Archive | Digital Media RSS feed for this section

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.”

Media Agencies on Edge as Management Consultants Take Aim

1 Jun

Contract SigningIt came as no surprise to anyone in the industry when Accenture recently announced the launch of its programmatic ad unit. After all, weeks before Accenture had completed the acquisition of Meredith’s digital media unit MXM. Further, over the course of the last few years many of the large management consultancies, including Accenture, had acquired creative, design, digital, CRM, Social and full-service agencies as they looked to expand their presence in the marketing services sector.

The row over Accenture’s announcement, at least within the agency community, was focused on its Media Management practice and the work that they do globally in the media auditing and agency review space. The argument proffered by agencies and their associations, specifically the 4As and the UK’s IPA, was that it was inappropriate for Accenture to provide media auditing and search consulting services and programmatic media buying due to the potential for conflict of interest. In short, the agencies expressed concern that Accenture would utilize the data that is accesses in its media management practice to inform its work in the programmatic buying area.

Many would argue that the “conflict of interest” defense raised by the agency community rings hollow. This is due to the fact that Accenture and other management consulting firms routinely implement firewalls and processes to separate and protect data from one client or practice being co-mingled or misused intentionally or not by another.

Further, the agency community has had its share of “conflict of interest” challenges in the recent past ranging from its acceptance of AVBs to media arbitrage to ownership interests in intermediary firms not disclosed to clients that have served to undermine their credibility and the level of trust clients are willing to afford them. Thus, while Accenture’s announcement may be a sensitive topic for agencies, clients will likely have little concern.

Let’s face it, the world is changing and the media landscape has become more complex thanks in large to the growing impact of technology, accelerated levels of media fragmentation and fundamental shifts in consumer media consumption habits. Marketers in particular have become more highly focused on the effective use of data and insights to better target select audiences, geographies, behaviors, etc. Thus, organizations looking to boost their performance and to optimize their marketing investment, are seeking partners that can provide holistic, objective, strategic insights to guide their decision making.

Management Consultants are well positioned to provide the requisite marketplace, competitive and consumer assessments along with strategic recommendations and tactical implementation support across the evolving marketing funnel. Global in scope, the large consultancies have hundreds of thousands of employees, serving in a variety of specialized practices that can be tapped to work with marketers in the identification of problems and opportunities and the pursuit of strategies to achieve their business objectives. The addition of programmatic media capabilities to encompass planning and buying is a logical extension of the consultants service offerings.

Media agencies were long the profit engines for agency holding companies and the onset of digital media and the meteoric growth of programmatic buying represented a boon for media agency margins. Unfortunately, revelations about certain buying practices and growing advertiser concern over the lack of transparency surrounding their digital media investment ushered in a period in which advertisers began to actively evaluate new media agency partners, tighter client-agency contracts and new digital media models. It should be noted that among the new models that advertisers have pursued has been bringing aspects of the programmatic media buying process in-house, often with the counsel and assistance of management consulting firms. These trends have allowed the consultancies to curry favor with CEOs and CMOs and to expand their toe hold in what had been space traditionally dominated by ad agencies.

Given the size of the global programmatic marketplace, measured at $14.2 billion in 2015 and estimated to be $36.8 billion in 2019 (source: MAGNA Global, June, 2016), it is easy to see the appeal for the management consulting firms in general and Accenture in specific. As an aside, the market potential in this sector dwarfs the size of the media auditing and review market by a wide margin.

The media agency community would best be served by focusing on what it can do to leverage its position of strength to protect its share of the media planning and buying business. Time spent focused on “conflict of interest” claims as a defense against incursions from consultants or other non-traditional competitors will likely garner little support outside of the agency community and will therefore not be productive.

 

 

Will the Media Industry Find Its Way?

27 Apr

agencies as media ownersThere was a time when ad agencies represented an advertiser’s interest when interacting with media sellers to secure time and or space for the conveyance of the advertiser’s messaging. The media supply chain was uncluttered, machine-to-machine buying was not even a distant thought and the roles of the various players were understood by all parties.

As the media industry has evolved, the complexities of the supply chain and the clarity of “what” each intermediary does, what they are responsible for and what they earn have sown confusion, limited advertiser transparency and eroded stakeholder trust.

One of the key drivers of supply chain complexity, and all that comes with it, has been the rapid growth of digital media in general and specifically the expansion of programmatic buying. Thus, there may be no better barometer of this dynamic than the “Marketing Technology Landscape” prepared annually by Scott Brinker. Mr. Brinker’s landscape chart incorporates the logos of each available advertising, marketing and search solution. This year’s version contains logos for over 6,800 solutions, up from 150 in 2011. That is a staggering number of ad tech and mar tech solutions vying for a slice of an advertiser’s digital media dollar.

In spite of the dramatic increase in the number of marketing technology solutions and the exponential increase in the level of data available to inform practitioners media decisions, the industry is still grappling with issues that negatively impact media performance. Issues that include ongoing limitations in attribution modeling, difficulties with omnichannel measurement, a lack of standardization in assessing audience delivery and continued concerns regarding ad viewability, fraud, ad blocking and privacy.

Many would agree that the current state of affairs is not healthy for the global media industry which totaled $500 billion in 2017 (source: MAGNA Global Advertising Forecast, December, 2017).

Marketers, who are under increasing pressure to improve performance, are clearly not satisfied with the status quo within the media supply chain, which many describe as “murky” and “inefficient.” These marketers are committed to seeking out new partners, processes, tools and solutions that can improve working media and increase the chance that each dollar they invest in media has the opportunity to positively impact business outcomes.

Media agencies, for their part are increasingly being challenged to improve both transparency and the cost effectiveness of their clients’ media spend. Sadly, many agencies have taken the stance that there is a cost to be paid for improved transparency, enhanced viewability and brand safety and believe that these costs should be borne by the advertiser. Advertisers rightly disagree with this position.

Let’s be clear. When agencies strayed from a singular focus on their fiduciary responsibility to their clients, they did so at their own risk. Their pursuit of principal based media buys, non-disclosed relationships with other commercial entities in the media supply chain (including their own affiliates) and the myriad of unauthorized, non-transparent revenue generation practices employed by some agencies netted them significant profit gains… in the short-term.

However, as advertisers became aware of these practices and began to understand the negative impact on their business this created a crisis in confidence among advertisers and lessened the level trust that they had in their agency partners. In turn, this has created opportunities for management and technology consultants to make inroads with CMO’s as it relates to their media business and incented many advertisers to begin looking at taking control over portions of their media business, including bringing work in-house.

These trends coupled with the corresponding reduction in non-sanctioned revenue opportunities resulting from greater levels of advertiser transparency have constrained agency margins. How agencies positon themselves for the future in light of the evolving competitive set, while rethinking their service offerings and charging practices remains to be seen, but will be of critical importance.

As for the ad tech sector, there will surely be a shakeout that will result in a reduction in the number of vendors (over 6,200 in 2018) providing solutions. This will be driven in part by consolidation due to the convergence of ad tech and mar tech solutions and the dominance of large players, such as Google, Facebook and Amazon. In addition, the emergence of consumer privacy protection regulatory actions and the eventual emergence of blockchain technology within the media market has the potential for significant disruption.

Clearly, there are uncertainties and challenges facing the media industry and the myriad of supply chain participants. That said, while continued change will be the norm and course corrections required, there will be winners that are able to navigate these turbulent times and position their organizations for future success.

“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” ~ Charles Darwin

 

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.

If Not an RFP, Then What?

15 Mar

RFP ProcessIt was with great interest that I read a recent article on Digiday entitled; “End of an era: Media buyers are ditching the much-hated RFP” that heralded the demise of the digital RFP.

For those of us with a media background, we’re certainly familiar with the longstanding list of complaints leveled by media sellers at agencies on the multitude of abuses heaped upon them by what is perceived as an unfair or at least highly disorganized and inefficient RFP process. I get it and I empathize with the media sellers for the inequities which they have suffered at the hands of misguided or poorly trained media buyers.

Let’s face it, the RFP does serve an important role in allowing media agency buyers to gather the requisite detail from media sellers as it relates to their ability to deliver on the agency’s media plan and to solicit inventory, audience delivery and pricing feedback.

Yes, the standardization of RFP templates appears to be a pipedream and the resulting impact on the time and effort required by media sellers to complete these RFPs is onerous, the process cumbersome and meaningful feedback from agency media buyers rare. For these and other reasons, it is understood that agency media buyers and publishers alike dislike RFPs.

That said, some of the reasons cited in the aforementioned article to support the declining use of RFP’s should raise concerns among advertisers. I’m not talking about the reduced role of price negotiations due to the increased use of biddable media, but rather the notion that an uptick in the use of digital direct buying, agencies relying on meetings with sellers rather than an RFP or a seller’s ability to “figure out what the strategy is” do not support abandonment of this important tool.

Properly executed, the RFP process allows an agency buyer to communicate strategic and tactical instructions to the seller. In turn, asking sellers for feedback on how best to drive performance for the advertiser’s brand can yield a treasure trove of information. The RFP also provides an excellent opportunity for publishers to make a compelling case as to why they should be on the buy.

Additionally, RFPs serve as an ideal tool for establishing parameters on items such as site retargeting, frequency capping and content considerations (including restrictions). It allows media buyers to gather the requisite detail on items ranging from data segments and sources to audience specifications and universe estimates. How better to communicate creative unit specifications or cross device allocations and target consumption levels or to establish measurement requirements for everything from impressions and video completion rates to qualified site visitors, viewability levels and cost per completed view. What about identifying verification sources and costs, third-party tagging requirements and or establishing the level of reporting granularity.

Last, but certainly not least, the RFP serves a vital “accountability” role by clearly establishing advertiser expectations and communicating guidelines that a seller will need to adhere to, should a deal be transacted.

So while the RFP process is far from perfect, rather than scrapping it, I would advocate that the process be revamped to make it more relevant to all stakeholders, less onerous for media sellers and more productive for agency media buyers. In the words of the noted journalist George Will:

“The pursuit of perfection often impedes improvement.”

 

 

 

 

 

 

4 Questions That Can Impact Your Digital Buys

15 Nov

four

According to eMarketer, in 2017 advertisers will spend 38.3% of their ad budgets on digital media – in excess of $223 billion on a worldwide basis. Yet, in spite of the significant share-of-wallet represented by digital media, there is generally little introspection on the part of the advertiser.

Looking beyond the “Big 3” [ad fraud, safe brand environment and viewability concerns], the lack of introspection begins much closer to home. Simply, in our experience, client-agency Agreements do not adequately address digital media planning / placement roles, responsibilities, accountability or remuneration details.

Standard media Agreement language does not adequately cover digital media needs – specific rules and financial models need to be included in Agreement language that covering each potential intermediary involved in the buy process and to guarantee transparent reporting is provided to the advertiser. It is our experience that Agreement language gaps related to “controls” can be much costlier to advertisers than the aggregate negative impact of the Big 3.

And, regardless of Agreement language completeness, a compounding factor is that too few advertisers monitor their agencies compliance to these very important Agreement requirements.

To assess whether or not your organization is at risk, consider the following four questions:

  1. Can you identify each related parties or affiliate that your ad agency has deployed on your business to manage your digital spend?
  2. Does your Agreement include comprehensive compensation terms pertaining to related parties, affiliates and third-party intermediaries, that handle your digital ad spend?
  3. Is your agency acting as a Principal when buying any of your digital media?
  4. What line of sight do you have into your ACTUAL media placements and costs?

If you answered “No” to any of the questions, then there is a high likelihood that your digital media budget is not even close to being optimized. Why? Because the percentage of your digital media spend that pays for actual media is likely much lower than it should be, which is detrimental to the goal of effectively using media to drive brand growth.

Dollars that marketers are investing to drive demand are simply not making their way to the marketplace. Often a high percentage of an advertiser’s digital media spend is stripped off by agencies, in-house trading desks and intermediaries who have been entrusted to manage those media buys. A recent study conducted by AD/FIN and Ebiquity on behalf of the Association of National Advertisers (ANA) estimated that fees claimed by digital agencies and ad tech intermediaries, which it dubbed the programmatic “technology tax” could exceed 60% of an advertiser’s media budget. This suggests that less than 40 cents of an advertiser’s investment is actually spent on consumer media.

A good place to begin is to ask your agency to identify any and all related parties that play a role when it comes to the planning, placement and distribution of your digital media investment. This includes trading desk operations, affiliates specializing in certain types of digital media (i.e. social, mobile) and third-party intermediaries being utilized by the agency (i.e. DSPs, Exchanges, Ad Networks, etc.). The goal is to then assess whether or not the agency and or its holding company has a financial interest in these organizations or are earning financial incentives for media activity booked through those entities.

Why should an advertiser care whether or not their agency is tapping affiliates or focusing on select intermediaries to handle their digital media? Because each of those parties are charging fees, commissions or mark-ups for services provided, most of which are not readily detectable. This raises the question of whether or not the advertiser is even aware charges are being levied against data, technology, campaign management fees, bid management fees and other transactional activities. Are such fees appropriate? Duplicative? Competitive? All good questions to be addressed.

When it comes to how an agency may have structured an advertiser’s digital media buys, there is ample room for concern. Is the affiliate is engaged in Principal-based buying (media arbitrage)?  Is digital media being placed on a non-disclosed basis, versus a “cost-disclosed” basis where the advertiser has knowledge of the actual media costs being charged by the digital media owner?

Evaluating your organization’s “risk” when it comes to digital media is important, particularly in light of the findings of the Association of National Advertiser’s (ANA) “Media Transparency” study released in 2016, which identified agency practices regarding non-transparent revenue generation that reduces an advertiser’s working media investment.

The best place to start is a review of your current client-agency Agreements, to ensure that the appropriate language safeguards are incorporated into the agreement in a clear, non-ambivalent manner. Once in place, monitoring your agency and its affiliates compliance to those contract terms and financial management standards is imperative if you want to assure compliance, while significantly boosting performance.  

“Today, knowledge has power. It controls access to opportunity and advancement.” ~ Peter Drucker                                                                                                                    

Interested in learning more about safeguarding your digital media investment? Contact Cliff Campeau, Principal, AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this important topic.

 

Are We Missing the Real Issue with Ad Blockers?

26 Oct

blockerThe advertising industry is rightly concerned about the financial impact related to consumers growing use of ad blockers, which can filter out ads before users ever see them. A recent study by OnAudience.com highlights the reasons why:

  • 26% of U.S. consumers now use ad blockers, resulting in lost publisher revenues of $15.8 billion in 2016, up from $11.0 billion in 2015. The U.S. represents approximately $45 billion of the $100 billion global display market.
  • Internationally, the loss of publisher revenue from ad blocking is projected to rise to $42 billion, up from $28 billion in 2016.

In addition, Google has announced that the 2018 version of its Chrome web browser will allow consumers to automatically block “annoying, intrusive” ads, which will accelerate the financial impact of this trend given that Chrome represents approximately 60% of the desktop/mobile/tablet browser market (source: NETMARKETSHARE, September 2017). Google’s motivation, it claims, is that they are simply introducing the Coalition for Better Ads recently announced best practices standards to enhance the consumer’s web browsing experience.

It is no surprise how we got where we are. Advertisers wanted to improve consumer engagement and publishers wanted to drive revenues. This, in turn, led to publishers placing more ads on a web page, including higher paying video units, making ads larger or forcing visitors to somehow interact with these ads to get to the content. This involves video ads that automatically refresh or blast audio automatically or force consumers to wait for :05 to :10 seconds before they can access the content they seek.

In the end, advertisers and publishers have not realized greater levels of engagement, but rather helped to fuel greater levels of consumer irritation and therefore ad blocker usage.

Thus far, the industry has been focused on blocking the ad blockers. It is true that many publishers believe that being exposed to ads is a user’s obligation if they want their content to be free. Others, however, share the consumer’s disdain for obnoxious, intrusive ads, and would like to see them banned from their sites. The problem is that ad blockers tend to block all ads.

So what is the ad industry to do? Busting the use of ad blockers or implementing web browser workarounds would appear to be somewhat short-sighted. Consumers have clearly signaled that they find the level, number, positioning and type of online ads served to them on a regular basis to be discordant with their intended browsing habits. Pursuing a more measured approach on the part of the industry is warranted. As Supreme Court Justice Ruth Bader Ginsburg intoned:

“Reacting in anger or annoyance will not advance one’s ability to persuade.”

The challenge is clear, finding a mechanism for publishers to fund their content creation at least in part through the use of online advertising. The answer, however, is not so readily apparent.

Let’s face it, by in large, consumers do not want to view online advertising. This can be evidenced by plummeting open and click-through rates, reductions in conversion rates and declines in average viewing times. Advertisers and publishers want “engagement” and sadly, consumers want nothing to do with most of the advertising foisted on them.

Is the answer better creative that informs, educates and entertains in the hope that users will both notice the ads and choose to interact with them? Or is it fewer, less intrusive ads that can take away from a user’s web browsing experience? Or will publishers finally have to solve the “pay to view” content dilemma, which consumers have largely been resistant to thus far?

If consumer engagement is the goal, the answer is likely “Yes” to all of the above.

 

Lawsuits Expose the Seemly Underbelly of Programmatic Digital

25 Sep

fraudsterAt the rate things are progressing in digital media and programmatic trading, the tenuous relationships between advertisers, agencies, ad tech providers, exchanges and publishers are about to come unglued.

While many in the ad industry have had their doubts about programmatic digital, this sector has grown unabated for the last several years. According to eMarketer in 2014 advertisers invested 28.3% of their ad budget in digital media. Their projection is that this will grow to 44.9% in 2020, likely topping $100 billion in total spend. eMarketer estimates that 80% of U.S. digital display activity in 2017 will be transacted programmatically. 

Interestingly, since 2014 the industry has become much more attuned to the risks encountered by advertisers when it comes to optimizing (or should we say safeguarding) their digital media investment. Yet in spite of the findings regarding unsavory practices emanating from the ANA’s seminal 2016 study on “Media Transparency” advertisers continue to pour an increasing share of their advertising spend into this media channel.

However, not all advertisers are continuing to embrace digital media quite as readily as they once did. A handful of progressives, namely Procter & Gamble, have begun to rethink the share of wallet being allocated to digital media and programmatic trading. Marc Pritchard, P&G’s Chief Marketing Officer, has been very outspoken in summing up his company’s position quite succinctly; “The reality is that in 2017 the bloom came off the rose for digital media. We had substantial waste in a fraudulent media supply chain. As little as 25% of the money spent in digital media actually made it to consumers.”

Given Mr. Pritchard’s comments it has been quite intriguing to monitor the legal developments in two high profile lawsuits that have recently been filed.

In the first case, Uber is suing Fetch Media, its digital agency suggesting that it had “squandered” tens of millions of dollars to “purchase non-existent, non-viewable and/ or fraudulent advertising” on its behalf. Uber has further alleged that the agency “nurtured an environment of obfuscation and fraud for its own personal benefit” and that of its parent company, Dentsu Aegis Network. To be fair, Fetch Media has denied what it says are “unsubstantiated” claims by Uber which it claims is designed to draw attention away from their “failure to pay suppliers.”  Allegations include that the agency acted as agent for Uber in some markets and executed principal-based buys in others and that they earned and retained undisclosed rebates tied to Uber’s media spend.

The second case involves RhythmOne, a technology enabled media company and its partner dataxu, a programmatic buy-side platform/ applications provider. RhythmOne originally filed suit regarding $1.9 million worth of unpaid invoices. Dataxu filed a counterclaim alleging that RhythmOne “used a fake auction to consistently overcharge” them and suggested that RhythmOne also “procured inventory from other exchanges, and then marked it up,” both violations of their partnership agreement. As an aside, for the $1.9 million in payments that dataxu admittedly and intentionally withheld from RhythmOne, going back to January, 2017, it is likely that dataxu’s clients had been billed and remitted payment to them. Which raises questions as to how and when their clients will be made whole.

Of note, both of these lawsuits delve into a range of topical issues that pose risks to most programmatic digital advertisers:

  • Agencies executing principal-based buys, rather than acting as agent for the advertiser.
  • The retention of undisclosed rebates tied to an agency’s use of advertiser funds.
  • Non-transparent fees and mark-ups being tacked on to the actual cost of media inventory by multiple middlemen (i.e. agencies, DSPs, exchanges).

These are issues that advertisers should familiarize themselves with and address through the development of a comprehensive client/ agency contract. In addition, advertisers must vigilantly monitor supplier compliance with the terms of those agreements to insure full transparency and, importantly, accountability when it comes to the stewardship of their digital media investment.

As these two cases highlight it is dam difficult for an advertiser to accurately assess the value of digital inventory that is being proffered on their behalf by their agency and adtech partners. Beyond establishing what percentage of an advertiser’s digital dollar actually goes toward media inventory, these separate, but related legal actions demonstrate that it is not just a lack of transparency that advertisers must worry about, but a lack of ethics. When it comes to programmatic digital media the American artist, John Knoll, may have said it best;

“Any tool can be used for good or bad. It’s really the ethics of the artist using it.”

There are steps that advertisers can take to both safeguard and optimize their digital media investment. If you are interested in learning more, contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Will AI Render Media Agencies Obsolete?

11 Sep

artificial_intelligenceArtificial intelligence (AI) is already reshaping how advertising is developed, planned and placed. The marketing applications being envisioned and adopted by agencies, consultancies, publishers and advertisers are nothing short of remarkable.

From the onset of “Big Data” it stood to reason that the concept of predictive analysis, the act of mining diverse sets of data to generate recommendations wouldn’t be far behind. Layer on natural language processing, which converts text into structured data, and it is clear to see that “deep learning” is on the verge of revolutionizing the ad industry. As it stands, algorithms are currently optimizing bids for media buying, utilizing custom and syndicated data to match audience desires (or at least experiences) with available inventory.

Effective, efficient, automated methodologies for sorting through vast volumes of data to evaluate and establish patterns that reflect customer behavior for use in segmenting audiences and customizing message construction and delivery holds obvious promise.

So, what does this mean for media agencies? Will they be at the forefront of automation technology? Or will they be swept away by the consultancies and ad tech providers that are already investing here?

If media agencies desire to remain in control as the industry evolves, there are real challenges that they will have to address to remain viable:

  • Re-establish role as “trusted advisor” with the advertiser community. Recent concerns over transparency, unsavory revenue generation practices and a failure to pro-actively safeguard advertisers’ media investments from fraud and from running in inappropriate environments have created serious client/ agency relationship concerns.
  • Attract, train and retain top-level talent to re-staff media planning and buying departments. The focus will need to be on bridging the gap between developing, and applying automation technology and providing high-level consulting support focused on brand growth to their clients. Presently, media agencies are not effectively competing for talent, whether in the context of compensation and or personal and career development options being offered by their non-traditional competitors.
  • Provide a framework for addressing the compensation conundrum. Whether this is in the form of cost-based or performance-based fees tied to project outcomes, commissions or hybrid remuneration systems, tomorrow’s successful media agencies will need to establish clear, compelling compensation systems. These systems will need to reflect value propositions that will differentiate them from an expanded base of competitors, while offsetting (to some extent) non-transparent sources of revenue that many media shops have come to rely on in recent years.

This will not be an easy path for media agencies, particularly for those that are hampered by legacy systems, processes and management perspectives that may limit their ability to more broadly envision and ultimately, assist client organizations addressing their needs and expectations.

Either way, the race is on, as management consulting firms are acquiring various marketing and digital media specialist firms and as media agencies raid the consultancies for personnel to build out their strategic consulting capabilities. The key question will likely be, “Which business model holds the greatest promise, in the eyes of the Chief Marketing Officer, for improving brand performance?

 

 

 

%d bloggers like this: