The post-crisis 'to-do' list: reset the online ad market
The programmatic dream isn’t happening, writes Nick Manning - so let's use this period to plan for a recalibration
The rapid and unforeseen spread of COVID-19 is wreaking havoc on the world economy and the advertising industry is suffering a massive sudden downturn.
Unlike recessions of former times, there is both health and money directly at stake now and many of the old rules about investing in brands through the downturn don’t apply.
Yes, brands need to be sustained but how they support people and communicate their efforts sensitively are essential in such a delicate environment. Reading the nation’s mood is critically important, and the end of lockdown won’t be ‘business as usual’.
This requires real communications expertise and the right tools for the task, providing advertising and media specialists an opportunity to demonstrate their true worth. So far the advertising industry is playing its part for brands while dealing with unprecedented pressure. Many new lessons are being learned which should inform how our industry behaves hereafter with new business models needing to be invented.
It might sound glib at this time but the old cliché about not wasting a crisis is now appropriate. This is a crossroads and an opportunity to correct some of the industry’s imperfections.
Let’s start with the question of personalisation. We all know the trite mantra of ‘right people, right message, right time…’ and the industry has convinced itself that data-led programmatic technology would deliver this utopia. But it hasn’t worked out that way at all for many people.
I’m a sample of one, but my favourite go-to website has recently served me up ads for trail running shoes, steam mops, female fashion, make-up and, today, Hollister coats featuring female models. Hello, it’s Spring and no-one is going outside right now, and I’m male. Harry’s are chasing me even though I ended my subscription only recently.
Virtually none of the advertising I see online is relevant to me and based on my profile and browsing history. Try it for yourself and ignore re-targetting.
So, if the programmatic dream isn’t happening, why is this?
One key reason is the financial model underpinning the open online display market. The industry has adopted ‘impressions’ as its base currency and everyone has simply signed up to its use, with all of the transactional players taking their share per impression.
We’ve deluded ourselves that ‘impressions’ is an audience currency and not just a machine-to-machine process.
Media vendors price against it, media agencies buy against it, and it underpins the business models of ad exchanges, tech providers of multiple kinds and even the independent measurement providers, such as viewability and ad fraud detection companies. With few exceptions, everyone is taking a cut on impression flow and lots of VC money has been raised on the basis of this scalable model.
In this scenario, it is in the interests of the buyers, sellers and intermediaries to maintain high impression counts, but it doesn’t necessarily benefit the advertiser and certainly not the advertising industry as a whole.
The online market is flooded by impressions that are simply untargeted, despite the existence of machinery that can and should provide a personalised data-rich user experience. Done correctly, personalisation reduces impression counts by its very nature as it narrows the audience, but this reduces revenue throughout the transactional chain. So while the industry says one thing, it’s doing another.
Low-cost impressions on open exchanges encourage a ‘throw it at the wall’ approach to advertising, especially among performance-led brands who are chasing a low cost-per-customer or sale. ‘Last click’ stubbornly prevails. The result is a high level of pollution that damages the advertising environment and can make the user experience intolerable. You will already avoid some sites that are simply a mess.
It gets worse. The whole ad fraud ‘industry’ is fuelled by the artificial manufacture of impressions, and it’s already worth many billions of dollars. When demand drops off, the fraudsters will continue to manufacture artificial traffic at rock-bottom prices that look superficially attractive. Anyone can buy at ridiculously low prices if they’re prepared to overlook the provenance of the inventory. Traffic-selling sites proliferate and will probably crank up during the downturn. There is no real cost of production in fake traffic.
Let’s remind ourselves of the WFA study in 2014 that showed that 60% of a brand’s online ad budget can be eaten up by fees and other costs, before it even sees the light of day. And before poor viewability and ad fraud eat up a big chunk of the rest. So advertisers may be paying 60% in costs for impressions that may or may not be real and may have been seen or not. Fraudsters can fake viewability.
The waterfall is really a trickle. And with so much value being consumed in the trading process, a lot more money needs to be spent by advertisers to compensate for the leakage.
And is it any surprise that the public is alienated by the bombardment of massive ad volumes that ruin the user experience and irritate through lack of relevance?
In fact, the online display market has been taken over by automated trading to the detriment of the advertising industry. Does anyone seriously think that much progress has been made in the last six years?
So, what’s the answer and why now?
As I argued in last month’s column, our industry needs to rediscover media planning and charge correctly for it, and the discipline that needs the most planning reinvention is digital.
Not only is it now vital to all brands, whatever their objectives, it also requires the most intra-media planning rigour to make the most of the data for targeting purposes, and to minimise wastage through poor viewability and ad fraud.
And it needs to be well structured to eliminate the inefficiencies of the supply-chain.
Currently online display often gets the least planning attention, despite the unlimited amount of data available. The trading mechanics predominate and the ‘black box’ nature of online buying obscures the reality of what is really being delivered. At implementation stage the machines are often ‘set and forget’ with insufficient optimisation and oversight by suitable qualified people.
New approaches at planning stage are required for both creative and media. With the demise of cookies and the arrival of tighter privacy rules, great care needs to be applied to the use of data. The over-supply of inventory and the resultant clutter should be addressed by inventive use of creative messaging, with dynamic formats and contextual relevance.
Advertisers should pay for digital services on the basis of the expertise employed, the value added by data and technology used and the results gained. Payment per impression should be avoided wherever possible. Full transparency should, of course, be provided.
The ‘old’ programmatic model has not delivered on its promise, but this does not mean that programmatic per se is invalid. When correctly planned and delivered, with the right charging model, it can do everything it originally promised.
Advertisers should reappraise how their programmatic set-up works, demand a higher standard of planning and transaction and measure both the inputs and outputs correctly.
The current crisis offers the opportunity to recalibrate some of the ills that have harmed our industry. Now is the time to take action.
Nick Manning is the co-founder of Manning Gottlieb OMD and was CSO at Ebiquity for over a decade. He now owns a mentoring business, Encyclomedia, offering strategic advice to companies in the media and advertising industry. He writes for Mediatel each month.
He's also just joined Twitter: @NickManningEBQ