Cash in on the value created by quality publishers

Sponsor content: The programmatic ad market is currently failing both brands and publishers, writes The Ozone Project’s Damon Reeve – here’s what marketers can do to fix it

‘Follow the money… Always follow the money.’

That was the advice from the inside source who led journalists to uncover the Watergate White House scandal in the 1970s, and it still inspires investigative reporters today.

When the Wall Street Journal ‘followed the money’ spent on behaviourally targeted advertising, where did the trail go?

Certainly not to publishers. According to a US academic study quoted in the WSJ piece, on average publishers received only 4 per cent more revenue for an impression that had a cookie enabled for targeting than one without.

Yet different research from George Washington University in the US estimated that marketers often pay over 200 per cent more to buy such targeted impressions.

And the overall UK digital ad market continues to report double-digit growth rates, with the IAB estimating that UK spend in digital advertising increased by a compound growth rate of 14 per cent between 2008 and 2017.

So where does the money go?  In the programmatic market, which generates enough revenue to make a few providers hugely profitable and support countless intermediaries, it is easy to see how value can be extracted across an opaque and fragmented supply chain.

The World Federation of Advertisers has calculated that 55 per cent of all programmatic advertising spend goes into the ad supply chain, rather than into the end environments in which ads appear. (Others think the figure is 40 per cent).

Whatever the exact statistic, if you manage a brand or portfolio of brands, this situation should prompt at least two questions.

1) Is my money going to the most effective places to create long-term value for my brands? And 2) if not, what should do I about it?

Luckily, the evidence and industry initiatives exist to help marketers address both points.

The only pre-condition is a willingness to look with fresh eyes at the market and its practices from the bottom up.

At its base, programmatic’s unit of currency is the impression. An ad impression is a commodity with no real attributes other than ad unit size.

Anyone who has used a DSP (Demand Side Platform) will know that the site on which the purchased ad impression will appear is invisible to the buyer and not deemed relevant.

To the buyer who wants to purchase MPUs (Mid-Page Units), it doesn’t really matter if those MPUs are found on a website, such as The Guardian, which has invested heavily in journalistic and production standards over many years, or on a blog repackaging old or fake news.

Context can count for little. Instead, transactions are largely driven by the goal of securing impressions at the lowest prices, and if audience targeting is involved, targeting segments are overlaid with data of unknown provenance.

For the most part, buyers of programmatic ads are unwilling to pay significantly more for ads to appear in environments where newsbrand publishers have invested to build a quality context and audience attachment.

This refusal has led some publishers  – often lower quality publishers – to adopt strategies to maximise their revenue, such as increasing ads on the page, refreshing inventory more frequently to create more slots, and running click-bait articles.

Such techniques often cheapen editorial environments and lower the standard of the user experience, leaving other publishers and everyone else in the supply chain to suffer as a result.

Back to our first question: Is programmatic money being spent in the most effective ways?

There is plenty of evidence that suggests it is not.

Although owners of quality digital environments struggle to charge more for their inventory, repeated studies have found that quality sites are more effective to advertisers in multiple ways.

For example, a study by Lumen, the eye-tracking specialists, and Newsworks, the industry body for newsbrands, estimated that newsbrand websites generated 30 per cent more dwell time and 60 per cent more ad viewing time than non-newsbrand sites.

Other Newsworks research with Group M reported that campaigns run on newsbrand sites delivered higher engagement, better brand response, and superior cost-effectiveness than when the same advertising appeared on the run of the internet.

In addition, neuromarketing analysis suggests that the higher attention paid by audiences in quality contexts results in stronger ad recall.

Yet despite this overwhelming evidence, the programmatic market’s currency and prevailing trading practices fail to translate the value created for advertisers by quality environments into proportionately higher ad rates and revenue growth for quality publishers.

Given the evidence that quality publishers create more value for advertisers but only receive a meagre share of the increased spend on digital advertising, it would be hard to argue that programmatic money is being spent as effectively as it could.

Which brings us to our second question: What should I do about it?

I suggest marketers take two steps.

First, quiz your media team on how they can demonstrate they are buying the most effective ad inventory, and not just the cheapest. And check exactly which publishers your brand is associated with by volume.

Depending on the answers to these questions, review the metrics your agencies buy programmatic against and strengthen measures that reward spending to deliver greater engagement, attention, and ad effectiveness.

Second, encourage agencies to support industry initiatives, including the IAB Gold Standard and the Association for Online Publishing’s Protocol and Ad Quality Charter, which work to promote quality online publisher environments and increase trust in digital advertising.

These developments, which are also endorsed by the IPA, ISBA and other trade organisations, are industry-led efforts designed from the outset to be open and support competition.

They differ strikingly from attempts by some leading providers to establish their own kite marks for digital ads that have the stated aim of inspiring advertiser confidence, but are more likely to result in decreased competition.

By themselves, these two steps are not going to change market practices overnight.

But if enough marketers adopt them, they could start to move the programmatic industry’s focus away from buying commodity advertising at the lowest prices and towards prioritising quality contexts and ad effectiveness.

And rather than trying to ‘follow the money’, marketers could begin to lead it – into the most effective and value-creating channels.

Damon Reeve is CEO at the Ozone Project