Media companies need to wake up to the digital advertising mess

Obsession
Mobile Web
Obsession
Mobile Web

Digital media are stuck with bad economics resulting in relentless deflation. It’s time to wake-up and make 2015 the year of radical—and concerted—solutions.

Trends in digital advertising feel like an endless agony to me. To sum up: there is no sign of improvement on the performance side; a growing percentage of ads are sold in bulk; click-fraud and user rejection are on the rise, all resulting in ceaseless deflation. Call it the J-Curve of digital advertising, as it will get worse before it gets better (it must–and it will.).

Here is a quick summary of issues and possible solutions:

The rise of ad blocking systems, the subject of a Dec. 8, 2014 Monday Note. That column was our most viewed and shared ever, which suggests a growing concern for the matter. Last week, AdBlockPlus proudly announced a large scale deployment solution: with a few clicks, system administrators can now install AdBlockPlus on an entire network of machines. This is yet another clue that the problem won’t go away.

There are basically three approaches to the issue.

The most obvious one is to use the court system against Eyeo GmBH, the company operating AdBlockPlus. After all, the Acceptable Ads agreement mechanism in which publishers pay to pass unimpeded through ABP filters is a form of blackmail. I don’t see how Eyeo will avoid collective action by publishers. Lawyers—especially in Europe—are loading their guns.

The second approach is to dissuade users from installing ABP on their browsers. It’s is up to browser makers (Google, Microsoft, Apple) to disable ABP’s extensions. But they don’t have necessarily much of an incentive to do so. Browser technology is about user experience quality when surfing the web or executing transactions. Performance relies on sophisticated techniques such as developing the best “virtual machines” (for a glimpse on VM technology, this 2009 FT Magazine piece, “The Genius behind Google’s browser” is a must-read.) If the advertising community, in its shortsighted greed, ends up saturating the internet with sloppy ads that users massively reject, and such excesses lead a third party developer to create a piece of software to eliminate the annoyance, it should be no surprise to see the three browser providers tempted to allow ad-blocking technologies.

Google is in a peculiar position on this because it also operates the ad-serving system DFP (DoubleClick for Publishers). Financially speaking, Google doesn’t necessarily care if a banner is actually viewed because DFP collects its cut when the ad is served. But, taking the long view, as Google people usually do, we can be sure they will address the issue in coming months.

The best way to address the growing ad rejection is to address it at its root: It’s up to the advertising sector to wake up and work on better ads that everybody will be happy with.

But reversing this trend will take time. The perversity of ad-blocking is that everyone ends up being affected by the bad practices of a minority: Say a user installs ABP on her computer after repeated visits on a site where ads are badly implemented, chances are that she will intentionally disconnect ABP on sites that carefully manage their ads are next to zero.

As if the AdBlock challenge wasn’t not enough, the commercial internet has to deal with growing “bot fraud.” Ads viewed by robots generating fake—but billable—impressions become a plague as the rate of bogus clicks is said to be around 36% (see this piece in MIT’s Technology Review.) This is another serious problem for the industry when advertisers are potentially defrauded to such a great extent: as an example, last year, the FT.com revealed that up to 57% of a Mercedes-Benz campaign viewers actually were robots.

In the digital-advertising sector, the places to find some relief remain branded content or native ads. Depending on how deals are structured, prices are still high and such ad forms can evade blocking. Still, to durably avoid user rejection, publishers should be selective and demanding on the quality of branded content they’ll carry.

Another ingredient of the cleanup involves internet usage metrics—fixed and mobile. More than ever, our industry calls for reliable, credible and, above all, standardized measurement systems. The unique visitor and pageview can’t remain the de rigueur metrics, as both are too easily faked. The ad market and publishers need more granular metrics to reflect actual reader engagement (a more critical measure when reading in-depth content vs. devouring listicles dotted with cheap ads.) Could it be time spent on a piece of content or shares on social networks? One thing is for sure, though: the user needs to be counted across platforms she’s using. It is essential to reconcile the single individual who is behind a variety of devices: PC, smartphone, or tablet. To understand her attention level—and to infer its monetary value, we need to know when, for how long, and in which situations she uses her devices. Whether it is anonymously or based on a real ID, retrieving actual customer data is critical.

The answer is complicated, but one thing is sure: to lift up its depleted economics, the industry needs to agree on something solid and long-lasting.

The media industry solutions to the problems we just discussed will have a significant impact on digital information. As long as the advertising market remains in today’s mess, everybody loses: Advertisers express their dissatisfaction with more pressure on the prices they’re willing to pay; intermediaries—media-buying agencies—come under more scrutiny; and, in the end, publisher finances suffer. The two digital world mega-gatekeepers—Facebook and Google—could play a critical role in such normalization. Unfortunately, their interests diverge. There is not a month when we do not see competition increase between them, on topics ranging from user attention, to mobile in emerging markets, internet in the sky, and artificial intelligence.

At this stage, the result of this multi-front war is hard to predict.

You can read more of Monday Note’s coverage of technology and media here.

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