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2 “Year-End” Practices That Will Boost Agency Performance

30 Nov

end-of-yearTo be sure, the end of the calendar year is a hectic time for advertisers and agencies. Tasks such as wrapping up ongoing initiatives, closing out jobs, addressing last-minute out-of-scope projects and readying for year-end financial reporting take on a sense of urgency and seem to consume more time than either party has available to invest.

Then, seemingly without warning (but never too soon) the holiday season is upon us and co-workers, suppliers and client-personnel scatter to the wind as companies close down for the holidays and individuals use up remaining comp time. This is followed by a “return to normalcy” the first week in January when we close-out any remaining prior year tasks and turn our attention to implementing the new year’s plans.

Sound familiar? Probably so.

Thus, it comes as no surprise to anyone that certain intended actions fall by the wayside as people adjust schedules for the December/January timeframe in order to balance hectic and often stressful workplace and personal schedules.

In our experience, there are two Client/Agency activities that often fall victim to this re-prioritization:

  1. Undertaking year-end agency financial reconciliations (i.e. time-of-staff, agency fees, expenses); and
  2. Conducting annual 360º agency evaluations.

On one hand, it is easy to understand how and why these activities get moved down the priority list, receive a lower-than-desired level of scrutiny or simply get passed over. On the other hand, these are incredibly valuable practices that yield a wealth of financial, process improvement and relationship management insights and opportunities, well in excess of the time and energy invested in their undertaking.

Sadly, missing these annual end-of-year activities once, significantly increases the odds of annualizing their omission from the standard operating procedures “playbook” moving forward. Further, human nature being what it is, people then begin to rationalize why it is appropriate never to reconcile and review. Perhaps Paul Harvey, the noted broadcaster, got it right when he quipped:

Ever since I made tomorrow my favorite day, Ive been uncomfortable looking back.”

From a practical perspective, our experience would fully support Mr. Harvey’s lack of comfort with “looking back,” particularly when clients and agencies forgo these important annual oversights and relationship management practices. Why? The lack of oversight can beget poor record keeping, which in an estimated billing system carries huge financial risks. Additionally, forgoing a 360º evaluation and the opportunity to discuss how to address open issues, correct performance shortcomings and leverage those things that are working well is not only costly, but can sow the seeds of discontent in the Client/Agency relationship, which is not healthy for either party.

Therefore, we believe that these two “year-end” practices should never be forgone or given short shrift. The most practical approach to prevent this is to create project work plans for these practices, complete with timetables and milestones, the assignment of task level responsibilities to specific individuals and locking-in calendar placeholders for progress updates and report-out meetings.

In the end, everyone benefits from the enhanced levels of transparency, solid two-way communications and ultimately, improved performance.

AARM Formalizes Its Relationship with the ANA

1 Nov

thAARM | Advertising Audit & Risk Management becomes a member of the Association of National Advertisers (ANA), joining more that 1,000 leading suppliers, agencies, law firms, media companies and consultants as a Marketing Services Provider (MSP).

 

Advertisers: What Does the Department of Justice Know That You Don’t?

19 Oct

FBI LogoIt has been two years since the Association of National Advertisers (ANA) published its blockbuster study on media transparency in the U.S. marketplace. Among the study’s findings were that the use of media rebates paid by publishers to agencies was “pervasive” and that there was a “fundamental disconnect” regarding client-agency relationships and the agencies assumed fiduciary obligation to act in an advertiser’s best interest.

Later that same year, December of 2016, the Department of Justice (DoJ) announced that it was conducting an investigation into the practice of “bid rigging” by agencies for TV and video production jobs. The bid rigging was allegedly being done to favor the agencies in-house production groups over independent production companies. This was done by urging outside production vendors to artificially inflate their bids, creating a reason and a paper trail for supporting the agency’s decision to award the production job to their in-house studio, which coincidentally bid a lower price for the work. At least four of the major ad agency holding companies were subpoenaed as part of this ongoing investigation.

One year after the release of the ANA media transparency study the ANA conducted research among its members that found:

  • 60% had taken “some” steps to address the study’s findings
  • 40% had not taken steps or weren’t sure if their companies had taken action
  • 50%+ of those that had taken steps indicated that had revised agency contract language
  • 20% of those that had taken steps had conducted audits of their agency partners

Given the $200 billion plus in estimated U.S. media spending (source: MAGNA, 2018) and the $5 billion U.S. commercial production market the aforementioned numbers are stunning in that more advertisers have not taken action to safeguard their advertising investment by implementing controls and oversight actions that mitigate risks and improve transparency.

It would appear as though the Department of Justice is taking these matters more seriously than many advertisers. The reason that the DoJ and FBI have undertaken probes of U.S. media buying and creative production bidding practices is quite simple… fraud, price fixing and bid rigging are prohibited under federal law.

The question is; “Why haven’t more advertisers, whose media and production dollars are at risk, been more proactive in constructively addressing these issues with their agency partners?”

The fact that the federal government has determined that it was necessary to launch two separate investigations into U.S. advertising industry practices is a clear signal that marketers should reinvigorate their oversight and compliance efforts. The stakes are high and the risks have not abated since the aforementioned practices first came to light.

If federal investigations into ad agency practices in these areas isn’t enough to spur advertisers to action, perhaps the words of Jon Mandel, former CEO of Mediacom in an interview with Mumbrella following his whistleblowing presentation regarding media agency “kickbacks” at an ANA conference in 2015 will provide the necessary incentive;

Clients need to stop suspending disbelief. The agency is supposed to be a professional providing you with proper advice not tarnished by their own profit. Marketers need to know the limits of that.

 

 

Exchanges Seek Outside Support to Reform

18 Oct

Tag LogoMuch needed reforms could be coming to the programmatic digital media marketplace. Earlier this week it was reported that several of the top exchanges had reached out to the Trustworthy Accountability Group (TAG) for help in cleaning up some of the non-toward practices that have plagued advertisers.

Of note, these exchanges have agreed to not to charge hidden fees or give rebates to unduly influence agency holding companies. Further, they pledge to notify buyers in advance if they change auction dynamics, to clearly mark first-price and second-price auctions and not to bid cache without notice.  

Translation, the exchanges been employing these practices all along to the detriment of advertisers as a means of shoring up their bottom lines. Step in the right direction or affirmation of the ongoing murkiness associated with programmatic digital? Advertisers will have to decideRead More

Never a Wrong Time to Do the Right Thing

27 Sep

DoTheRightThingDoing right by others is certainly a core value and one that many of us subscribe to. For me personally, as a former ad agency account director, I have always been fond of the quote by Victor Hugo, the nineteenth-century French author: “Initiative is doing the right thing, without being told.

In the professional services business sector this credo was once considered “cost of entry.” Today, however, having one’s advertising agency and or intermediaries “do the right thing” isn’t a given and, in the current environment, very likely will come at a cost.

As an example, Forrester recently interviewed thirty-four media agency clients and found that “transparency” was a key priority for marketers. However, many of the media agencies that they spoke with indicated that they “are only transparent if clients require it in their contracts.” Nice to know.

Perhaps you’ve been following the trend among influencer marketing agencies and their vendors who are now charging clients incremental fees for conducting content reviews or brand-safety checks to safeguard advertisers’ placements. For years, influencers have been paid largely based upon the number of followers that they had. Sadly, many influencers had engaged in buying followers to boost their appeal to advertisers and, in turn, their revenue. Now that advertisers are savvy to this practice and are looking for assurances on the influencers utilized and the nature of their followers, influencer agencies want to incorporate an upcharge to advertisers.

What about those instances where trading desks and DSPs are now charging premiums to access content from exchanges that will ensure proper placement, safeguarding brands and minimizing the incidence of media fraud? Whoever said that it was okay to purchase high-risk, low return inventory to begin with?

Maybe you’ve experienced abnormal delays with regard to your ad agency partners closing and reconciling projects to actual costs or in receiving post-campaign media performance recaps. Or perhaps you were expecting your agency to competitively bid your production work, only to find out that they were relying on the same vendor(s) that they’ve always used (maybe even an agency affiliate). Or, you were of the belief that your media campaigns were being monitored and that audience delivery guarantees were being negotiated in-flight, only to find out that there was no such stewardship of your media investment.

What is going on? What happened to doing the right thing? When you query your agency partners they suggest that the Scope of Work (SOW) didn’t specifically call for those activities nor did the agency Staffing Plan allow for providing that support at the frequency or within the time frame that you had come to expect. This obviously begs the question, “When did the agency stop providing the level of service and oversight support that it once did?”

The message is clear, advertisers can take nothing for granted and certainly cannot assume that their agency, adtech, production and media vendors have their back. Simply stated, we are operating in an era when advertisers must incorporate legal terms and conditions, which provide the requisite safeguards and controls that govern the behavior and service levels that they expect, into their agency agreements in order to have each vendor in the advertising supply-chain do the right thing.

As importantly, having solid contract language and tightly written scopes of work in and of themselves does not guarantee that agents and intermediaries will fall in line and comply with advertiser expectations. Experience suggests that adherence will typically only be achieved through performance and accountability monitoring. As the old adage goes; “What is inspected is respected.”

Please note, that we are not suggesting that an advertisers shouldn’t pay for the level of coverage and service that they expect to receive. That said, advertisers can no longer take it for granted that certain service standards, which historically have been part and parcel of agency standard operating procedures and hadn’t been necessary to be called out in an agreement or an SOW, are still being followed. If a service provider drops or alters the nature of a service being provided, it should be incumbent to at least communicate those decisions to the advertiser and engage in discussions to ascertain if the changes are acceptable or negotiate additional fees to cover the desired level of support.

In the end, successfully aligning advertiser expectations and supply-chain member service delivery standards comes down to all parties committing to a policy of open, honest, two-way dialog to ensure that there are no surprises and to incent an environment of initiative taking.

 

 

Will Programmatic Ever Address Advertiser Transparency Concerns?

20 Aug

dreamstime_m_35343815It has been two years since the Association of National Advertisers released its study on media transparency issues impacting advertisers within the U.S. media marketplace.

While much has changed, there remain reasons for concern. Most perplexing is the fact that with all of the intermediaries in place between advertiser and publisher, few seem to be looking out for the advertisers’ best interests.

The reasons for this lack of an advertiser-centric perspective are many and include greed, a lack of knowledge, insufficient oversight processes and often times indifference up and down the programmatic digital media supply chain.

Thus, it was with great interest that I read a recent article on Adexchanger.com entitled; “Index Exchange Called Out for Tweaking Its Auction.” In short, the article dealt with the fact that Index Exchange had altered its auction processes, without notifying advertisers, ad agencies or DSPs. Ostensibly, the exchange’s motivations for this move was to boost its market share, although in fairness, they claimed that they believed their approach reflected “industry practice.”

Of note, Index Exchange made the aforementioned change more than one year ago, employing a technique referred to as bid caching. In short, bid caching is where the exchange retains losing bids in an effort to run advertiser content on subsequent content viewed by the consumer. From an advertiser perspective there are a number of issues with this practice, as detailed by author Sarah Sluis of the aforementioned article on Adexchanger:

  1. Buyers will bid higher prices for the first page in a user session. Thus, if the losing bid is retained and the ad is served deeper into a user session, the buyer will have overpaid for that inventory.
  2. Any delay between the initial bid and the ad actually being served, using a bid caching methodology, increases the chance that the DSP will have found the user elsewhere, resulting in the campaign exceeding the pre-determined frequency caps.
  3. Brand safety definitely comes into play, because even though the ad is served on the same domain, it is on a different page than what was intended.

What is truly remarkable about this scenario is that buyers just learned of this practice and, according to Adexchanger, “not from Index Exchange.”

How many advertisers were negatively impacted by Index Exchange’s unannounced move? What were their agency and adtech partners doing in the placement and stewardship of their buys that an exchange’s shift in auction approaches went undetected for more than one year? Unsettling to be sure.

Ironically, this exchange had implemented a similar move previously, adopting a first-price auction approach, which was known to publishers but not announced to buyers.

Advertisers would be right to raise questions about the current state of programmatic affairs; exchanges not notifying the public of shifts in auction methodology, agency buyers and DSPs unable to detect these shifts to adjust their bid strategies, ad tech firms not catching the shift to safeguard brand ad placements, and publishers that were aware, but settled for the higher CPMs resulting from the shift, rather than informing the buy-side.

This is disheartening news, particularly when one considers the percentage of an advertiser’s dollar that goes to fund each of their intermediaries (at the expense of working media). Yet, advertiser fueled growth in programmatic digital media continues unabated.

Clearly a case of buyer beware. Advertisers that have not already reviewed their supplier contracts or enacted the “right to audit” clauses of their agency and adtech supplier agreements may want to make plans to do so as they begin finalize their 2019 digital media budgets. As the old saying goes:

The buyer needs a hundred eyes, the seller but one.”

 

Try This Quick Programmatic Digital “Transparency” Test

16 Aug

exam resultsIf you’re like most marketers, your organization is spending considerably more of its media budget on programmatic digital media today than it did last year and certainly more than it did five years ago. The question is, “Are you getting value for that shift in media spend?

While agencies and ad tech firms have clearly benefited from the rapid growth of programmatic digital media many marketers have seen their working media levels languish due to the third-party costs and intermediary fees associated with programmatic media.

As marketers know all too well, every dollar invested programmatically is subject to what has been referred to as the “tech tax,” which according to David Kohl, CEO and President of TrustX this can account for over fifty cents of every dollar invested. In his article; “The High Cost of Low CPMs” written for AdExchanger, Mr. Kohl points out that “whether or not the ad reaches its target audience and whether or not it is served into the viewable window or below the fold, DSPs, SSPs, data providers, viewability and verification providers, tag managers, re-targeters and others all take their few cents.”

The question to be asked is; “To what extent is this happening to my organization?” Fortunately, there is a quick, three-step method for testing your risk profile when it comes to programmatic digital media.

Step 1 – Ask your accounts payable department to provide you with a few examples of the digital media invoices that comprise the billing from your digital media agency partners. Check if they have a description of the services provided and the type and level of media inventory purchased. The objective of this exercise is to determine whether the invoices are highly descriptive or general in nature and if a non-media reviewer would be able to ascertain the breakdown of “what” was actually provided for the amount being billed.

Step 2 – Review the third-party vendor invoices that accompany the billing from your agency. If supporting vendor documentation is not provided, ask your agency to provide detail for a handful of invoices. This detail should include the invoices from the actual media sellers, not the agency’s trading desk or an affiliate. Apply the same filter to your review of these invoices as you did for the agency’s billing, with regard to the adequacy of the descriptions breaking out the media purchased and all of the attendant costs (i.e. net media expense, agency campaign management fees, ad tech and data fees, etc.).

Step 3 – Evaluate both sets of invoices, agency and vendor, for an itemized list of the fees being charged such as:

  • Agency campaign management fees
  • Data fees
  • Pre-bid decision making/ targeting fees
  • Ad tech/ DSP fees
  • Publisher discrepancy fees
  • Ad verification fees
  • Bid clearing fees
  • Ad serving fees

If you find that invoice descriptions are less specific than you would like or that third-party vendor invoices don’t contain an itemized list of fees being charged, it is time to have a conversation with your agency partners.

The first topic to be discussed is establishing your position and preference for “How” your programmatic media buys are to be structured when your agency goes to market on your behalf. If it is transparency that you seek, they should be executing your programmatic buys on a “cost-disclosed” rather than a “non-disclosed” basis. This is the only way that you will be able to identify the net costs being assessed for the media inventory purchased and to calculate what percentage of your buys are going toward working media. Fraud and viewability concerns aside, advertisers have found that after fees are subtracted, they’re lucky if 50¢ of a dollar spent on programmatic digital media actually makes it to the publisher to fund the media that your consumers see.

Once you and your agency have agreed on the desired level of disclosure, conversation must necessarily turn to the need for updating client-agency agreements, statements-of-work and each of the media control documents utilized by the agency (i.e. media authorization form, electronic RFI templates, digital insertion orders, etc.). In spite of the ad industry’s efforts to reform what remains a murky digital media supply chain fraught with bad actors, questionable practices and a lack of transparency, advertisers remain at risk. Therefore, it is imperative to ensure all parties are held accountable that they employ the appropriate descriptive invoice detail, reporting requirements and itemized cost breakdowns mandated by the advertiser.

Testing the current state of your programmatic buys’ level of transparency is a necessary first step to stripping away the opacity that can surround digital media buying. In turn, the results of this self-examination will assist advertisers in both safeguarding and improving the return on their digital media investments. In the words of David Ogilvy:

“Never stop testing, and your advertising will never stop improving.”

Don’t Start There

25 Jul

contract complianceMost would agree that the days of conducting business on a handshake are long gone. Make no mistake, honesty, forthrightness, trust and respectability are still qualities that we look for in our professional relationships. However, when it comes to transacting business the protection afforded to all parties is greatly enhanced with the use of a contract versus a verbal agreement marked by a handshake.

A verbal contract isnt worth the paper its written on.” ~ Samuel Goldwyn

The good news when it comes to the advertising industry, most client-agency relationships are governed by a contractual agreement. That said, there is one common mistake made by many advertisers when it comes to contracting with their agency partners… they start with the agency’s base contract.

Unfortunately, this creates a handful of challenges beginning with the fact that by its nature, agency contract templates are not client-centric. Then, when the advertiser turns the draft agreement over to counsel for review the document will likely require major modifications or, depending on counsel’s degree of advertising industry knowledge, there is a risk that key terms and conditions, which safeguard the advertiser’s interest will not be included in the agreement.

For advertisers, getting the contract “right” is important for two reasons. Firstly, the client-agency agreement establishes the legal nature of the relationship (e.g. principal-agent), while clearly articulating both stakeholders’ roles, responsibilities and rights. Secondly, the agreement establishes expectations and guidelines related to key aspects of the relationship, including; agency performance, staffing, remuneration, reporting, audit and record retention and intellectual property and data rights.

Over the course of the last several years the nature of client-agency relationships has certainly evolved with the advent of emerging technologies, changes in the regulatory environment and a move away from principal-agency relationships, which once held agencies to a much higher fiduciary standard. Thus it comes as no surprise that the complexity of the legal agreements that govern these relationships has increased dramatically.

Larger advertisers certainly benefit from working with marketing procurement departments and in-house counsel that are adept at contracting with a myriad of marketing vendors. Many organizations have developed standardized marketing vendor Master Services Agreements (MSAs) that can be used across their agency network, with some modification. These are typically “evergreen” agreements that don’t need to be renegotiated on an annual basis. Complimentary annual Statements of Work (SOW), which include key deliverables, agency staffing plans and remuneration program details are designed to be reviewed every year.

Additionally, the Association of National Advertisers (ANA) and The Incorporated Society of British Advertisers (ISBA) have both developed comprehensive, client-agency contract templates for use by their members that reflect industry “Best Practice” trends in this area. For small advertisers, or relationships with smaller, independent agency partners, the ANA and ISBA contract templates may not be wholly appropriate, but will provide a worthwhile guide for key terms and conditions that will certainly be applicable.

In our experience, advertisers will be much better served by taking this approach as opposed to accepting or attempting to retro-fit an agency’s base contract.

Of course, once the contract has been executed, marketing and advertising team personnel have an obligation to their organizations… monitoring contract compliance and financial management across each of their agency partners. The first step in this process, one which is often overlooked, is to socialize the agreement. Since an agreement is intended to serve as the basis for the client-agency relationship, it is important to share a summation of this agreement with those client-side individuals responsible for managing these important relationships.

As it relates to ongoing contract compliance monitoring tactics, these can include the tracking and reviewing agency time-of-staff commitments, retainer fee “burn” rates, budget control and project status reports and annual fee reconciliations. Progressive advertisers compliment these efforts with periodic business review meetings (i.e. quarterly or semi-annually) and by conducting independent agency contract compliance audits every year or two.

Good contracts can be the building block for great relationships. The time and effort invested in fashioning them and insuring compliance to them will yield dividends and across an advertiser’s agency network.

 

 

 

 

Advertisers Beware: Agency Margin Optimization Efforts

19 Apr

Traffic LightIt was with great interest that I read an article on Digiday dealing with “key issues” facing ad agencies and, ostensibly, the “agency model” ranging from transparency to in-housing.

Masked behind the author’s perspective that transparency comes at a high cost was the reality that marketers remain at risk to the predatory non-transparent revenue practices applied by certain agencies.

Why? With marketers demanding more transparent ad buying practices and transitioning certain tasks and or ownership of elements of the tech stack in-house, agency gross margins are under pressure. In turn, this has created an environment where agencies attempt to make up for the margin shortfall from clients that don’t actively monitor agency contract compliance, financial management or media performance.

Of note, one anonymous agency executive went so far as to suggest that some agencies use a “traffic-light system to determine how knowledgeable the procurement teams at clients are.” This guidepost allows the agencies to assess how much margin they can make on a given account.

This certainly reinforces the reality of the old adage; “Where there is mystery, there is margin” and signals the importance for all marketers to get up to speed on both the potential benefits and the pitfalls related to their digital and other advertising investments. For client organizations, most of which do not have the bandwidth or subject matter expertise in-house, engaging an independent contract compliance or media performance auditor or consultant could greatly help to mitigate risks in this area.

In spite of the potential for efficiencies that fueled the rise of programmatic media buying, what we have all come to realize is that the costs related to algorithmic, machine-to-machine buying have far outweighed these efficiencies. One dynamic, which drives costs is the number of agent firms involved in a typical programmatic digital media buy and the fees that each charge for their role. Below is an overview of typical fees or mark-ups that are charged by those on the demand-side of a programmatic transaction.

Digital Dollar

Source: Industry Experts

As is readily apparent, the dollar dissipation that occurs between the advertiser’s initial investment and the money that actually ends up with the publisher is significant. Industry studies have consistently shown that less than forty cents of each digital dollar invested makes its way to the publisher.

To combat this trend, rightly or wrongly, marketers have focused on reducing the number of intermediaries and the fees charged by each, with the goal of improving working media ratios and ultimately the performance of their digital campaigns. Thus, the agency margin squeeze.

That said, the agency practice described in the aforementioned Digiday.com article of taking advantage of unsuspecting, less knowledgeable clients to make up for the margin lost on those that have moved to transparent buying models, is neither appropriate nor sustainable. Agencies conducting themselves in this manner may want to reflect on the words of the renowned physicist, Stephen Hawking:

Intelligence is the ability to adapt to change.”

This is particularly true given the competitive inroads being made by the management consultant and tech consultancies that are focusing on the digital media segment of the market. The best path forward for agencies is to actively engage their clients in an open dialog about mutually beneficial remuneration methodologies.

In our opinion, it is right and just to eliminate the potential for media arbitrage, non-disclosed fees, no charge media weight and volume-based rebates that often accrue to agencies, and much of the time without the advertiser’s knowledge. Further, we also don’t believe that clients are obligated to make up the gap in lost agency revenue tied to transparency reforms. That said, we are fully supportive of an agency’s right to earn a fair and reasonable profit and to have the potential for incremental gains tied to extraordinary performance.

Near-term, the best way to balance an advertiser’s quest for transparency and an agency’s ability to generate a reasonable profit will likely be a compensation schema that incorporates a base fee using a direct-labor or cost-plus methodology with an outcome-based performance incentive. This approach is particularly apropos for advertisers that are leaning toward a managed-service model. With this approach, ownership of the tech stack and or tech platform licensing agreements transition from agency to advertiser; and the agency is then engaged to oversee the digital planning, buying and ad operations chores associated with programmatic media.

Will Facebook Go the Way of Myspace? And Can Regulation Be Far Behind?

21 Mar

facebookIt wasn’t long ago that the world’s largest social networking site was overtaken by a rival and lapsed into irrelevancy. Will the same fate befall its successor?

Many will remember that from 2005 to 2008, Myspace was the number one social-networking site in the world and the most visited website in the U.S. Aside from the emergence of new competitors, analysts have cited factors such as Myspace’s inability to enhance their users social networking experience, an over proliferation of advertising (which slowed the site down) and the inability to effectively filter inappropriate content or to limit phishing, spam and malware, as reasons for its demise. 

It was Facebook, the shiny new object with expanded social-networking apps that succeeded Myspace as the world’s largest social media platform. At the time, social networking was immensely popular with young people, and Facebook was no different, building its fortune by focusing on 18 – 24 year olds in general and college students in particular.

Over time, older adults began to flock to Facebook in record numbers driving both platform usage and advertiser appeal. However, the growing presence of GenXers and Boomers on Facebook caused many younger users to lose interest, turning to alternatives such as Instagram, a Facebook owned company, and Snapchat. Ironically, the dynamic of having this younger user base abandon Myspace for Facebook is what precipitated its decline from the number one website in the world to its current rank of 4,446 based on total web traffic (source: Alexa Traffic Ranks).

Are we beginning to see chinks in the Facebook armor?

Of note, on a recent earnings call, Facebook executives indicated that the organization had experienced declines in both the number of daily users and time spent on the site. The negative indicators for these two key metrics caused the stock price to fall and analyst to begin to question Facebook’s stranglehold on its social networking position. As an interesting corollary, the duopoly of Facebook and Google, which is projected to account for a 56.8% share of digital media spending in the U.S. in 2018 (source: eMarketer) is expected to see its share of “new” digital media spend drop to 48% from a high of 73% in 2016.

Fast forward a few weeks and Facebook has been hit broadside by a data scandal stemming from the actions of a political behavioral research firm, Cambridge Analytica that secretly “scraped” the personal data of up to 50 million Facebook users, without the accountholders permission. Once again, the financial markets reacted quickly, with Facebook shares falling more than 12.0% over a two-day period, wiping out billions of dollars in shareholder value.

However, the bigger risk resulting from the Cambridge Analytica scandal is not the near-term impact on share price, but concerns regarding “trust” and the lack of data and privacy protection for users, advertisers and government regulators. Facebook users will surely be upset that Facebook was seen to be not only lax in protecting their privacy, but greedy in aligning themselves with and profiting from a relationship with a firm like Cambridge that is involved in nefarious activities designed to impact political elections in various countries around the world.

Further, lawmakers in both the U.K. and the U.S. are moving forward with requests to compel Facebook’s chairman, Mark Zuckerberg to appear before the appropriate parliamentary and senatorial committees to answer questions about the company’s recent lapses in data security and privacy controls along with the firm’s ongoing lack of transparency and or cooperation with government regulators.

Beyond the recent consumer privacy protection shortcomings, Facebook’s acceptance of fraudulent advertising during the 2016 presidential election in the U.S. and its lack of screening controls for fake ads and inappropriate content had already raised the specter of U.S. regulatory involvement.  The Federal Trade Commission’s (FTC) Bureau of Consumer Protection has indicated that there is a “strong possibility” that it will be launching an investigation into whether or not the company violated federal rules prohibiting “unfair, deceptive acts or practices.”

Unfortunately for Facebook, its ongoing indifference toward lawmakers and the lack of sensitivity it has demonstrated or sense of ownership that it has taken regarding the aforementioned issues are not winning it many friends.

Of note, neither Facebook’s CEO, COO or Chief Privacy Officer have provided public commentary on the Cambridge Analytica situation as of this writing.

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