Digital Advertising: A Shady, Shoddy, Fast-Growth Business
How can publishers make a business out of a series of shady practices?
I read this week where Zenith Optimedia predicted that global spending on Internet advertising would be more than spending on television commercials for the first time ever in 2017. In fact, Internet advertising was expected to grow three times faster than the rest of the advertising industry, driven by spending on social media video and search, according to the report. Throw in native advertising, programmatic, and content marketing, plus the massive migration of consumers to mobile media, and there’s clearly enough energy there to explain the incredible excitement and growth.
But I also read this week how Vice Media’s traffic plunged in February by 17 percent from the prior month, almost exclusively because Vice practices a controversial method of boosting traffic—mixing traffic to its own site with traffic that it compiles from other sites and then offering the combined package to media buyers. This is called “traffic assignment letters.” But Vice, according to a report in Variety, is an aggressive practitioner of traffic assignment—with Vice.com accounting for less than half of the traffic attributed to “Vice Media” by Comscore. The rest of the traffic is from click-bait sites—which live and die on whether they’re successful in getting people to click. Variety used a colorful and apropos metaphor for the use of traffic assignments: They’re the online advertising equivalent of mortgage-backed securities.
This little example of a common and legal practice in online advertising is just one example of widespread disfunction in the digital-ad industry. Ad fraud, ad blocking, viewability, a lack of transparency, and a reluctance to acknowledge that engagement is really bad—these all add up to the conclusion that digital advertising as we know it isn’t a solution, it’s a problem. Start with the sleazy off-site links that appear at the bottom of the page in a lot of publications, including many otherwise reputable ones. If you foolishly click on one of those links, more likely than not you'll end up in places that are NSFW. Or in clickbait hell, with flashing ads, neon colors, and a page that barely moves.
That all may produce incremental revenue, but only at a high cost in UX and the publisher’s reputation.
But it’s more than just that. A brilliant article on this appeared in MediaPost a few weeks ago. It laid out an interesting series of facts, based on data from the Association of National Advertisers and other sources:
Of every dollar spent on programmatic advertising, only 40 cents actually goes to reaching audience. The other 60 cents goes to agencies and tech platforms.
In 2015, according to the ANA, anywhere between 3 percent and 37 percent of spend could be lost to fraud involving bots—non-human traffic.
So of the 40 cents on the dollar you spend that actually reaches the consumer, you lose another 25 percent. The 40 cents just went to 30 cents.
And then there are ad blockers, which take another 20 percent of actual audience. So you’re down to 24 cents on your dollar of spend that really reaches consumers.
Wow. How can such a fast-growing industry allow this state of affairs? Why do marketers put up with it? How can publishers make a business out of a series of shady practices?