13 June, 2016
Online advertising is far less expensive than TV. And with the ability to generate metrics, it would seem to offer a smart ROI for business. But with so many new companies jumping into the game, and the technical complexity of the Internet, it seems the market is ripe for fraud, scams, and deception.
What is your top concern for buying online ads?
Take the poll here.
This year Internet advertising will “surpass broadcast television’s long-held dominance of media ad spending,” becoming the single largest medium for advertising dollars, according to FTI Consulting’s 2015 U.S. Media Industry Forecast. Digital ad spending is expected to increase roughly 14 percent in 2016, and by 2017 digital most likely will account for a third of all global advertising spending. In the U.S., it is estimated that in 2015 advertisers spent almost $60 billion on digital advertising, with retailers alone accounting for almost $13 billion.
Advertisers love the Internet. And for good reason.
From the early days of using emails to promote products, to today’s use of sophisticated programmatic advertising algorithms, advertisers have embraced the Internet (famously to the detriment of print, and, now, television), not only because online ad impressions are far less expensive than print and TV ads, but also because digital publishing can generate data that can describe accurately an ad’s success and reach, driving increased sales and revenue through more targeted advertising placement and spending. The availability of data upon which to base campaigns has moved advertising from the realm of art to science, and it is impossible to overstate its impact on the advertising and publishing ecosphere.
But when the data are unreliable, the foundation of this paradigm shift becomes unsteady.
In 2013, the American subsidiary of the giant Dutch brewer Heineken USA made a heavy investment in both digital and TV advertising to promote its new bottles. But when the company examined the ROI of its advertising spend, comparing TV to online, it discovered the return on its TV ads was 6:1 ($6 of increased revenue for every advertising dollar spent), and 2:1 for digital.
Heineken USA was not seeing an uptick in sales and revenue from its online ads commensurate with what it expected given the data it was receiving. Why?
Because it was not reaching the audience the data said it was.
In fact, only 20 percent of the ad impressions the company had paid for were ever seen by human beings.
The hits Heineken’s ads were receiving, and the clicks for which it was being charged, were coming from computers – bots – not people.
As Internet advertising has grown, advertisers have become mindful that, like Heineken, they may not be getting what they are paying for. And publishers, too, share this concern about ensuring that they are delivering valued eyeballs. A 2014 study of thousands of advertising campaigns run across a variety of publishing sites and networks conducted by comScore
revealed that about 54 percent of online ads served are never even seen, and “across all campaigns in the data set, only 46 percent of the campaign impressions had the opportunity to be seen by a consumer.” (comScore defines “being seen” by the Internet Ad Bureau’s standard as an ad that appears for more than one second. Pop-up ads, for example, fully counted as ad impressions, can appear for less than a second, and it’s well known that consumers are more than twice as likely to click on an ad that appears for more than one second than on one that appears for less.)
Digital publishers are aware of this problem, and are working to make sure their pages are viewable by (among other things) having them audited by reputable agents, diagnosing and correcting technical problems that negatively affect ad viewability, reducing their dependence on cost-per-thousand impression (CPM) banner ads, while also establishing industry best practices by analyzing actions taken by other publishers. But while publishers work to address these issues, agencies and advertisers must understand the ways internet advertising can be distorted so that they ensure that advertisers are getting what they are paying for.
All Those Metrics
Internet publishers can provide advertisers with many measurements and data to judge the amount of traffic, consumer engagement, and conversions generated by their ads. These metrics include (but are not limited to):
- Impressions (the number of times an ad is displayed, measured when an ad is served to a browser)
- Uniques (the number of individuals reached by an ad as defined by cookies, those messages sent to a server when a
- browser requests a page)
- Clicks (the number of times a visitor clicks a mouse on an ad box)
- Click-through-rates (the percentage of people visiting a web page who access a hyperlink to an ad)
- Visits (the clicks that end up on the advertiser’s web site)
- Visitors (the number of people that come to a site from an ad)
- Time-spent-on-site (how long a visitor who comes to a site stays there)
- Bounce rate (the number of visitors who leave a site without taking any action, such as buying something)
- Conversion rate (the percentage of visitors who come to a site that take a desired action)
- Page views (the number of site pages viewed on a visit)
These metrics can get very specific, including how much the advertiser is charged according to cost-per-click (CPC), or CPMs, the industry standard.
All these metrics can allow businesses to measure the effectiveness of their advertising spend with a precision unimaginable before the Internet, when determining ROI involved guesswork and gut feel, not hard numbers. Combined with the enormous size of the online audience (according to the Media Audit, the Internet now represents one-third of daily U.S. household media use), online advertising’s increasing dominance comes as no surprise.
Nor is it a surprise that businesses, deploying sophisticated technologies, have arisen to facilitate the purchase and placement of online ads, including:
- Programmatic advertising that automates the purchase and placement of advertising while targeting the buyer’s desired demographic, thereby optimizing the ad’s value
- Traffic brokers who sell advertisers visitors at fractions of a penny per person
- Content discovery sites that place ads where they will be most effective, charging an average 10 cents per click
- Search engines, such as Google, that sell phrases or words associated with products and services, serving up ads to visitors searching on that word or phrase, with the cost to purchase running from pennies to hundreds of dollars
So, with all this technology and process, why are a large percentage of online ads sometimes not seen?
How Ads Can Become Invisible
The reasons why so many online ads become invisible are many and varied, and can be hard for advertisers to recognize and difficult for publishers to eliminate.
When an agency hired by an advertiser does large scale, aggregated digital advertising buys with what is called a Demand Side Platform (which manages multiple ad exchange accounts), publishers and advertisers may not know all of the sites where an ad is being shown. The ad could appear where there are no customers, on sites with which a company may not want itself or its product associated, or the ads may be directed to another site entirely.
In one instance, FTI Consulting discovered that a reputable, established financial services company’s ads were running (unbeknownst to the company) next to a story on Gawker (an online content aggregator with many websites) about a Chinese couple that filmed themselves having sex in a Beijing department store’s fitting room. Clicking on the story brought the visitor to a porn site. This, of course, exposed the financial service company’s potential customers to multiple risks, such as infection by computer viruses (with which porn sites notoriously are rife), not to mention embarrassment, and even the possibility of loss of employment if they were brought to the porn site from their work computer.
Obviously, had the company known, it would not have wanted its ad appearing on that site and next to that story.
A brief swing around the Internet reveals such established companies as Ameritrade, and the Global Association of Risk Professionals (GARP), listed as advertisers for a January 2016 post from the UK tabloid The Sun about a woman eating a baby bird. Another January 2016 post, this one from gossip site TMZ, was headlined “Underage Girl Bullied for ‘Ruining’ Celeb Relationship,” and listed Amazon, Lifetime Network, and Save the Children, among others, as advertisers.
These companies’ ads are appearing where they most likely do not have customers, where there are customers they don’t want, and on sites that do not promote positive brand associations.
Advertising brokers also unwittingly can hire businesses that guarantee page views when, in fact, those views are generated by bots – software robots – that run programs that mimic actual clicks and views, counting them when no actual human has clicked on the ad. All the advertiser would know is that its ad received 1.2 million hits in July. What it won’t know is that some portion of those hits may have been generated by a computer system, not by the potential customers the advertiser is seeking and paying for.
According to the Association of National Advertisers, in 2015 advertisers worldwide lost $6.3 billion paying for traffic generated by bots.
For example, the director of insights for Kellogg’s, the U.S. multinational food manufacturer, discovered that half of its online ads “never come into view.” And Unilever, the world’s third-largest consumer goods company, said only 30 percent to 40 percent of its online advertising was reaching its target audience, as measured by Nielsen.
And there are many other stories about internet abuses.
In 2011, the U.S. attorney’s office in New York charged and arrested six Estonians for using malware to hijack four million computers worldwide (500,000 in the U.S.) which they used to swap ads that were supposed to run on sites such as ESPN.com (say, for Dr. Pepper) for spurious ads (say, for timeshares) for which the criminals received kickbacks amounting to $14 million. The malware also redirected visitors to ads for which the criminals received payment, not the ads that the viewer was clicking on, and for which the purchaser of the ad was being charged.
Other kinds of malware can count clicks for an ad – for which the advertiser will be charged – when a cursor is merely hovering in the ad’s vicinity, in open space.
And how would the advertiser ever know?
Indeed, the transparency of the Internet that has driven the epochal shift from other advertising platforms to online is, in reality, less real than many people appreciate. The technical complexity that undergirds the Internet, and especially the automatic nature of programmatic advertising, can create an environment in which criminals and fraudsters can operate and thrive.
Advertisers and Publishers Securing the Internet
Smart advertising and marketing departments, as well as publishers, are aware of these problems and continue to look carefully at online advertising in an effort to ensure that advertisers are getting what they are paying for, and publishers are providing optimal value and accurate data.
Kellogg’s, for example, removed its ad buying business from agencies and moved it back in-house. The company also began running software that monitored its ads and sounded an alert when they ran on suspect sites. Finally, Kellogg’s declined to do business with publishers that wouldn’t allow third-parties to screen for suspect traffic.
Subsequently, Kellogg’s reported a 50 percent to 75 percent drop in bot traffic, and a rise in ROI for its cereal brands.
It behooves companies to examine the metrics from their online advertising carefully, as did Heineken USA, and, like Kellogg’s, get more involved in their online advertising efforts.
If, for example, a company’s online spending is increasing, its sales should be rising with some reasonable correlation between the ad spend and revenue. If online display advertising is not translating into expected revenue, or if there is little correlation between the ad spend and incremental sales, then that should be a red flag indicating that, perhaps, all the ads are not being seen by humans.
ConAgra Foods, the U.S. packaged foods giant, discovered that its online ads were reaching its preferred demographic only about 30 percent to 40 percent of the time, and is now demanding that all its display ad deals come with a guarantee from publishers that their ads will be seen by humans, and by their target audience. To get ConAgra’s business, a publisher must prove that ConAgra’s ads are viewable, and the company verifies that through monitoring.
This is a best practice. Companies should monitor their ads to the best of their abilities (or engage a third-party to do so) to make sure their ads are appearing where they’re supposed to. Companies should request audits of their online advertising by specialized media auditing companies, and insist that publishers allow them (or the third-parties they hire) full access to their site data. And publishers are building trust by welcoming these audits, offering third-party verification services to advertisers if requested, and implementing the internal systems required to track viewability.
Companies should also perform basic due diligence on the agencies they hire to conduct programmatic advertising. This can best be accomplished by engaging advertising technology companies to analyze whether the views being purchased are real or generated by computer script – that is, by bots.
Part of due diligence should include checking to see where the agencies hired really are based. They may, for example, have a U.S. office, but their data processing – their operations – may be offshore, in jurisdictions with looser regulations, or none at all, and where it may be difficult to seek redress if contracts are breached.
Finally, companies should investigate the reputations of the agencies and publishers with which they do business.
Internet advertising can confer great benefits. It has the capability to deliver ads to the customers that companies want, on sites where they will be seen, at the optimal time: When those customers are ready to buy. The metrics that can be derived from online advertising can drive more effective ad campaigns, and allow for a hard calculation of advertising ROI. This has never before been possible with the precision online can afford.
But these extraordinary benefits can be obtained best if publishers and advertisers work together, taking the actions described in this article. Doing so will ensure that ads are being seen by the right customers, in the right places, at the right time, and that they are being placed and served via systems and processes thoroughly understood – and vetted – by all stakeholders.
For further information, please contact:
Greg Hallahan, Senior Director, FTI Consulting
greg.hallahan@fticonsulting.com
