who got hired away by Bloomberg because he had so many contacts at Apple who fed him rumors, has just started a gadget show that will stream live on FB live. This follows the successful sale of the Wirecutter to the New York Times, and the launch of Circuit Breaker by The Verge. Apparently everyone thinks unboxings, demos, and reviews of gadgets will be the best way to monetize video on Facebook.

We don’t think so. One of the problems with Facebook is that no one goes there to buy things, or even to look at branded content. Rather, they go to connect with other human beings in Facebook Groups, or to respond to invitations to Facebook events. We think that as time goes on and Facebook’s numbers get audited by third parties, we will all learn that Facebook, although it has such amazing scale, does not produce proportional results.

And all of this may be further complicated by new tools Facebook has just released that allow users to suggest that specific articles and sites might be fake news.

We’re pretty sure that the days of sheer scale are numbered, and advertising will go back to more sensible goals — reaching the right potential buyers.

 

 

 

 

Quality Print Design Could Help Publishers Succeed Online

The backlash is upon us. Publishers who have misjudged the online market will have more problems in the coming months if they don’t figure out a way to trade useless scale for more targeted reach, because the flight to quality continues for advertisers. While that means more niche and less reach, it provides an amazing opportunity for quality publishers with great design who might not have mattered in the past. It also provides the utmost in brand safety. Publishers aimed at Millennials, who are the biggest users of ad blockers, have begun to try new approaches toward reaching their audiences.

This week we got a look at a new publication launched through crowdfunding. It’s called Racquet, and it appeals to the tennis industry. You don’t have to be a tennis player, just someone who likes the tennis lifestyle.

Here’s what the media kit says:

With a target age range of 25-50, Racquet is a lifestyle brand primed to attract an engaged readership who wants quality in all their lifestyle choices—travel, entertainment, food & drink, accessories, design and more. These are influencers, who move and think globally, value the experiential and carefully curate their consumption—from what’s in their Netflix queue to what’s on their coffee table. Our readers might never pick up a tennis racquet, but they love the style and culture of the sport, and look to us to guide them towards what will make them more cultured, stylish and informed.

At the front of the first issue is a list of “founders,” who contributed to getting the magazine off the ground. This in itself is different. Also different is the look of the print copy. The design is stunning. Each issue is designed to be a collectible.There are perhaps a half dozen ads in the entire print copy. And the print run is 5000, distributed worldwide. That’s not many, so if this company plans to monetize, they’ll have to go beyond print.

Online, the main revenue stream is merchandise for now. Here’s where the unique combination of online-offline becomes more interesting. As an advertiser, you might want to sponsor a podcast, or add your brand to an issue of the magazine that is actually printed, but sold online afterward as a printed copy. Back issues of Racquet, for example are $15.00. This is a different and exciting cross-channel promotion opportunity, and we see it as having great potential for luxury brands.

The ad formats will have to be different from what is usually sold through programmatic, although we predict that eventually the magazine’s site will itself have a limited number of appropriate ads. If it is going to scale, it must. But doing it slowly and carefully, and keeping the product special, may prove to be a differentiator.

 

 

 

New Law Threatens Privacy

Another marathon political month ends with the US going in the opposite direction regarding consumer data from the EU.  This could end up being confusing to both consumers and advertisers.

The US Senate has passed a bill saying that ISPs can now monetize consumer data in the same way Google and Facebook do. This bill is headed over to the House for a vote. On the face of it, the bill actually equalizes rights, giving ISPs the same rights as platforms. The FCC Chairman who replaced Tom Wheeler has defined this as  part of net neutrality, although that’s not what net neutrality used to be.

““The federal government shouldn’t favor one set of companies over another — and certainly not when it comes to a marketplace as dynamic as the Internet,” said FCC Chairman Ajit Pai and FTC Chairman Maureen Ohlhausen in a joint statement. The two agencies will work together to achieve “a technology-neutral privacy framework for the online world,” they said. “Such a uniform approach is in the best interests of consumers and has a long track record of success.”

Several privacy advocate groups have, of course, come out against the new legislation, including the Electronic Frontier Foundation.

Americans have enjoyed a legal right to privacy from your communications provider under Section 222 of the Telecommunications Act for more than twenty years. When Congress made that law, it had a straightforward vision in how it wanted the dominate communications network (at that time the telephone company) to treat your data, recognizing that you are forced to share personal information in order to utilize the service and did not have workable alternatives.

Now Congress has begun to reverse course by eliminating your communication privacy protections in order to open the door for the cable and telephone industry to aggressively monetize your personal information.

Of course the EFF is an advocacy organization, but privacy groups have become very powerful. And we care about this because anything that makes consumers feel uncertainty about their personal information has a propensity to interfere with the advertising business model most publishers depend on.

We work closely with the Online Trust Association, which also saw this as a potential blow to consumers, and thus to the ad-supported business model, since privacy advocates are now saying ISP stands for “Information Sales for Profit.” As a platform, we neither hold nor track  consumer data, so we’re not directly involved. But we do have a dog in this hunt because we are strong supporters of free internet content that is ad-supported. We work with our partners to make better ads, so there can be fewer ads. We also work with our partners on brand safety in media buying.

We must take pains to maintain the highest ethical and privacy standards so we don’t entice consumers to download more ad blockers. Before this ruling, we had achieved stasis, and were moving on. Let’s do everything we can to keep going in the right direction for both publishers and advertisers, as well as for consumers.