Category: Advertising

IAB Report Reveals Flaws in Internet Supply Chain

Internet companies and digital rights activist organizations have spent considerable resources over many years promoting the idea that we should think of the Web as an extra-legal territory.  From Barlow’s  evangelical Declaration of the Independence of Cyberspace in 1996 to current debates over the relevance and meaning of an “open” Internet, one recurring theme that still holds sway among many people is the idea that these networks should operate beyond the boundaries of public or private regulation.  Digital rights proponents—many of them funded by Silicon Valley corporations—at times come rather close to describing the Internet as a religion—as though it runs on esoteric virtues like freedom, good intentions, and the human spirit rather than, y’know, money.

For better or worse, the Internet most of us use every day is one vast, complex media platform designed to attract advertising dollars, which means the major Silicon Valley firms and their shareholders have more than a vested interest in a sustainable digital adversing ecosystem.  As such, it’s worth noting that their own anti-regulatory rhetoric often used to lobby for a laissez faire approach to all things Web can potentially backfire and threaten the viability of their own existence, like unfettered deforestation in the Amazon.  (I mean the real Amazon).  And according to a new report released last week by the Interactive Advertising Bureau (IAB), conducted by EY, the digital advertising ecosystem in the U.S. is currently losing an estimated $8.2 billion a year in value due to “fraud and flaws in the Internet supply chain.”

Without working in digital media planning and buying, it’s tough to fully understand the advertising ecosystem, but this video created by IAB is a helpful overview that at least gives one a pretty good idea as to why it’s called an ecosystem.  Media buying and selling in a market with billions of pages in constant motion is naturally a complex universe of interdependent functions, which are necessarily automated and, therefore, not entirely transparent to all parties. Available online inventory is purchased through a semi-automated exchange where the available inventory of impressions is bought and sold, functioning much like any other commodities exchange.  At the most basic level, advertisers are paying for impressions, which are supposed to be based on real human traffic to the sites and pages where they have directed their ads. But because the system is complex, partly opaque, and because any site owner can serve ads to his page, there is tremendous opportunity to exploit imperfections in the system for profit.

As complex as the system may be, dishonest brokers have developed a variety of equally sophisticated methods for either siphoning ad dollars away from the intended market or for using the advertising ecosystem to deliver malware or conduct scams and theft. For instance, the IAB report estimates that Invalid Traffic is costing the industry $4.6 billion.  One example of Invalid Traffic would be an advertiser paying for ad impressions based on a volume of non-human traffic to a given site or page.  Serving ads to bots or generating false impressions via clickfarms are among the growing problems for the advertising industry. Additionally, this type of Invalid Traffic is interrelated with the two other corruptions in the supply chain identified by the IAB report—Malvertising+ and Infringed Content.

Infringed Content (e.g. piracy sites) is estimated by the report to be draining value from the advertising ecosystem to the tune of $2.5 billion. The lion’s share of that number represents a combined estimate of either paid-for content or ad-supported content that would be legally consumed if Infringed Content could instantly be made to disappear from the Web. I have written in earlier posts about advertisers losing brand value when their ads appear on sites dedicated to infringed content, but this report identifies specific ways in which Infringed Content is related to Invalid Traffic. For instance, a user who visits a pirate site is increasingly vulnerable to malware, which can then slave the user’s device to generate Invalid Traffic for ads in a variety of ways unbeknownst to the user.

Malvertising+ is estimated in the report to be costing the industry $1.1 billion in value and is described thus:  “Malvertising+ refers to the potential distribution of malware across a larger population of consumers by compromising a single advertisement or script than would be possible through compromising a single website or content source.”

In a nutshell, Malvertising+ includes various methods by which bad actors are using the advertising ecosystem to deliver malware that may either be used to generate fraudulent revenue via Invalid Traffic or to attack individual users with scams like ransomware, which installs a virus to seize control of a user’s system so the hacker can then charge a fee for its release.

Suffice to say the IAB report cites too many examples—and they’re fairly technical—to describe in this post, but to put that $8.2 billion in lost value in perspective, this article by TechCrunch, citing ZenithOptimedia, states that the projected U.S. ad spend for all Internet advertising—which includes more than the portion relevant to the report—in 2015 was expected to have been approximately $51 billion.  That means just about 16% of the total domestic spend on online advertising is being poured into what the IAB report calls an “untrustworthy supply chain.” Presumably, there is a tipping point at which advertisers can lose confidence in the digital advertising ecosystem, which seems to me the kind of outcome one might expect from an entirely unregulated Internet.

Because each of the various types of corruption identified in the report represents criminal activity, it seems likely that the remedies necessary to maintain confidence in the advertising supply chain will comprise some combination of both law-enforcement efforts and voluntary measures on the part of key players in the advertising ecosystem. And it is interesting that the second largest corrupting force identified in this report happens to be Infringed Content.  After all, the Internet industry—particularly Google—has spent such vast resources devaluing the relevance of copyright in the digital age and claiming that ISPs cannot “police the Internet” whenever the copyright holders have sought voluntary measures to mitigate mass infringement.  But if the ad buyers cannot have confidence in the market, then the ad sellers may suddenly find both the will and the ability to stifle the opportunity of pirates and thieves to leech off legitimate trade.

GroupM Announces Major Step in Anti-Piracy Effort

As I reported this February, the advertising industry announced a new initiative led by the Trustworthy Accountability Group (TAG) called the Brand Integrity Program Against Piracy.  That post outlines the basic principles of the program, but suffice to say, this is a voluntary effort by the major brand advertisers to keep their high-value ads off exploitative sites, whose traffic is derived by media piracy.

In what will likely prove to be a significant step forward for this program, the world’s largest advertising conglomerate, WPP’s GroupM, today announced that it will require its partners to use TAG-certified, anti-piracy services.  GroupM handles $106 billion in media for its clients according to Adweek.  Writes Lauren Johnson, reporting on this news for that publication, “Such fraudulent sites rip off advertisers in two ways: They sell ads against copied content, or they set up botnets that infect computers with viruses that drive huge numbers of clicks on ads.”

While many pioneers of the Internet did not envision that its design would ultimately serve the purpose of advertising, there’s no question that’s how it is designed today.  Just about every declaration we hear about the Internet’s power to [insert platitude here] is backed entirely by the revenue derived by marketing and advertising.  Every “new model” recommendation to authors of creative works—whether valid or not—is in one way or another predicated on advertising revenue.  Web 2.0 is a media business.  And whether or not everyone thinks this is the best possible use of this technology is secondary to the fact that the value in this market should be inoculated against the toxicity enabled by the technology.

Piracy is too often treated as either neutral, beneficial, or prescient; and it is assumed that the only victims are giant corporations, which can afford to lose a few sales.  GroupM’s progress in this initiative demonstrates that widespread piracy actually poisons the entire value stream that drives the Internet as we know it today.  And anyone who still thinks that to be anti-piracy is synonymous with being anti-technology should take a gander at this video from GroupM’s agency Mindshare.

Like’s Labour’s Lost – Facebook Advertising

Beauty is bought by judgment of the eye,
Not uttered by based sale of chapmen’s tongues.

So, like, what’s a Like worth anyway?  I mean a Facebook Like.  Well, for starters, like, Facebook is valued at like more than 120 times its earnings, so, like, the concept “value” is like, y’know, hard to define. Likes are indeed currency, though good luck trying to figure out the exchange rate.  For most of us, a Like is just a casual, and usually literal, means of expressing appreciation among friends.  Like the new baby pics, Like that smart or funny comment you made, Like that you wished me good luck or Happy Birthday, and so on.  And while all that Liking does yield data for Facebook, which is fed into the box of dark magic that conjures what may or may not be useful market research in the social media age; Likes for business, organization, or cause promotion are another matter altogether.  And you know this because if you create a Facebook page for one of these things, Facebook will immediately let you know that you can broaden your exposure by paying for Facebook advertising.

There’s a classic advertiser’s quote, often attributed to David Ogilvy (though maybe not correctly), that says, “I know half my advertising budget is wasted, I just don’t know which half.”  Waste is the advertiser’s dilemma; nobody wants to spend money advertising to people who will never be customers, and the best traditional solutions to this have been based in demographics and broad market research, which trades in old-school likes (e.g. consumers who like football also like beer).   The advertiser of a sports car, for instance, can’t entirely avoid waste, but he can put commercials against programs known to be watched by his most likely customers based on market research.

The Internet is supposed to do better than that for advertisers. Rather than spray-and-pray sports car ads at men in a target demo, the hope has been that the advertiser can reach Steve, who is actively looking for a sports car right now. Much of the design of the Internet as we know it is built with an aim to achieve this goal and not whatever altruistic, social progress is being spun in the PR departments of social media giants.  One irony, to me anyway, is that I actually find Facebook to be a largely positive social network, which is not where it derives its market valuation; yet, I am very skeptical of its worth as an advertising network, which is where it derives market valuation.  I won’t lie:  I’ve enjoyed connecting with old friends, making new friends, keeping up with people, and kibitzing on Facebook; but I bet I’m not alone in saying that I am probably less brand aware today than I ever was in the days when I only had one screen in my life and a limited number of channels.

If anything, I find the obvious advertising on Facebook is either utterly missable or utterly obnoxious.  The only times ads have caught my attention on the network have been negative attention.  For instance, when Facebook tells me that a friend “Likes” a certain big corporation (e.g. Sam Likes Bank of America), it only attracts because I know it isn’t true, and I find myself wondering a) where Facebook gets the nerve to say this?  b) what idiot thinks this is good marketing for BofA? and c) what am I endorsing that I don’t know about?  Similarly, I’m sure we all notice that Facebook will very quickly feature ads for items we browsed online within minutes of said browsing, and maybe this is an effective sale closer sometimes, but certainly not if it’s an item we just bought. In this case, the ad just elicits a well-deserved sneer.

So, in the pursuit of “Steve,” that real customer, I often wonder whether these rather ham-handed efforts do not represent the new “waste” in advertising, particularly in light  of what has surely been lost in recent years, which is consumer relationships built on brand identity.  In the 1990s, advertisers were still very much talking about relationships, but today, it seems the word is engagement, meaning interactions through social media.  And believe me, I honestly think there are a million smart ways to build relationships through these platforms, but it’s not clear that there is much value to the Facebook Like.

The owner of a business, organization, or cause page on Facebook can purchase Likes through two mechanisms — one supposedly above board, the other not so much.  Paying for Facebook ads is the legit, and at least somewhat organic, way to attract valid, engaged interest in a page.  The not so kosher approach is to buy clicks through a third party that simply pays foreign labor in what are called “Click Farms” to sit and click on things at a rate of about $1 per 1000 clicks.  (I know, it’s a job that just screams innovation and prosperity, right?)  But this is how many a Facebook page acquires tens of thousands of Likes, which are less than worthless in the pursuit of engaged prospective customers, readers, or supporters of your cause.

Unfortunately, according to Derek Muller, creator and host of the YouTube science and tech series Veritasium, buying Facebook ads seems to generate roughly the same worthless pile of Likes as buying third-party Likes.  In fact, Muller explains that, based on the way Facebook algorithms test and then broaden the reach of posts in response to apparent engagement, having tens of thousands of bogus Likes actually reduces exposure to people who are legitimately interested in your page. The reason Muller gives for the Facebook ad buy attracting just as many fake Likes is that Click Farmers actually click on stuff for free (i.e. pages they haven’t been paid to click on) in order to hide their identities in the vast confusion of clicks throughout the network.  In short, so that nobody notices a sudden Like spike on one particular page from, say, the Philippines.  Muller doesn’t accuse Facebook of intentionally selling fake Likes, and this is probably fair; but I still wonder what a real Like is really worth.

I recommend watching the video.  Muller is very entertaining, and the whole series looks great.  Had I first seen it on Facebook, I like totally would have Liked it.