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Was this the most important week in the recent history of advertising?

27 Sep 2016  |  Nick Manning 
Was this the most important week in the recent history of advertising?

Last week was tumultuous for the ad industry, writes Ebiquity's Nick Manning - and the consequences could be monumental.

It takes something seismic for the advertising industry to make banner headlines in the Wall Street Journal and Financial Times with multiple stories, but last week was no ordinary week.

In fact, no fewer than five significant and connected stories emerged that could have profound implications for advertisers:

- The Wall Street Journal reported that a number of major US advertisers are reviewing their media agency contracts in the light of the ANA investigation earlier this year.

- The WSJ also reported that Facebook had admitted to overestimating the performance of its video advertising inventory.

- AdNews in Australia was the first to break the news that Dentsu in Japan had over-charged Toyota for digital services, with subsequent reports that over 100 Dentsu clients are affected.

- The Financial Times' lead story on 23 September was the rumoured sale of Twitter to either Google or (via paywall) Also reported in the Guardian here.

- A giant data breach at Yahoo was reported as compromising over 500 million customer accounts.

Unsurprisingly, some observers have put two and two together from the Facebook and Dentsu stories especially, building on the questions hanging over the industry following the ANA's recent media transparency initiative.

In particular, the revelation that Facebook had been overstating the average amount of time people spent watching online video advertising produced a strong reaction, including a comment from a spokesperson from WPP who is quoted in the Financial Times as saying:

"We have been calling for a long time for media owners like Facebook and Google not to mark their own homework...the referee and player cannot be the same person".

There is unquestionably a real question mark hanging over online measurement but also the need for advertisers to seek independent measurement of advertising performance, rather than relying on the media owners and media agencies whose compensation is often dependent on reported performance.

The Wall Street Journal connected the dots between the Facebook, Dentsu and ANA stories to rightly question the effectiveness of online advertising.

While the WSJ article was especially well-informed, the connective tissue between all five big stories from last week has yet to be fully explored, and the combined effect of the five is of major significance for advertisers.

The news that Twitter is supposedly up for sale is especially noteworthy: it has failed to live up to expectations in terms of its advertising revenue, partly due to the increasing dominance of Facebook and Google.

According to the Financial Times analysts at Kleiner Perkins Caulfield and Byers have estimated that these two players take 75% of all new ad spending in online, leaving all other players to fight over 25%.

If Google were to buy Twitter, advertisers would have even less choice and Google’s power in the market would grow; this would also consolidate the control of the media market exercised by the six major media buying groups, Facebook and Google.

The 'long-tail' of online media owners will increasingly struggle to generate revenues in this environment, and will resort to the kind of 'clickbait' revenue that clutters webpages and encourages ad blocking.

The effect of the data breach at Yahoo! is perhaps of less obvious significance to advertisers, but it has a double effect on the advertising market.

Yahoo users have begun to close their accounts, potentially reducing the available audience for Yahoo's online advertising inventory, which further consolidates the market.

It also adds to the increasing sense that data is hard to protect, even in supposedly safe environments such as Yahoo, a sense that is not helped by the revelation that the data breach occurred in 2014 and Yahoo! were aware of it earlier this year, and during their negotiations with Verizon.

Data breaches such as this will not reassure people that the online environment is a safe place to do business.

It's no exaggeration to say that last week was a tumultuous one for the advertising industry, with implications for all participants, and especially the advertisers.

As Advertising Week kicks off in New York, the drumbeat of disquiet among advertisers will undoubtedly grow in intensity as the questions over media accountability and transparency multiply. There is plenty to talk about in New York this week.

Nick Manning is chief Strategy Officer at Ebiquity

This article was first published on Ebiquity's blog and republished here with kind permission

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