Facebook Faces Competition from Snapchat

On the day Snap, Inc.(SNAP), the parent company of Snapchat, became a public company, its stock soared 44 per cent.  That’s because Snapchat reaches a demographic everyone wants to reach: young people who are just forming allegiances to brands. But it’s also because there’s a dirty little secret out there: Facebook advertising doesn’t work.

The Copyranter blog from Digiday says it best:

 You know who knows better than anybody that Facebook advertising doesn’t work? Facebook! Of course they do! All that proprietary data they’ve got on 1.8 billion people, they know pretty much everything about brands, consumers, and interactions between the two. That’s an unprecedented level of lying, even in the skeevy ad industry. Or maybe you think this is all just conspiratory “truther” talk?

We’ve always loved Copyranter because he calls it like he sees it. Last fall Facebook ran into trouble three different times over incorrect or incomplete numbers:

Facebook has always been very purposely opaque and doesn’t share its methodology and algorithms with anyone, which makes it impossible for anyone to do any objective reporting — or regulating — of those numbers.

Then last September, right about the time it was announcing that its first three quarters profit was near $6 billion, up from $3.69 billion in 2015, it also reported a big whoopsie: It had been inflating video view numbers by 60-80 percent (94 percent in Australia).

Facebook has now been forced by P&G at least to allow third parties in to verify its numbers, and perhaps that will help. But Facebook has done its job: it has soaked up advertising dollars not only without producing accurate and verifiable returns, but with at the same time destroying the creativity that made brand ads bearable for viewers. Facebook does not have engaging formats; its entire value proposition is targeting. Well, guess what? It’s difficult to engage attention without creative, especially on a site where people do not come to buy.

The shift from brand advertising to direct advertising that accompanied the dream of “metrics” has forced advertising agencies and brands to change their models and their goals. No longer do we expect advertising to create either brand lift or sales — instead we show the boss meaningless metrics, such as Facebook “likes.” At the end of the day, those do not move the sales needle.

On the other hand, Snapchat filters are really countable; when a person sends a snap with a sponsored filter, that person has actually made a choice to engage with a brand. It’s a very different energy from the energy used to click on “like” on Facebook.

We’re watching publishers drift away from Facebook live, and we predict they will continue to drift away from Facebook as it continues to fail both the sell side and the buy side.

Depth Replaces Reach for Small Publishers

With the coming of  2017, expect native advertising to take a sharp turn to e-commerce. Buzzfeed rolled out its gift guide newsletter in late September, but now we expect all new product reviews to include ways to buy the product that’s reviewed. And actually, this kind of native advertising makes a lot of sense, because it doesn’t annoy the consumer. Presumably, if someone is reading a product review, they’re considering whether to buy the product, and if they decide to buy it, an affiliate link or a shopping cart might just simplify things. And both publishers and advertisers are looking for ways to stop consumers from blocking ads.

This Christmas is going to be the big “tell” for both mobile advertising and e-commerce. Not only will Buzzfeed, whose readership is primarily young women, use native ads to sell products on its site, it will go further into tailored newsletters, moving into verticals like medical, grammar, and even people whose vocabularies include curse words.

And Buzzfeed is not alone. Before Gawker Media was sold, Nick Denton admitted that he got about 25% of his revenue last year from e-commerce.

What does this mean for traditional advertising? Not much, because the percentage of ads that are amenable to e-commerce is limited. Most large advertising spends are focused on branding. However, what it means for publishing is another story.

It means every publisher doesn’t need to go to Facebook to find an audience. Small publishers who go deep into verticals with affinity groups can do very well with small audiences that are very faithful. Take Brian Lam, a former journalist who now publishes The Wirecutter and Sweet Home. The Wirecutter uses product reviews to drive sales. Here’s what Lam, who used to work for Wired and Gizmodo, says:

Everything we choose is an award-winner, and we don’t focus on presenting you with anything but the things we love.

Consider them billboards for electronics and everyday things. The point is to make it easier for you to buy some great gear quickly and get on with your life.

Lam is transparent about the fact that he gets an affiliate commission for every product he sells. While his business model wouldn’t support a large organization, it does fine for his small team, and it earns him a loyal following among gadget geeks.

And what’s at the top of his site? A single banner ad for an HP laptop. And on Sweet Home, a single ad for an air purifier. Nothing to turn readers off, and something the readers might also want. Everything else on both sites is a product review.

We think this represents the future of advertising. Fewer ads, well-targeted, not looking for gigantic reach, but for depth of targeting.

 

 

EMarketer Says Programmatic Has Won

The latest eMarketer roundup on the programmatic marketplace tells us that more than two thirds of all digital display advertising will be bought programmatically this year.

In 2016, US programmatic digital display ad spending will reach $22.10 billion. That’s a jump of 39.7% over last year, and represents 67.0% of total digital display ad spending in the US.

It’s hard to believe that programmatic, for all intents and purposes, is only about three years old. It took a while for marketers to figure out that it was a work flow solution and was safe to use. It was also a bit complex, but now everyone’s comfortable with it, and pleased with its efficiency. This year, programmatic will take over mobile, and next year will be the big year for programmatic mobile video.

Mobile is driving growth of programmatic ad spending. This year, mobile programmatic spending will reach $15.45 billion in the US, representing 69.0% of all programmatic digital display ad spending. Next year, mobile video programmatic spending will exceed its desktop counterpart for the first time.

With respect to programmatic video, 2016 will be a pivotal year. More than half of all digital video ad spending in the US will be programmatic. This year, programmatic video ad spending will reach $5.51 billion, representing 56.0% of total digital video ad spending. That figure represents in turn 24.9% of total programmatic digital display ad spending.

Next year will be the tipping point for programmatic mobile video ads, as mobile surpasses desktop for the first time. By 2017, programmatic mobile video ad spending will reach $3.89 billion, representing 51.0% of total programmatic ad spending in the US. By comparison, programmatic desktop based video ad spending will reach $3.73 billion, dropping to 49.0% of total programmatic digital display ad spending…

That being said, programmatic isn’t growing quite as quickly as it has in the past. We think that’s because, although media planners may recognize that programmatic is efficient, there’s a difference between efficient and effective. So far, there isn’t enough experience with mobile video ads, programmatic or direct, to prove how and where they’re as effective as other channels.

And the landscape is further complicated by header bidding, which has been gaining momentum and will be rolled out by Facebook’s ad network this month.

On Being the “Tortoise”

I read another post recently about the Armageddon coming in the ad tech space. There are still 3000 companies on the Lumascape, and the author of the post refers to “obliteration rather than consolidation.”

That’s because the capital markets are drying up, and most of the companies in the space rely on outside capital. Those should go away. If you haven’t gotten to sustainability by now, and you haven’t been acquired, you are probably going to be out of luck.

ZEDO does not rely on outside capital.  That’s why we aren’t as large as some of the VC funded companies. On the other hand, we have had far fewer hiccups along the way, even as the industry changed. We were founded in 1999, and we have learned to stay nimble and responsive.

We are funding the company the old-fashioned way, with good products that bring us customers. We have the ability to look out into the future, which is what our marketing department does, rather than simply create pretty pieces and figure out how to spend more money sponsoring conferences.

When we see a customer need, we have a strong development team to respond to it, and we put it on our product road map. That’s now we came to develop SwipeUp, our mobile ad format. SwipeUp came from a meeting we had between marketing and development to talk about formats mobile consumers would tolerate and respond to. It accompanies our already successful inArticle video format.

Our goal is to create formats and innovations that are fundamentally better advertising, not to make VCs happy with exponential growth. In the advertising industry, if you grow to fast in one direction, it makes it harder to pivot to the next change. We really want to remain responsive, and use our technology leadership on behalf of customers.

We have always been known for our outstanding support as well.

Now that we are private platform for buyers and sellers with a clean supply chain, we are interested in meeting people who want to deal with a “real” company, rather than a creation of marketing and PR that’s out ahead of product and customer service.

I rarely write one of these posts about our virtues, but as I look around at the landscape and read the industry trades I can’t help but feel fortunate that we chose to be the tortoise.

Programmatic Needs a Dash of Trust

At the quite contentious IAB Annual Leadership Meeting,  four Town Halls were set up to address some of the big problems facing the industry: ad blocking, fraud, mobile, and programmatic. Because all of them met at the same time, attendees had to choose one.

We attended the programmatic Town Hall, there most of the conversation was about making programmatic tools better, so they could be used to connect the right buyers and sellers — not just more buyers and sellers. Last year, the advertising industry has learned that more — more ads, more frequency, more reach — is definitely not better. On the other hand, there are many imperatives urging us to advertise with fewer ads that are more visible, more costly, and more acceptable to consumers. There’s still some doubt about whether programmatic can actually bring that off.

Programmatic has certainly taken over the industry and automated the work flow. However, it got off on the wrong foot as a tool to help publishers monetize the worst of their inventory rather than the best. Because the buyers know they’re buying remnant, and are only using it for reach, it’s easy for targeting to go wrong in programmatic. What’s missing is trust.

We’ve been around the ad business a long time. During most of that time, a buyer and a seller met for lunch and a drink and discussed the “buy.” The buyer (agency or brand) could not only tell the seller (publisher) the objectives of a campaign, but could ask questions about the availability and desirability of the inventory. Software, while it should have been able to replace these conversations, hasn’t done it. Rather, it has provided both sides greater opacity in a process that used to be relatively transparent.

No wonder so many ads miss their targets, raising consumers’ ire. I’m not sure publishers who refuse to serve content to people who use ad blockers are the solution to this problem any more than ad blockers themselves are.

 

Happy Holidays!

A very happy holiday from all of us to all of you. We hope you enjoy this music.

Switching From Google Ad Server Can Keep You in Business

Several weeks ago, Google announced the restructure of itself into Alphabet. If you don’t think that will make a difference for publishers using the Google ad server, you’re wrong. The more risky Google activities were split off into separate companies, each with its own CEO.
But they are still all financed by the same business: Google’s ad tech business. More than one writer has come to the conclusion that Google intends to “milk” its cash cow ad words and ad serving business to find things like life extension and autonomous vehicles.
What does that mean? For publishers, it means that Google will continue and perhaps accelerate its policy of just barely out bidding the highest bidder simply to get the impression. Google’s ad server doesn’t look for quality, it looks for numbers, but not publisher profit.
End-to-end technology.  On the other hand, ZEDO has always been a publisher ad server, and now we are one of only three companies that has an end-to-end technology. Now we are not only a publisher ad server, but we operate our own private exchange and buy-side platform. That kind of knowledge and control of the ecosystem not only filters out malware, but allows us to innovate and offer high impact formats (HIF) that make more money for publishers. Over the past three years, we have found that our  HIF are easy to sell. The advertiser can still provide  standard creative,  but we change it to something better dynamically on the publisher page. We do this for web, mobile web and in-app.
Free banner ad servingWe also serve and help sell standard banners to all exchanges. We know all the banner exchanges, like AdX, and can help a publisher make money from them. If ZINC can monetize some of the impressions, we often offer ad serving for standard banners at a low price – effectively free to decent quality publishers.
 One platform for HIF and banners. And we do the ad serving for both standard manners and our unique new formats in one platform. Google is taking a bigger and bigger % of the ad revenue. premium publishers are getting lower and lower %. Google reserves their best technology for YouTube,  so that they benefit most from the move to video ads.
Better Technology to Win Bigger Spends. With the ZEDO platform premium publishers have better technology to win video spends, win spends on high impact formats and so win back a fair share of online ad spends.
Globally admired tech support.
So if you are sticking with Google out of inertia, now is the time to think about whether that is in your best interest or simply Google’s.

 

AdTech Matures As an Industry

 

The Wild West is over in advertising technology. We’re about to see a bloodbath, in which only the truly good guys will survive. By good guys, I mean companies that actually perform a useful function for either advertisers or publishers without subjecting site visitors to a barrage of  ad fraud, spam, malware, and unwanted ads.

ZEDO solves these problems by providing agency trading desks with an end to end platform — a direct (secure) pipe from the ATD to the publisher pages.  Our three-part ad stack admits no third parties who can introduce bad stuff. ATDs log into our buying platform, and go to our private exchange only for our unique ad formats. Our formats are built for differentiation and performance. On the supply side, the supply comes only from our ZEDO publisher ad server, and we create all the impressions on the publication’s page. We don’t buy from anyone so nothing bad can be introduced.
ATDs love this clean end to end platform. Our control over the whole supply chain allows us to innovate instantly, which we do. We have the best formats in the industry, and they get better every month. We launch 2-3 new formats every year. ATDs love the fantastic formats and clean supply chain, because it is like the days before advertising got so complicated.

When the first online ads appeared in 1994 the geeks had all the control, because neither the advertisers nor the publishers understood how online advertising  worked. They couldn’t serve make an ad appear on a digital site without an intermediary who knew how things worked. Early online banner ads were effective, so the industry to supply them grew quickly in response to marketer demand. However, in the ensuing 20 years, the industry almost intentionally tried to obfuscate its operations, introducing more and more complex technological solutions to the simple problem of trade — buying and selling — which is almost as old as human existence. And now online ads are hated, and in extreme cases blocked entirely, with 25% of the population running some kind of ad blocker.

This threatens the traditional free content ecosystem, which has existed for hundreds of years with newspapers, magazines, and TV networks producing content for which visitors are accustomed not to pay. Without advertising, there’s no business model for free content.

But as one person said on an industry call I participated in recently, “this industry seems determined to self-destruct.  We’ve been so disrespectful of users — forcing invasive, noisy, deceptive ads in front of them without regard to their experience — and until now, they’ve had no means to have any response.”

Never mind the user. The industry as also failed to respect the entity that pays the bills, the advertiser.

Now, a number of initiatives have coalesced to force the ad tech industry to change its ways.

The first is Do Not Track, a standard web browser setting that allows users to avoid sharing their browsing behavior with advertisers. Chrome, Firefox and Safari already have Do Not Track capabilities built in, but users have to choose them; they’re not the default. Many users don’t know they exist, and industry-led initiatives to prevent the widespread use of Do Not Track have had the unintended consequence of fostering the use of ad blocking software.  For a couple of years now the industry failed to come up with a satisfactory compromise between the user and its own need to keep revenue flowing.

Now the Electronic Frontier Foundation has stepped in to propose a code of conduct for online publishers. The EFF calls this a compromise that allows consumers to avoid tracking and still allows publishers to get revenue from online advertising. We are in the process of getting a briefing to further understand how we as a company can help our publisher partners participate in this initiative without losing revenue. Like everything else in ad tech, this is complicated.

The second, the Trustworthy Accountability Group (TAG), is an industry initiative that focuses on click fraud, piracy, deceptive advertising, and malvertising. Its goal is to create a clean supply chain in the industry. In its latest press release, the TAG announced a new program to block illegitimate and non-human ad traffic originating from data centers. It will use Google’s database of data center IP addresses and enhance it based upon broader industry intelligence. Other companies joining this phase of the project include Dstillery, Facebook, MediaMath, Quantcast, Rubicon Project, The Trade Desk, TubeMogul, and Yahoo.

Next, Ad Block Plus, one of the largest distributors of ad blocking software, has issued an acceptable ads manifesto which explains its criteria for acceptable ads and how to apply for whitelisting. Since it is focused on static ads and most ads today are video, this is going to be interesting. It’s even more interesting as more and more advertising falls under the category of “native.”

And last, Yahoo’s recent malware attack has forced the industry to deprecate the use of Adobe Flash to deliver ads. Flash seems to be one of the riskiest content frameworks for delivering ads.

These and other developments are expected to fundamentally alter the landscape for people who have been making money by assuming both buyers and sellers of advertising are still ignorant. It ain’t necessarily so.

 

 

 

 

 

 

Publishers Combine for Larger Audiences

The recent merger of 17-month-old Recode with Vox Media, owners of The Verge, coupled with the recent demise of GigaOm, another respected tech industry publication, raises the question of survival for independent publications with niche audiences.  In actuality, the idea of trade industry networks that support niche publications isn’t new; print publications long ago combined into industry networks the size of IDG or  AdvancePublications. Perhaps the little guy can’t survive alone.

In fact, Vox Media itself, which is venture-funded, may end up being part of Comcast, which was an investor in both Recode and Vox.

The push toward larger and larger digital media networks is driven by the changing vagaries of the advertising market. This year alone publishers have had to re-design their sites for viewability as large marketing budgets like those of GroupM began to insist on 100% viewability as a metric. Just as publishers got slightly comfortable with the concept of being paid only for viewable impressions rather than impressions served, another change came over the horizon: Facebook’s trial with nine publishers who will publish directly to the Facebook site rather than on their own. This product, called Instant Articles by Facebook, is being tested by sites that include Buzzfeed, NBC News, Atlantic,  the New York Times, and National Geographic.

On the face of it, giving up traffic to Facebook seems counterproductive or at least counterintuitive. However, if you think about the fact that Facebook and Google already control 80% of the digital advertising dollars, you can see why a publisher might consider it, especially in the beginning when publishers are being allowed to keep all of the ad revenue they generate on Facebook’s site. No one, by the way, thinks this will last.

The best analysis of why publishing on Facebook was inevitable for even the biggest independent publishers is given by Newsosaur:

Superior mobile prowess.In addition to the sheer size of its audience, Facebook has mastered the art and science of mobile publishing better than almost anyone. In the first quarter of this year, the company reported, 65% of its traffic and 73% of its ad revenues came from such highly optimized mobile sites as its Paper app. 

Superior audience engagement. Based on the amount of time people spend on Facebook, it is fair to say its users are considerably more passionate about the service than the visitors to a typical news site. According to Alexa.Com, the average user spends 18.4 minutes per day on Facebook, as compared with 9.5 minutes at the New York Times, 6.4 minutes at NBC News and 5.4 minutes at BuzzFeed.  

Superior customer data.Because enthusiastic users frequently and liberally update the site with a plethora of personal data, Facebook knows more intimate and accurate details about more people than any company in the world. The information is updated dynamically in real time, as people report everything from their favorite new song to the jeans they want to buy to the fact they will have a baby in six months.  

Superior ad intelligence.Facebook enables advertisers to target messages with heretofore unprecedented precision, thanks not only to the rich information supplied by users but also by analyzing information captured from the friends in their networks.  The ad-intel is supplemented with location data acquired from Facebook’s popular mobile services. 

Superior content targeting. In the same way data is used to target commercial messages, Facebook has the capability to match the right content with the right user by monitoring her searches and media consumption. If Facebook sees that someone likes cooking Italian food, it can slip relevant recipes from the NYT food page into her news feed, paired conveniently with an ad for a pasta maker. When Facebook recognizes that a bride is planning a honeymoon in Florida, it can send her travel videos embedded with customized hotel offers. 

The Newsosaur blog is written by Alan Mutter, a former journalist, editor, and CEO of several tech startups, who now serves as a consultant to the media industry. Because of his position at the intersection of media and technology, he probably has the best perspective on what’s ahead for publishers — even the Buzzfeeds of the world.

Fraud and Lack of Viewability Are Not the Same

It’s frightening how poorly the trade pubs in the advertising industry have dealt with the current big issues of viewability and ad fraud. Almost all of the journalists have conflated the two concerns, leading to unrealistic expectations of what should be done to remedy each. At the very least, we in the industry ought to recognize that they are two different problems. It’s a lot easier to fix viewability issues than it is to combat ad fraud, because fraud largely comes from outside the industry.

Marketers are a little smarter about it than the media. In a recent Ad Age survey, 61% were concerned about paying for ad fraud, but 87% were concerned with viewability. The marketers seemed to understand that there’s only so much we can do about ad fraud, because it isn’t always committed by someone in the ecosystem.

What’s the difference between fraud and viewability?
The commission of fraud is intentional; fraudulent publishers send people or bots to click on ads, forcing the marketer to pay for the ads.  Or they create sites that aggregate large amounts of traffic in ways that don’t match the vision for a brand. Porn sites are an example, of this. They may draw 18-25 year old males, but if you were a consumer brand you might not want your ad to appear there.  But outside of the advertising industry, malware can also be embedded in ads, sometimes by cyberterrorists. For example, cryptoware ransomware was found embedded in fake Hugo Boss ads running on premium sites recently. The ads were delivered through RTB, on the Engage:BDR ad network. But they were placed by criminals, not advertisers or publishers.
Viewability problems , on the other hand, are mostly unintentional: in a real time bidding environment, ads can be served so quickly that they literally step on one another and the site visitor doesn’t even see the ad. Many other things can influence viewability, including the design of a publisher site, the size of the ad, how the ad is served, and the ad’s format. Native, large format, or high impact ads don’t have a problem with viewability. Most good publishers measure viewability using a partner like DoubleVerify or comScore and strive to make sure their ads are viewable.
What led these two problems to be conflated was the realization on the part of marketers that despite the introduction of an entire new set of partners between the advertiser and the publisher, advertiser ROI was still not what it should have been for the dollars spent. Can anyone say “creative“?