As the drumroll to the 2016 Summer Olympic Games grows louder, Rubicon Project on Wednesday said that it will make Olympics-specific inventory packages available from more than 30 publishers including Condé Nast and the USA Today Network. With a combined publisher reach of more than 100 million monthly unique sports enthusiasts, the packages represent the first in a series of sports marketing initiatives Rubicon is planning in coming months to target hardcore sports fans. As part of the initiative, Condé Nast is debuting the first in a series of ad packages focused around what it’s calling “key consumer moments” with the launch of Olympics-specific packages. These packages will be made available via Rubicon’s Guaranteed Orders platform. This is the first time Condé Nast has enabled advertisers to target audiences across its digital network for specific events like the Olympics, in a programmatic fashion. “As a power user of Rubicon’s Guaranteed Orders system, we implement many campaigns through this platform monthly, and find it to be a great outlet for us to reach a large community of buyers through a single integration,” Evan Adlman, head of programmatic for Condé Nast, told Real-Time Daily via email. "The custom packages we’re creating and our custom audience segments are the perfect products for this marketplace and a new way for us to transact against them,” he added. Rubicon also disclosed the findings of its “2016 Summer Olympics Consumer Pulse Sports Poll” of more than 1,000 sports fans that outlines how they’re engaging with content. The survey found that while 87% of sports fans plan to watch the Summer Olympics, they’ll be consuming more of the content on mobile and online video vs. TV. For example, the survey found that 79% of millennials plan to watch the Summer Olympics online, and seven out of 10 plan to watch on their mobile devices. And eight out of 10 millennials will have a second screen open “most of the time” while they watch the games. They’ll spend most of their second-screen time consuming and engaging with content related to what’s on TV. In fact, millennial Olympic fans are more than twice as likely to have a second screen open “most or all of the time” compared to non-millennials (82% vs. 48%). “We found that the always on, always connected digital Olympics fan will ‘watch’ the games in different ways. Fans are taking control of where and when they watch,” said Dallas Lawrence, chief communications officer, Rubicon Project. Lawrence said the research found that sports fans plan to watch the games online, via mobile devices and access multiple video streams. The Summer Games offer ample opportunities for brands, and the second screen/device is another avenue for brands with less budget to make meaningful ad buys. Lawrence said the goal of Rubicon’s Olympics advertising marketplace is to offer a pool of content from more than 30 publishers, not just about the games but also such related topics as gossip, culture, style and the social scene. Rubicon wants its Olympics marketplace to be the “go-to” destination for brands seeking to reach always-on Olympics sports fans at scale, Lawrence added. Among the survey’s findings:
It’s no secret that traditional advertising is increasingly ineffective, as online ad blocking and ad-skipping are becoming pervasive. Add another data point to the growing pile on ad blocking: In a survey of 1,015 adults by ORC International, in conjunction with ad-tech firm Mirriad, 76% reported blocking ads online and skipping traditional TV ads. The study found the outlook for video advertising to be even worse: Ninety percent of people skip pre-roll ads appearing ahead of online video content and TV shows. While experts estimate that most Americans are exposed to around 4,000 to 10,000 ads per day, the messages are not sticking. The survey found that 68% of people recall less than five ads they’ve seen in the past week. Juniper Research estimated in a recent study that digital publishers stand to lose more than $27 billion by 2020 as online publishers struggle to find effective strategies to counter ad blocking. Among the other findings from the ORC-Mirriad study:
After months of anticipation, the Association of National Advertisers finally released its study of the media-buying ecosystem. While the study, conducted by K2 Intelligence concluded that so-called “non-transparent” activity was “pervasive” throughout the process, a couple of things are certain: No criminal probes have been launched and nobody is going to jail. The full report can be downloaded here. Another certainty: the holding companies think the report is seriously flawed and has done little, if anything, to bridge differences between agencies and clients on the transparency front. Publicis Groupe, for example, issued a response that stated in part that “The ANA has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions. Despite repeated urging by Publicis Groupe and others in the industry to include names and sources in its report, the document hides behind suspicions and anonymity rather than encouraging real accountability.” The Groupe added: “We are committed to understanding and respecting our clients’ transparency requirements in all situations, and this is a standard part of our client contract negotiation process. We are crystal clear: we are committed to full compliance with the terms of the client-agency agreements we sign, and we have strict internal rules that serve as controls on our practices.” Interpublic was also critical of the report’s blanket anonymity: “The broad and anonymous nature of the report’s allegations is unfortunate and inflammatory, the firm stated. “The picture the report describes is not consistent with our actual business practices.” IPG stated that it “has been a leader in terms of media transparency since 2005 when we proactively confronted the types of non-transparent” activity in the wake of a lengthy SEC probe. “We eliminated these practices from our organization, issued public disclosures, and strengthened our governance controls.” Added GroupM: "The ANA report and the objectivity of its authors and advisors needs to be examined carefully. The report should not be allowed to tarnish the entire industry, nor every company in it. As we stated from the outset of the ANA’s exploration, GroupM does not seek, nor accept rebates or hidden revenues in any form from media partners in the U.S. Nor do we accept service fees from vendors that are not disclosed to clients. GroupM is straightforward with clients concerning our proprietary media products and the value they provide; clients always exercise an informed opt-in to participate. As we’ve already indicated, we insist that the ANA share any specifics relating to our group with us so that we can ensure continuing contract compliance. If clients have any questions, they should contact us.” The report addresses the resale of purchased inventory by agencies to clients, finding mark-ups that ranged from 30% to 90%. Omnicom’s statement: “We have not yet had a chance to fully review the ANA study, however based on the overview provided in the press release we believe that the key findings – neither quantified nor qualified, and based on a small sampling of unnamed sources – do not accurately portray how Omnicom's agencies work on behalf of our clients; in so doing, it does not serve the best interests of the clients that the ANA purports to represent. As we have said since the ANA first launched its study last year, we believe that trust and disclosure are the cornerstone of every client relationship. This means that all of our US media agency clients receive all value negotiated on their behalf in the form it is received. Compliance with each individual client contract has always been central to that trust at Omnicom – as is transparency in the structure and execution of each contract. “ Jerry Buhlman, CEO Dentsu Aegis Network stated: "Today’s ANA Report (June 7th) is an insubstantive report with subjective methodologies and anonymous input. The business practices referenced in this report do not exist within our US business. Our media buying process is robust and transparent for our clients, is subject to rigorous compliance processes and all our clients have the ability to audit us. Furthermore, we pride ourselves on our focused and extensive efforts on compliance policies, practices and controls.” The 4As, which had been working with the ANA to jointly address transparency issues until a split over differences earlier this year, also commented: “A healthy and constructive debate about media buying can only happen with a bipartisan, engaged, industry-wide approach -- and that is precisely the opposite of what the ANA has pursued. The immense shortcomings of the K2 report released today -- anonymous, inconclusive, and one-sided -- undercut the integrity of its findings. The agency association added, “We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them. Without an opportunity for agencies to assess and address the veracity of information provided to K2, sweeping allegations will continue to drive attention-grabbing headlines; this does nothing to foster a productive conversation or to move our industry forward.” Not everyone was as critical of the report. Tom Denford, co-founder of media and marketing consultant ID Comms said the report was insightful. “The report has provided clarity where previously suspicion and speculation had created a highly troubled relationship between major advertisers and their media agencies,” Denford Stated. “The evidence presented by K2 gives companies much needed insight into what has become a complex, opaque and confusing area of their marketing investment. We are very concerned at some of the practices that have been uncovered and it would be good to know whether these problems are focused on particular holding companies.” In a briefing Tuesday morning ANA and K2 executives stressed that from the outset of the endeavor, which began last fall, finger-pointing was not part of the mission. Also, they said, determining whether any of the non-transparent activity fell out of legal bounds was “beyond the scope of the report,” as Richard Plansky, creative managing director K2 Intelligence put it. Also not part of the scope was to determine to what extent if any contractual violations occurred. The report’s big take away is that there is a substantial “disconnect” between how advertisers define their relationship with media agencies and how the agencies view it. According to the report, clients believe that by definition agencies must serve in their “best interests,” with no ifs, ands or buts. Agencies, on the other hand, believe the relationship is defined by the contractual agreement signed by the parties. Asked whether the big issue was a failure to communicate, ANA Bob Liodice responded that “communication is one of several elements that is at play. With such specific facts now on the table, it will be interesting to see how the agency community communicates its perspectives on the findings.” But there are two deeper issues at play, Liodice added. “The first is the complexity of our environment has changed the rules of the game… and I don’t think all parties have appropriately caught up with those new ‘rules of engagement.’ The second -- that is somewhat tied to the first -- is that marketers need to understand that the agency acting as principal requires a different relationship. The agencies are duty bound to their shareholders and their clients -- and that becomes a different line to straddle that the marketers must be far more sensitive to than they have in the past.” The report does cite specific instances of rebates being issued in the U.S., although the identities of all the interviewed parties are anonymous, which the ANA and K2 said was essential to encouraging cooperation with the study. Here’s one example: “Among the sources who stated that rebates are provided to agencies in the U.S. market was an executive at a large online media supplier who described a cash rebate program currently in operation at his company. According to the executive, several years ago the media supplier proactively established an incentive program designed to encourage agencies to direct a greater amount of spend toward a certain type of this media supplier’s ad space. The media to which this program applies is purchased at a pre-negotiated and fixed cost, rather than on a public exchange. The incentive program, which is open to individual agencies, establishes certain thresholds for both overall spend and year-over-year growth, above which agencies receive a cash rebate at the end of the year. The metrics required to trigger the rebate, and the percentage of rebates provided, are determined on an agency-by-agency basis. According to the executive, the rebate received in the U.S. is linked to the volume of U.S. spend; at the end of the year, the media supplier sends each agency a spreadsheet detailing its total annual spend by advertiser and noting the rebate generated by each advertiser’s expenditure. He stated that agencies at Agency Holding Companies received rebates in this program and noted that all rebates provided through this program were transmitted in cash.” What remains unclear, however, is whether the rebates described above were passed back to the clients or not. “During the interview, K2 noted that certain Agency Holding Company executives have stated publicly that rebates do not occur in the United States. In response, the source stated that, based upon his conversations with agency staff, he believed that the agencies that received rebates from his company were “absolutely” passing the benefits back to their clients. In an attempt to reconcile these public statements with the rebate program, he opined that perhaps the agencies do not consider these cash back payments to be rebates, since the agencies have said they are passing the funds back to their clients. The source reiterated that the only basis for his belief that the funds were being returned to the clients was what the agencies had told him. K2 did not attempt to verify whether these rebates were, in fact, being provided to advertisers in order to avoid compromising the executive’s confidentiality.” The report uncovered rebate activity in the outdoor and TV sectors as well as the online space. In addition to cash and free media rebates, it also reported on rebates structured as “service agreements” where media companies pay agencies for research or consulting initiatives often tied to volume of agency spend. The report also cites instances where “rebate contracts” were agreed to. In one such instance “An ad tech executive provided K2 with a copy of a rebate contract between his company and an independent agency effective for the 2015 calendar year. The contract included a provision for the payment of a “referral fee” representing 10% of agency spend, which the ad tech executive described as a rebate by another name. The executive also provided K2 with internal company emails from the period in which the deal was being negotiated. In these emails, the ad tech company employee in charge of managing the agency relationship reported that the agency wanted to make a profit from the ad tech firm and was therefore requesting a rebate of 10% up to a certain spend threshold and 15% above that threshold. The agreement was to be active through the rest of the calendar year with the rebate to be paid in the first quarter of the following year.” K2 acknowledged that five of the six holding companies declined to participate in the study, leading some to question just how comprehensive the study could be. According to Plansky,“Five of the six Agency Holding Companies declined formal requests to make executives available for interviews. However, among our sources were current and/or former high-level employees of all six Agency Holding Companies.” The total number of sources interviewed was 150 comprised of marketers, media suppliers, ad tech vendors, current and former advertising and media agency professionals, trade association executives, consultants, attorneys, barter company staffers and members of the post-production community. With respect to the rebates, 41 sources reported their occurrence and 34 said they weren't disclosed or returned. Does that equate to pervasiveness? Plansky responded: “Within the study sample, these practices were pervasive, in the sense that they were widespread throughout the cross-section we reviewed. “ “Just to clarify, 41 sources provided information regarding the practice of rebates -- not individual instances of rebates. Many of these sources described rebates as an ongoing practice as opposed to isolated incidents.” “These sources provided detailed firsthand accounts of rebate deals in which they had personal involvement. Many of these instances were corroborated by documentary evidence, like e-mails and contracts. Whether or not these rebates violated any contractual provisions was beyond the scope of our mandate.”
The true power of modeled audiences is the ability to dynamically determine the right recipe for each individual. A more custom approach to building and modeling audiences is already being successfully used by forward-thinking marketers. Tailoring to Real Audiences Instead of creating a campaign they believe will resonate with their audience and then buying media to see what works, marketers and agencies can use data to identify new audience segments and then craft a campaign to appeal to these carefully refined segments. Case in point was Dieste's campaign to launch LALA, a drinkable yogurt. Most yogurt marketing featured families sitting down to eat yogurt with a spoon. Dieste's custom audience approach combined research it conducted on its own with outside data from Simmons to identify a new segment, 31-million strong, that it called "shapers on the go." This custom audience was trend-setting, very image-conscious and sought convenience. The resulting campaign featured a variety of people #Yogurting—that is, grabbing and drinking LALA—as they play sports, work and enjoy life. The campaign, launched in February, surpassed the company's initial goals. "Simply aiming for 'women 25 to 35 without kids' is not enough anymore to guide a brand into a truly honest and authentic connection with their consumers," says Carla Eboli, CMO of Dieste. "We know that data-driven insights give creatives a more successful brief that will lead into a results-driven campaign." Similarly, when we modeled a custom audience for a luxury brand, we discovered that it was crucial to model off a very specific, custom seed set. Targeting new audiences who actually convert is particularly challenging for luxury brands because only a small percentage of people who are interested in high-end items will ever buy them (for example, the majority of visitors to a luxury car site are teenage males who cannot afford them). In order to effectively target actual buyers, the strategy was to develop seed sets based on carefully tailored attributes: in-market consumers who have not only visited luxury websites, but also have high incomes and previous purchase behavior buying similar luxury goods. Based on a combination of first-party retail marketplace data and declared demographic data, the brand was able to segment a seed set of actual buyers, and bring down the cost of acquisition significantly by targeting shoppers known to purchase luxury items. The Future of Modeling Considering that 90% of the world’s data was created in the past two years (and it shows no signs of slowing) it's exciting to consider what marketers can do with modeling in the future. Not only will there be more data to work with, but targeting capabilities will become more powerful. As cross-device targeting improves and innovations like beacons better support the in-store experience, it will allow marketers to effectively reach modeled audiences across channels. Eventually, marketers will even be able to create powerful, sequential creative messages that guide the customer through the purchase journey, no matter where they are. Custom audience targeting is not just a boon for marketers. It also has the potential to change our ads from interruptions into welcome, relevant, helpful information—and that's the goal of all smart marketers.
“A prince who is not himself wise cannot wisely be advised,” wrote Machiavelli many years ago. As marketers’ jobs have become more complicated, it has been difficult for many of them to know as much as they would like about the ecosystem they participate in, especially in the important fields of media planning and buying. With the release of a long-awaited report related to media transparency from K2 (commissioned by marketer trade group the ANA), we expect that marketers will be made much more wise about the ways media agencies generate revenue. As marketers become better informed, they will probably become more aggressive in their efforts to eliminate or curb many practices that agencies have pursued to generate revenues in the fast growing / high-margin media agency business. While the report did not contain any shocking revelations, the documentation contained in the report will resonate within the industry for many more years to come. Overall, the findings are generally damning of the whole industry – even if problematic practices described in the report are not undertaken by all holding companies – which will likely contribute towards negative sentiment towards the whole agency sector. For background, In October of last year, K2 was appointed by the ANA to explore the topic of rebates and non-transparent practices in the media agency industry, following on several years of other work by the ANA. The survey released today was “based on information compiled from interviews with 150 individual sources. Those interviewed included marketers, media suppliers, ad tech vendors, current and former advertising and media agency professionals, trade association executives, industry consultants, attorneys, barter company employees, and post-production professionals.” “Five of the six major agency holding companies and their affiliated companies declined formal requests to make any of their current executives available to be interviewed.” However, sources interviewed included “38 agency professionals, both current and former, including representatives of all agency holding companies” While agency holding companies will understandably protest the absence of identification of specific holding companies in the report, let alone separation of good from bad agencies, the report nonetheless represents the views (perceptions of fact, at minimum) of many of their largest clients. As noted in the past, the low (and worsening) levels of trust between marketers and agencies likely contribute towards more aggressive fee-squeezing efforts between marketers and agencies. Non-transparent practices described include: • Rebates in cash and free media • Rebates structured as service agreements (whereby an agency provides token work for the media owner, such as consulting, research reports or other limited value activity in exchange for significant spending by the media owner to the agency). • The collection of rebates by affiliates (domestic and international) of a marketer’s primary agency. • Agencies using opt-in principal trading services where negotiating clout of all clients (those opting in and those not) affects underlying media costs for media an agency resells as principals. • Directing of spend towards media owners (primarily ad tech companies) in which agencies have equity or contingent equity. Key findings from the report include: • Cash rebates are pervasive. “K2 identified evidence of several methods by which rebate deals are structured, including financial incentives in the form of cash or free media. Other sources noted that rebates are often structured as service agreements whereby the fees for the services – usually described as consulting or research – are tied to the volume of agency spend. Moreover, these services were either of minimal utility, significantly overpriced, or not provided at all.” • Rebates are not necessarily disclosed or passed along to advertisers. “41 sources…reported that media rebate deals occur in the U.S. market. Of those 41 sources, 34 reported indicated that the rebates were not disclosed to advertisers, were not passed through to advertisers, and/or were demanded by agencies “ • The agent-principal relationship was described in a broken state. There is “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.” “In general, advertisers expressed a belief that their agencies were duty bound to act in their best interest. Meanwhile, many agency executives interviewed said their relationship to advertisers was solely defined by the contract between the two parties.” • Many media types – not just digital advertising – are involved. “K2 found evidence of non-transparent business practices across digital, OOH, print, and television media.” • The problems involve higher level agency employees. “K2 found evidence that senior executives at agencies and Agency Holding Companies were aware of and even mandated some non-transparent business practices, suggesting high-level buy-in.” • Audit rights are commonly limited. “Some advertisers have limited audit rights that are insufficient to detect the kinds of non-transparent business practices described above, do not fully exercise their audit rights, and/or are not aware of what audit rights their agency contracts permit.” • Marketers may not fully understand their agreements with agencies. “One former Agency Group executive told K2 that agency addendums to client contracts permitted practices that, in his opinion, most clients did not anticipate.” “in many cases, advertisers were unaware of details in their agency contracts that addressed the issue of transparency.” • Some media owners encourage these practices. “A senior executive at a magazine publisher reported that he was engaged in negotiations with an Agency Group to finalize a similar rebate deal, which would provide the Agency Group with free media linked to spend at a certain monetary threshold. The executive reported that, “if you’re trying to turn around an aging [media] property, these [rebate] deals are beneficial.” He noted that his company was “scraping and clawing for every dollar we can” and that he felt no pressure from agencies to enter into rebate deals. “The pressure was from me,” he said. In agencies’ defense, we took away several important considerations: • Marketers’ efforts to reduce agency fees have contributed to the current state of affairs. “Advertisers and their procurement departments drive down agency fees and seek extended payment terms, thereby causing agencies to seek additional sources of revenue.” • Clients can be complicit in non-transparent activities. “A former chief marketing officer at a global advertiser reported that he signed a contract addendum to (a Master Service Agreement) that permitted his agency to engage in non-disclosed buying. The source indicated that he agreed to the addendum with a sense of unease over the lack of transparency with regard to underlying media costs, but that he did so because the addendum promised – and delivered – lower rates for media.” • Some of the activities described may originate from mis-understandings. “a former media executive at another U.S.-based advertiser told K2 that it was indeed possible that his agency was returning rebates without him or his team knowing. “The number of transactions and invoices is breathtaking,” he said. “Given the complexities, it's likely that they were returned and we were unaware.”” As I have written in the past, assessing the financial impact to agencies from such revelations is difficult. I believe the most significant consideration is that marketers who are better armed with more knowledge may apply more pressure to the conventional fees they pay. However, they will also likely recognize that the quality or volume of services they receive would likely go down if they squeeze too hard. As well, agency holding companies are entrepreneurial environments, where new types of services emerge over time (i.e. marketing technology consulting) that replace some of the lost revenues. A bigger potential risk that may remain outstanding from a report such as this one is whether or not there are legal consequences or clawbacks to follow. While the report notably did not use the words “fraud” or “illegal” anywhere, one anecdote described in the report suggested approaches that some marketers might pursue, especially if audit rights become more expansive in the future for more marketers. A former head of global media for an international advertiser said that he helped negotiate broad audit rights with the firm’s agencies that extended up to the holding company level and included any affiliate organizations of the Agency Holding Company. “We had the right to audit the books of every affiliated organization in every country for all our agencies,” he told K2. However, in his experience, the firm only commissioned audits on Agency Group operations at a country level, never on the agency’s global holding company. He recalled one occasion when his firm sought to activate its full audits rights but the agency “flatly refused to allow us anywhere near the holding company-level accounts or numbers, so technically they were in breach of contract.” The source said his firm considered taking legal action but decided against it because it feared a lawsuit could damage its continuing working relationship with the agency. The source, who has former agency experience, added that even if his firm were to obtain full audit access in order to uncover any non-disclosed sources of agency revenue, “it would be an enormous task to unpick the various stitches in the tapestry to find out where the gold is buried.” In general, I think that the findings are generally damning of the whole industry, which will likely contribute towards negative sentiment towards the whole group as investors learn more about the report and what it reflects around their largest clients’ perceptions. What should happen next? Trust was generally poor between agencies and marketers before the presentations on transparency at an ANA event in March of 2015 that ignited focus on the topic. It became much worse afterwards, and will likely worsen further as more marketers explore the details contained in K2’s report. The approach the industry has taken to date – mostly denying the existence of rebates – does nothing to help. Certainly, agency trade group the 4As exacerbated the problem with the release of its own “Transparency Guiding Principles of Conduct” document earlier this year, which seemingly ignored some of the obvious concerns. (It also irritated the ANA and many of its members with the implication that ANA members were supportive of that document.) A statement from Publicis that was released shortly after the K2 report release this morning – which says that “the ANA has failed its members” can only be interpreted as unhelpful, if not damaging, not least as it seems to ignore the very real concerns of its members. We think it is important to recall that when agency holding companies express concerns that comments in the K2 report “(hide) behind suspicions and anonymity” it is important to note that marketers may have been expressly prohibited – by contract with their agencies – from sharing their contracts with K2. Marketers who “out” themselves may be taken to task by their own management for having allowed non-transparent activities to occur on their watch. Media owners who “out” themselves may find their relationships with holding companies worsen. Agency executives who identify themselves would likely be fired. With luck (for the agencies) there will eventually be a recognition of the problems at hand. Accepting the presence of non-transparent revenue activities and actively talking with the industry about those activities is a good way to go. We think the approach that WPP’s GroupM has taken, openly engaging in a dialog with the industry about such activities, is the right one. Alternately, an agency group claiming complete transparency could offer audit rights at a global holding company level to any marketer willing to pay for the process, and with the auditor of their choosing. However, it may be a bumpy ride ahead, with ongoing education efforts from the ANA towards its members on the topic and the pending release of another report in several weeks’ time related to recommendations for marketers going forward.