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4 Questions That Can Impact Your Digital Buys

15 Nov

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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.

 

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.

Increase Your Digital Coverage by 40% In One-Easy-Step

1 Aug

simpleisgoodConfucius once said that “Life is really simple, but we insist on making it complicated.”

Perhaps the same can be said of digital media buying. Too often it seems as though the onset and rapid growth of programmatic buying has created more problems than solutions. An expanded media supply chain with multiple layers of costs, increased levels of fraud, brand safety concerns, visibility challenges, a lack of transparency and perhaps most troubling, eroding levels of trust between advertisers and their agencies.

Growing pains? Perhaps. But something needs to change and this author would like to suggest one potential solution… abandon programmatic digital media buying altogether. Seriously? Why not?

Consider the following and the concept won’t seem so far-fetched:

  • In 2015, advertisers spent $60 billion on digital media, with close to two-thirds of that going to Google and Facebook (source: Pivotal Research).
  • According to the advertising trade group, Digital Content, today this duopoly is garnering 90% of every new dollar spent on digital media.
  • What happened to the magical pursuit of the long-tail and the notion of smaller bets being safer? Economics. The fact is that the notion of the long-tail simply didn’t work as researchers and economists found that having less of more is a better, more statistically sound pursuit. To wit, Google’s and Facebook’s market share.
  • Today, programmatic digital display advertising accounts for 80% of display ad spending, which will top $33 billion in 2017 (source: eMarketer).
  • Between 2012 – 2016 programmatic advertising grew 71% per year, on average (source: Zenith).
  • In 2018, programmatic will grow an additional 30%+ to $64 billion, with the U.S. representing 62% of global programmatic expenditures (source: Zenith).

Come again. Two publishers are getting $.90 of every incremental digital dollar spent and programmatic digital media buying accounts for 80%+ of digital media spend. What are we missing? Is there an algorithm that specializes in sending RFPs and insertion orders to Google and Facebook in such a manner that the outcome yields a 40% or better efficiency gain?

As we all know, there have been numerous industry studies, including those sponsored by the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA), which have suggested that at least 40% of every digital media dollar spent goes to cover programmatic digital media buying’s transactional costs (third-party expenses and agency fees), with only $.48 – $.60 of that expenditure going to publishers.

So, for an advertiser spending $40 million on programmatic digital media, if the law of averages holds true, $16 million will go to cover transactional costs and agency fees. That means that of the advertiser’s original spend, they will actually get $24 million worth of media. While we know that programmatic media can yield efficiencies, can it overcome that type of transactional deficit?

If that same advertiser eschewed programmatic digital and decided to rely on a digital direct media investment strategy, what would it cost them?

Assume that they hired ten seasoned digital media planning and investment professionals for $150,000 each (salary, bonus, benefits), they would spend $1.5 million on direct labor costs. Further, in order to afford their team maximum flexibility, let’s say that the advertiser allocated an additional $1 million annually for access to ad tech tools and research subscriptions to facilitate their Team’s planning and placement efforts. This would bring their total outlay to $2.5 million per annum.

If they were spending $40 million in total, this means that the team would be able to purchase $37.5 million worth of digital media. Don’t forget that placing digital buys direct will greatly reduce fraud levels that can eat up another 8% – 12% of every digital ad dollar, while also greatly improving brand safety guideline adherence. Compare that to the $24 million in inventory purchased programmatically.

So how efficient is programmatic?

Sadly, most advertisers can’t even address this question, because their buys are structured on a non-disclosed, rather than a cost-disclosed basis. Even if they had line of sight into what the third-party costs (i.e. media, data, tech) and agency fees being charged were, they wouldn’t have a clue as to the fees/ charges that sell-side suppliers were levying, further eroding working media levels.

A simplistic solution? Perhaps. But the fact that the industry continues to drink the programmatic “Kool-Aid” without any significant progress toward resolving the dilutive effect that programmatic transactional costs, agency fees and fraud have on an advertiser’s investment seems a tad irresponsible.

Ask yourself. What would you do if it were your money?

 

 

Is Programmatic Advertising Worth the Risk?

26 Jul

dreamstime_xs_50082776Conceptually, it is easy to understand the potential of programmatic media buying. It is obvious to most that using technology to supplant what is a manual, labor intensive process to drive efficiencies and improve media investment decisions could be a plus for advertisers, agencies and publishers (not to mention ad tech vendors).

The only question to be addressed is “when” will the benefits of programmatic outweigh the costs and the risks to advertisers?

Proponents of programmatic will argue that this buying tactic has already generated economic benefit for advertisers when it comes to digital media buying. After all, streamlining the processes related to the issuance and completion of RFPs, buyer/ seller negotiations and preparation of insertion orders clearly saves time and reduces labor costs for all stakeholders.

No one would argue this premise. However, reducing labor costs associated with traditional buying is but one component of programmatic buying costs. Consider the broad array of programmatic buying related fees and expenses currently being born by advertisers:

  • Data Management Platform (DMP) fees
  • Demand Side Platform (DSP) fees
  • Data/ Targeting fees
  • Pre-Bid Decisioning/ Targeting fees
  • Ad Blocking (pre/ post) fees
  • Verification fees
  • Agency Campaign Management fees

It should be noted, that there are “other” non-transparent charges and fees linked to sell-side platforms (SSPs), bid processing, real-time bidding auction methodology and principal-based buys (media arbitrage) that are born by advertisers and limit the percentage of their digital media spend that actually goes toward inventory.

In a recent Ad News article by Arvind Hickman, the author referenced studies conducted by both the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA) that demonstrate the magnitude of these programmatic fees and expenses. The WFA study determined that $.60 of every dollar spent on programmatic digital media buying goes to cover “programmatic transactions and fees.” The ANA study suggests that advertisers could be paying between $.54 – $.62 of every dollar on digital supply chain data, transaction fees and supply side charges.

Bear in mind that neither of these studies addressed the impact of media arbitrage or ad fraud. Industry studies, focused on assessing the level of digital ad fraud, fielded by the Association of National Advertisers (ANA) and WhiteOps found that fraudulent non-human traffic in the form of bots was “more prevalent in programmatic environments.” According to the research, display ads purchased programmatically were “55% more likely to be loaded by bots” than non-programmatic ads.

And yet, in-spite of the challenges still being faced with programmatic digital media buying, this media investment model is being rapidly rolled out to out-of-home, print and television.

Who do you think will bear the learning curve costs and risks associated with expanding programmatic to other media categories? The answer, is primarily advertisers and to a lesser extent, publishers.

We certainly understand that programmatic is the future of media buying. That said, rushing headlong into this arena, without satisfactory levels of transparency and or fraud prevention, combined with the upfront costs of the industry’s investment in technology, that are ultimately passed through to the advertiser, are both risky and costly to advertisers.

Is there a need to reach and take risks in order to secure positive progress? Yes. But, it might be best to follow the approach advocated by one of this country’s greatest military leaders, General George S. Patton:

“Take calculated risks, that is quite different than being rash.”

It’s Only Money…

5 Jun

digital mediaThere was one particularly startling revelation that came from the ANA’s recent Agency Financial Management conference in San Diego. During the presentation of this year’s “Agency Compensation Trends” survey results it was noted that the ANA found that almost half of the members it surveyed had not reviewed the findings of the ANA’s 2016 Transparency study.

Think about that. If an organization did not review the Transparency study’s findings, that means that there must not have been any resulting internal dialog with or among marketing’s C-Suite peers, no direct interaction with their agency network partners, no review of existing Client/Agency contracts, no improvements in reporting and controls in which to illuminate how an advertiser’s funds are being managed.

This, in spite of the level of trade media coverage regarding transparency issues ranging from rebates, discounts and media arbitrage, to the Department of Justice investigation into potential ad agency bid rigging practices or the level of ad fraud, traffic sourcing or non-disclosed programmatic fees on both the demand and sell side of the ledger.

There is only one conclusion that can be drawn from this remarkable revelation…many marketers simply don’t care how their organization’s advertising investment is being allocated or safeguarded. Unfortunately, we regularly see the ramifications of this attitude of indifference in our contract compliance audit practice:

  • Client / Agency agreements that haven’t been reviewed or updated in years
  • Failure among clients to enact their contractual audit rights with key agency partners
  • Limited controls regarding an agency’s use and or disclosure of its use of affiliates
  • No requirement for agency partners to competitively bid third-party and affiliate vendors
  • Lack of communication to media sellers regarding ad viewability standards
  • Failure to assert an advertiser’s position on not paying for fraudulent and non-human traffic
  • No requirement for publishers to disclose the use of sourced-traffic
  • Incomplete instructions on buy authorizations to media vendors, minimizing or blocking restitution opportunities
  • Poorly constructed media post-buy reconciliation formats that lack comprehensive information and insights

Interestingly, there have been many positive developments from key industry associations such as the ANA, 4A’s, IAB and public assertions from leading marketers such as P&G and L’Oréal to further inform and motivate marketers on the topic of transparency accountability. Yet, given the materiality of an organization’s marketing spend and the publicized risks to the optimization of its advertising investment, many organizations have not yet taken action, tolerating the risks associated with the status quo. As the noted British playwright, W. Somerset Maugham once said:

Tolerance is another word for indifference.”

The failure to proactively embrace transparency accountability can pose perilous risks to an organization’s marketing budget which in turn directly impacts its company’s revenue. Many would rightly suggest needlessly.

In these instances, the fault for the increased level of attendant financial risk, fraud and working media inefficiencies lies squarely with those companies that have adopted an attitude of indifference toward these very real proven threats. One cannot blame an ad agency, production house, tech provider, publisher or media re-seller for taking advantage of the status quo and acting in manners that, while not in the best interest of the advertiser, are not expressly contractually prohibited.

The good news is that advertisers can address these issues head-on in a quick and efficient manner, mitigating the risks posed by transparency deficiencies. It all begins with a review of existing Client/Agency contracts and engaging one’s agency partners in dialog regarding the adoption of industry best practice contract language to facilitate an open, principal-agent relationship. The Association of National Advertisers (ANA) has a wealth of information on this topic and can also recommend external specialists to assist an advertiser with agency contract development and or compliance auditing.

Interested in safeguarding your marketing investment? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a no-obligation consultation on this topic.

Is Your Contract Worth the Paper It’s Written On?

25 May

partnershipThe Association of National Advertisers (ANA) recently released its study on programmatic media. The study was conducted in conjunction with the Association of Canadian Advertisers (ACA), Ebiquity and AD/FIN.

While the study provided fascinating insights into programmatic media performance and costs at the transactional level, there was one particular item that stood out:

88% of the advertisers that were interested in and 75% of the advertisers that signed up to participate in the study could not or had to opt out.

Why was this? According to the study’s authors, “because of a myriad of legal, technical and process roadblocks put up by players in the ecosystem.” Long story short, those advertisers did not have contractual language providing them with clear data ownership or usage rights with their agency, trading desk and or ad tech partners.

The obvious question to be asked is, How can an advertiser’s programmatic media transactional data not belong to the advertiser? After all, it was their media investment that funded the buys. It was their agency partners who invested those funds on their behalf (or not). So, who could possibly own that data if not the advertiser?

What would you do if your agency partner denied your organization access to programmatic performance data that you had requested. Data that would shed light on your programmatic media performance and costs (i.e. third-party costs, agency fees, tech fees, data fees). It certainly seems short-sighted that an agency would deny their clients access to this data, both in the context of the ANA study and for providing transparency into how their programmatic investment is being stewarded to disclose what their true working media percentage is.

Sadly, this is but one example of Client/ Agency contract language omissions that create disclosure and accountability gaps, which can lead to legal and financial risks for advertisers. Other examples include:

  • No requirement for an Agency to disclose or competitively bid in-house production resources or affiliate companies.
  • Media arbitrage deals in which the Agency is marking-up media by an undisclosed amount on inventory that it owns stemming from principal-based buys it has made.
  • Agencies acting as principals, rather than agents, when investing the Client’s creative production funds. One example might be the Agency or its production studio filing for and retaining incentives offered by states and municipalities for shooting or post-production work completed in their geography.

Marketing spend is on the rise and is certainly considered a material expenditure, which can represent 12%+ of a marketer’s revenue base (source: 2015 CMO survey).

And yet too often, an advertiser’s contractual audit rights are not broad enough to ensure unmitigated access to the data files, records and reporting necessary to evaluate an agency’s compliance with the agreement and or their financial management performance. This can and should include:

  • An advertiser’s right to select an internal or external auditor of its choice (i.e. contract compliance, media performance, financial management).
  • The right to audit the agency and its related parties (i.e. holding company, affiliates, related entities, etc.).
  • Assertion of the advertiser’s right to limit or eliminate an agency’s non-transparent revenue (i.e. AVB’s, rebates, non-disclosed fees, mark-ups, float income).
  • The right to audit principal inventory and or mark-ups.

Contracts are also a great vehicle for communicating performance guidelines for items ranging from brand safety and viewability policies to fraud monitoring requirements and an advertiser’s policy on not paying for bot traffic, all of which are designed to safeguard an advertiser’s investment.

From our perspective, it makes sense for advertisers to engage in dialog with their agency partners to talk through contract terms and conditions, such as these, to secure their perspective and ultimately their buy-in. After all, the contract is a document that will govern most aspects of the Client/Agency relationship. Thus, open dialog that leads to a transparent relationship can form the basis for a trusting partnership that will last for many years to come.

As Stan Musial, the legendary baseball hall of fame member of the St. Louis Cardinals once said:

The first principle of contract negotiations is don’t remind them of what you did in the past – tell them what you’re going to do in the future.”

Advertisers: Contract Compliance is Easier to Secure Than You Think

19 Apr

EasyIf you’re an advertiser, we have three brief questions for you to consider:

  1. Does your organization have contracts with its ad agency partners?
  2. Do those contracts contain right to audit clauses?
  3. Has your company ever enacted its right to conduct contract compliance and or performance audits?

Chances are your answer to the first two questions is “Yes” and very likely “No” to the third question. Why is this? Why would the majority of advertisers negotiate audit rights into their marketing supplier agreements and not take advantage of such an important control mechanism? This is particularly perplexing given the materiality of marketing spend and the many publicized challenges confronting advertisers and their relationships with advertising agencies. Challenges such as waning levels of transparency into agency financial management practices, lack of a direct line-of-sight into the rates paid by its agency partners, agency resource constraints and personnel turnover.

After years of conducting advertising agency contract compliance audits, our experience shows the agency community wants to do the right thing in most instances. Are there bad actors? Sure, as there are in any business sector. Are there lapses in oversight or judgment? Certainly. This is a people business and people make honest mistakes. Do errors occur? Of course, as in every organization… no entity is perfect in that regard. Beyond common lapses in judgement, follow-through and or mistakes the primary compliance challenge is often a sub-standard or outdated client/ agency agreement which does not supply an advertiser with the requisite legal safeguards and financial controls.

It is for all of these reasons that “Right to Audit” clauses exist and why it is considered “Best Practice” to engage independent audit support to assess an agency’s contract compliance and financial performance. The benefits of auditing are meaningful and many, with the resulting financial true-ups, identification of process improvement opportunities and new learnings in general, providing substantial contributions to future efficiencies.

These outcomes can have significant financial impacts for both stakeholders. For agencies, who have made oversights, misinterpreted or misapplied certain contractual conditions there is the obvious impact of correcting those items and reconciling their fee and or third-party expense billings. Advertisers benefit from the collection of past due credits, trueing up financial matters, identifying and eliminating unauthorized, non-transparent agency revenue and realigning its scope of work and agency resources on a go forward basis.

It is true that the consequences of an audit can sometimes cause an agency some discomfort and even be outside an advertiser’s comfort zone. However, these important accountability programs are more than offset by the positive outcomes that ultimately drive compliance with the agreement and motivate more effective financial stewardship. To this end, it was with interest that I read a recent article entitled, “Mix Enforcement with Persuasion” by Lucia Del Carpio, Assistant Professor of Economics with INSEAD. Professor Carpio wrote about the topic of improving compliance with laws and regulations. One of his observations had particular relevance to our compliance auditing experience and crystalized what we often profess:

“Compliance sometimes requires nothing but enforcement.”

 The cost to conduct agency contract compliance auditing is nominal relative to the benefits yielded by these initiatives. In our experience, we have never seen an instance where the financial and operational benefits of an audit didn’t provide a return multiple times its attendant cost. Factor in the notion that compliance auditing actually incents agency contract adherence and it is easy to understand why “Right to Audit” clauses exists in client/agency contracts to begin with.

Interested in learning more about agency contract compliance auditing? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for your complimentary consultation on this topic.

Does Anyone Really Want Advertisers to Solve the Attribution Dilemma?

14 Mar

conspiracyIt has been decades since the concept of Marketing Mix Modeling (MMM), the forerunner to Attribution Modeling, was introduced. The concept was relatively straightforward, marketers would apply statistical analysis to sales and marketing data to quantify the impact that each element of the marketing mix had in driving brand sales and profit. Once the causal relationship had been modeled, marketers would then be able to accurately forecast outcomes and inform resource allocation decisions.

While the concept may have been straightforward, the solution, for most marketers, has been elusive. Why? First and foremost, MMM has some inherent challenges, particularly when it comes to quantifying the impact of longer term brand equity development tactics versus those focused on short-term sales. Secondly, these models have not fared well in accurately assessing the impact of various media types on outcomes to assist in refining allocation decisions.

Fast forward to the late ‘90’s when we experienced an explosion in online media, the birth of e-commerce and the introduction of “Big Data.” The emergence of digital media and the attendant level of data that marketers where now able to gather led to the launch of “Attribution Modeling.” The goal, to assess and quantify what marketing and media touchpoints influenced an advertiser’s target audience, and to what extent, across the purchase funnel in an effort to optimize media spending across the ever expanding gamut of media alternatives.

While there are multiple variations of attribution models to consider, most marketers have relied on single-source attribution models, often using a “last click” approach which assigns responsibility for an outcome to one event. While simple, this flawed approach to attribution modeling gives too much credit to digital media, at the expense of traditional media and other marketing touchpoints.

Sadly, for advertisers that are doing both MMM and Attribution Modeling, it is rare that the feedback from these related, but different approaches synch. Further, there remain audience delivery measurement (i.e. cross-channel measurement), multi-touch attribution challenges that introduce a layer of complexity that drives up the cost of attribution modeling.

That said, since the onset of these two modeling tools being introduced, the industry has dramatically evolved its data gathering capabilities, enhanced CRM and DMP capabilities, conceived of and launched programmatic media buying, where algorithms have replaced media buyers and now we’re seeing the use of artificial intelligence bots, such as Adgorithms’ “Albert” that can plan and place media and create content. Heady stuff to be sure.

This got the cynic in me thinking; “Well if we can master all of this from a technology perspective, surely we should be able to cost efficiently and effectively master attribution modeling.” That led to idle speculation about whether or not the ad industry really wants advertisers to solve the attribution modeling dilemma?

After all, what if John Wanamaker was wrong? What if more than half of his ad spend was wasted? Remember, the marketing and media choices available to him in the 19th century were considerably more limited than those available to advertisers today. Would accurate attribution models eliminate some of the following marketing and media options from consideration?

  • Television
  • Radio
  • Magazine
  • Newspaper
  • OOH
  • Cinema advertising
  • Product placement
  • Direct mail
  • Email
  • Sponsorships
  • Online display
  • Online video
  • Podcasts
  • Paid search
  • Organic search
  • Mobile
  • Social media
  • Native advertising
  • In-store advertising
  • In-store displays
  • On-package advertising
  • Trade promotions
  • Price promotions
  • Couponing
  • Affinity marketing
  • Affiliate marketing
  • Applications
  • Earned media

Crazy. Right? Reminds me of a quote by the American journalist, Gary Weiss:

“One problem with the focus on speculation is that it tends to promote the growth of the great intellectual cancer of our times: conspiracy theories.”

What do you think…

 

What if You Discovered That Your Digital Dollar Netted You a Dime’s Worth of Digital Media?

12 Feb

dreamstime_xs_2601647In 2014, the World Federation of Advertisers conducted a study which demonstrated that “only fifty-four cents of every media dollar in programmatic digital media buying” goes to the publisher, with the balance being divvied up by agency trading desks, DSPs and ad networks.

Fast forward to the spring of 2016 and a study by Technology Business Research (TBR) suggested that “only 40% of digital buys are going to working media.” TBR reported that 29% went to fund agency services and 31% to cover the cost of technology used to process those buys.

Where does the money go? For programmatic digital media, the advertiser’s dollar is spread across the following agents and platforms:

  • Agency campaign management fees
  • Technology fees (DMP, DSP, Adserving)
  • Data/Audience Targeting fees
  • Ad blocking pre/post
  • Verification (target delivery, ad fraud, brand safety)
  • Pre-bid & post-bid evaluation fees

It should be noted that the fees paid to the above providers are exclusive of fees and mark-ups added by SSPs, exchanges or publishers that are blind to both ad agencies and advertisers. What? That is correct. Given the complex nature of the digital ecosystem, impression level costs can be easily camouflaged by DSPs and SSPs. Thus, most advertisers (and their agencies) do not have a line-of-sight into true working media levels…even if they employ a cost-disclosed programmatic buying model (which is rare).

Take for example the fact that a large preponderance of programmatic digital media is placed on a real-time bidding or RTB basis, and a majority of that, is executed using a second-price auction methodology. With second-price auctions, the portion of the transaction that occurs between a buyer’s bid and when the clearing price is executed without advertiser or agency visibility, thus allowing exchanges to apply clearing or bid management fees and mark-ups as they see fit. So for example, if two advertisers place a bid for inventory, one at $20 per thousand and the other at $15 per thousand, the advertiser who placed the higher bid of $20 would win, but the “sale price” would be only one-cent more than the next highest bid, or $15.01. However, advertisers are charged the “cleared price,” (could be as high as $20 in this example) which is determined after the exchange applies clearing or bid management fees. How much you ask? Only the exchanges know and this is information not readily shared.

Earlier this month Digiday ran an article entitled, “We Go Straight to the Publisher: Advertisers Beware of SSPs Arbitraging Media” which profiled a practice used by supply-side platforms (SSPs) that “misrepresent themselves.” How? By “reselling inventory and misstating which publishers they represent.” The net effect of this practice allow the exchanges an opportunity to “repackage and resell inventory” that they don’t actually have access to for publishers that they don’t have a relationship with.

Let’s look beyond programmatic digital media. Consider the findings from a Morgan Stanley analyst, reported in a New York Times article in early 2016 that stated that, “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” What is significant here is that until very recently, these two entities have self-reported their performance, failing to embrace independent, industry accredited resources to verify their audience delivery numbers.  

The pitfalls of publisher self-reporting came to light this past fall when Facebook was found to have vastly overstated video viewing metric to advertisers for a period of two years between 60% and 80%.  

By the time one factors in the impact of fraud and non-human viewing, and or inventory that doesn’t adhere to digital media buying guidelines and viewability standards, it’s easy to understand the real risk to advertisers and the further dilution of their digital working media investment.

Advertisers have every right to wonder what exactly is going on with their digital media spend, why the process is so opaque and why the pace of industry progress to remedy these concerns has seemingly been so slow. Sadly, in spite of the leadership efforts of the Association of National Advertisers (ANA), The World Federation of Advertisers (WFA), The ISBA, The Association of Canadian Advertisers and the Interactive Advertising Bureau (IAB) there is still much work to be done.

The question that we have continually raised is, “With advertisers continuing to allocate an ever increasing level of their media share-of-wallet to digital, where is the impetus for change?” After all, in spite of all of the known risks and the lack of transparency, the inflow of ad dollars has been nothing short of spectacular. According to eMarketer, digital media spend in the U.S. alone for 2016 eclipsed $72 billion and accounted for 37% of total media spending.

There are steps that advertisers can take to both safeguard and optimize their digital media investment. Interested in learn more? Contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation. After all, as Warren Buffett once said:

“Risk comes from not knowing what you’re doing.”

May You Live in Interesting Times

23 Dec

confuciousOften referred to as the “Chinese Curse” this popular saying derives from the English Politician Sir Austen Chamberlain in the early twentieth century. Used ironically, the phrase has been used to suggest a set of outcomes that are a little more ominous, “May you experience much disorder and trouble in your life.”

As we reflect on what has been a tumultuous 2016, those working in the marketing and advertising industry most certainly would agree that we are living in interesting times. Recent news suggests that the industry’s troubles will not abate much in the coming year. The year began with evidence suggesting that the level of digital ad fraud would eclipse $8.0 billion in 2016, this was followed by the blockbuster findings from the Association of National Advertisers (ANA) / K2 study on “Media Transparency” which rocked the global ad industry.  Sadly, the industry is winding down 2016 with a litany of additional actions and outcomes that pose serious threats to the level of trust, already shaken, between stakeholders in the $540 billion global advertising marketplace.

In the last two weeks, the industry heard once again from Facebook that it had made yet another audience reporting faux pas, its third of the year, which many in the ad agency community have been all too willing to forgive. Who could possibly be surprised with advertisers for being genuinely perplexed as to why the media agency community hasn’t more thoroughly scrutinized Facebook’s audience measurement reporting or pushed more aggressively for independent verification of those results.

Concurrently, halfway around the globe, Australia’s three largest magazine publishers (News Corp, Bauer Media and Pac Mags) decided to cease their participation in the Audited Media Association of Australia’s (AMAA) magazine circulation service leaving advertisers no other choice but to rely on these publishers’ self-reported “readership” numbers, rather than audited circulations figures.

In the United States, the federal government’s Department of Justice has subpoenaed agencies from four of the world’s largest holding companies; WPP, Omnicom, IPG and Publicis as part of its investigation into illegal bid-rigging for commercial production jobs. It is alleged that these agencies coerced and or rewarded independent production houses to submit inflated bids, ostensibly to manipulate the process in favor of agency in-house production resources. Many believe that the DOJ’s investigation will have a profound impact on both the estimated $5 billion production sector and potentially the rest of the business. Let’s not forget, the DOJ has not yet weighed in regarding agency practices identified in the ANA/ K2 study on media transparency.

Most recently, WhiteOps, a U.S. a cyber security firm providing ad viewability and fraud detection supporting the advertising industry, announced that it had uncovered a Russian led digital fraud effort that was literally stealing up to $5 million per day from advertisers. It was reported by the NY Times that the fraudsters impersonated more that “6,100 news and content publishers” while delivering up to 300 million fake ad views per day. How were they able to do this? By creating over one-half million bots that replicated the web surfing patterns of humans, starting and stopping videos and moving and clicking the cursor. 

If client organizations were experiencing a “crisis of trust” hangover following 2015, it certainly wasn’t remedied in 2016. Going into the New Year advertisers have every right to step back and ask, “Who can we trust?” Our agency partners? Ad tech vendors? Media Owners? Measurement Services? And who would blame advertisers for taking matters into their own hands and make a New Year Resolution to more directly deal with these issues. After all, it is their monetary inputs that fuel the entire industry and they certainly deserve better that what they’re getting right now. In the words of the iconic American actor, Clint Eastwood: Sometimes if you want to see a change for the better, you have to take things into your own hands.”

 

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