That's right, a full 60 cents go to agencies and technology “providers.” Those numbers are in line with findings from the World Federation of Advertisers from two years ago.
The ANA also reports that in 2015 you could lose anywhere between 3% and 37% of digital ad dollars to bot fraud. How do you calculate an average number for losses if the range is so wide? And what do you apply to an ROI calculation when you know that different digital media have different levels of fraud? The ANA reported that video had up to 73% more bots than any other form of digital advertising.
Well, let’s do some simple, back-of-an-envelope math. For every dollar spent, only 40 cents reach actual consumers. Let’s say that of that 40 cents you lose another 25% to bot fraud. That is 30 cents that actually reach consumers. But wait, one in five (?) people now use ad blockers, so take another 20% away. That leaves you with only 24 cents for every dollar spent on digital advertising that can generate potential consumer impact.
I will let that sink in for a minute.
For the record: I am terrible at math (just ask my 14-year-old son, whom I can’t help with his homework anymore). But if my numbers are halfway right, you get the idea. And it is shocking!
No wonder the impact of digital advertising is still being called into question. No wonder marketers are taking programmatic in-house (although that only solves one-third of the problem). No wonder all digital impact measures can only be expressed in fractured decimals.
Never mind “content is king.” Never mind creating engaging brand stories. Their chances of being heard or seen are decimated by a rigged system designed for many things, but not consumer impact.
And what baffles me the most is that the industry has never, ever accepted ANY percentage of fraud or loss to non-transparent practices for ANY other medium. When the television advertising industry grew to such proportions that it became more and more difficult to keep track of what was broadcast when and where, the industry agreed to the ISCI code. When outdoor or local radio were accused of charging for ads that were never placed, agencies and marketers jointly developed spot-check services. The industry did these things together.
Yet here we are in the 21st century with a whole segment of the industry that is, at best, shady and at worst, completely fraudulent, with no joint initiatives to tackle them whatsoever.
Michael Lewis’ book “Flash Boys” describes a terrifying glimpse into a financial system that is solely created to benefit its creators, not the people whose money it is supposed to manage. The automated media trading place creates the potential for a very similar set-up.
I keep thinking I am overreacting, but the facts are pointing more and more in the opposite direction. How do we get out of this mess?
Absolutely right, Maarten. The problem seems to be that the digital ad selling community hasn't yet recognized this "mess" as a disaster in the making and wants to protect its ad revenue stream at all costs. If a serious, industry-wide approach, rather than a hastily applied bandaid, were set in motion and, finally reached some sort of solution, this would probably cost many ad sellers a significant reduction in advertiser dollars relative to the gains they have become used to. So everyone----or almost everyone---is trying to circle the wagons and wait out the crisis as if it will somehow go away. It won't and it's getting more critical every day.
As I've noted many times, it's really up to the big players to step in with a unified approach that can be sold as workable to the technicians and fair to advertisers and ad sellers---not to mention the users. But the big players are more concerned with outdoing eachother than acting in the common good. So "the problem" continues to ferster and grow, like a deadly tumor. And it's giving many branding advertisers, who saw digital video as a logical and potentially valuable supplement to TV, to rethink. That's not a good thing.
Interesting. Many, many years ago I predicted some of the problems that are happening today. Why? I originally I studied quality control engineering in college with a main interest in manufacturing. For health reasons I switched to marketing and advertising. When I started Sweepstakestoday.com in 2003, there were no quality standards really for publishers, advertisers, programs and marketers. We are now seeing the lack or missing of quality standards today. The chickens have come home to roost.
In some ways, there are some in who are using banners like cheating slot machines in Las Vegas. Well the casino and slot machine manufactures got smart and figured out how to stop the cheating through both marketing and technology. It is time to do the same in online advertisement.
You can factor in the total results of any kind of advertising with some easy-to-use math called "The Barrows Popularity Factor." Even if 60% of your advertising doesn't even reach your target, the other 40% of your reach may indeed be worthwhile. How does that buy compare to other possible buys in similar or different media? Again, you can test the results with the math I developed. You can read more about "The Barrows Popularity Factor" online.
At the end of the day, the click is worth the price paid or no one would be buying. Inflated metrics that don't really matter still can't change that. It's like performance marketing where advertisers claim to be paying $X for a sale but they don't report all the sales so they can afford to inflate the per sale price.
And of course, unlike TV, radio, etc - there is no end to the delivery mechanism, such as a person watching a TV - it's all predicated on ever changing technology and new device/delivery options, so it changes faster than most people can keep up.
Thanks, Maarten, for the sobering assessment.
One point of clarification, but ad blocking is a pre-buy, not post-buy, factor. It imposes real costs on publishers but only opportunity costs on advertisers. Ad blocking might force an advertiser to allocate budget to less than ideal audiences, but it doesn't cut into the share of an advertiser's budget that reaches actual consumers (in proportion to the share of browsers who use ad blockers).
As to a perceived lack of joint initiatives to tackle the problems facing us, they're happening (e.g., TAG's DAAP validation process), but perhaps they're being drowned out by the increasing noise in our media lives.
Maybe we're moving so fast we can't imagine taking the time to stop to address the problems that keep us running...
I wrote this last week, steps we are taking ...
The supply chain costs don't include publisher costs as they spend an increasing amount trying to maintain yield (as the WFA model doesn't). So the problem is slightly worse than assumed. Most of the budget 'absorption' is on the buy-side as has been most of the tech investment. Most of the sell-side tech investment is also from organisations who operate on the buy-side as well. Given a lot of this investment is predicated on a future return, it is unlikely many of the current supply chain operators will work to replace their part of the puzzle (unless they are superceded of course). There are few publishers who can fund or otherwise support the investment needed to disrupt the current market.
It may seem that we are stuck with ever more complex versions of what we have now with little real progress.
However, I suspect change is coming from two directions, first, we are likely to see a correction in the number of companies in the supply chain as investors realise the diminishing potential for returns and shift their cash away, second, the model of highest payer wins doesn't serve a healthy market in the long-term. Auctions have a place but, while introducing flexibility and wider market access, they introduce uncertainty on all sides of the media market and are ultimately an inefficient use of resource when budget, investment and effort are included.
One commentator suggested that this inefficiency doesn't matter if the overall outcome is positive i.e. clicks, sales etc. However, among other things, successful marketing includes delivering both sales and efficiency.
Meanwhile, eMarketer projects that digital ad spend will surpass TV spend in the US next year - that is cliose enough in time to have a high probablility of accuracy. So for all the concerns about waste and inefficiency, the industry keeps increasing total spend. It's here: http://www.emarketer.com/Article/Digital-Ad-Spending-Surpass-TV-Next-Year/1013671
Henry, comparing ad revenue tallies between TV, which is 90%+ branding and digital, which is probably only 10- 15% branding is like comparing apples and oranges. There is still time for digital to sort things out if it wants more branding dollars----but, hopefully, this process will develop and gain momentum in the next year.
Agree with Steve's comment. Also the author is incorrect in stating its all fraud and ad blockers creating ineffiency. Its the "middleware" buying fees and bid pricing normalization created by the DSP to give the buyer a flat CPM that ultimately guts the net media buy seen by the individual publisher. Too many cooks. This pressure as well as the over mediation of most popular properties is squeezing out and sufficating all but the largest supply networks. Agency Trading Desks that go publisher direct get much better return on their media buy, as do suppliers who sell around the DSP achieve better margins.
The post equates all of digital marketing with banners and networked video preroll. Big mistake. Banners suck, which is why we don't really recommend them for our clients anymore. Network video? Why would you go outside of Facebook and YouTube to distribute their video online?They have the reach, the data, and a distinct lack of fraud. You get what you pay for.
Plus, in the end if you are measuring the impact and outcomes of your advertising activity, the fraud shows up in the numbers and you stop doing whatever wasn't working. The only people really impacted by the above are the big, bloated , media only agencies and programmatic buyers that are living and dying on banner buys that are still largely measured on impressions and clicks.