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4 Problems Online Advertisers Face

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4 Problems Online Advertisers Face

In an article titled, The High Cost of Online Trash, Bob Hoffman once again reminds us that the complex online advertising ecosystem is still rife with potential fraud and abuse. In a sneak peek from his latest book, he quotes Bob Liodice, CEO of the Association of National Advertisers, who says, “We keep feeding the beast by pouring incredible sums of money into this unproductive, unmanageable abyss. Remarkably, we keep doing so even though we know that only 25 percent of every digital dollar reaches the consumer. … [that] represents more than $20 billion in marketing waste, inefficiency and ineffectiveness.”

There are essentially two ways brands can buy online ads:

1. Contextually: Where the brand or media agency works directly with publishers to place ads on websites where the context of the site content determines the buying criteria.

2. Behaviorally: Where the brand does not buy on a specific site, but follows customers around the web using cookies or other tracking that allow advertisers to target based on behavior revealed by the tracking. The alleged benefits of this are lower costs, and economies of scale. Brands are told they can reach more customers in more relevant locations versus expensive direct-to-publisher placements.

The behavioral path is where all the problems are. Trust continues to be at record lows in social media and search platforms. According to the Edelman Trust Barometer, 73% of global audiences still worry about false information or fake news being used as a weapon. Often, the easiest way for fake news to find the funding it needs to propagate is by selling ad space that leverages behavioral targeting. Machines make the decisions.

Four problems Hoffman rightly has with online ads are:

1. Accuracy: Behavioral targeting is only as good as the data that informs it. Hoffman shares, “There is troubling evidence that data residing in the adtech ecosystem — particularly data bought from data brokers — is not as accurate as might be hoped. We experience it every day when we get ads for stuff we bought three months ago and ads for products we have no interest in. In one test, targeting data bought from a data broker was able to correctly intuit the sex of an individual 43% of the time.”

2. The “Tech Tax”: Data from the World Federation of Advertisers reports that the technology that drives behavioral buying costs about 60% of every ad dollar.

3. The “Fraud Tax”: So much of what happens online is fake. Some estimates say the amount of fraud in the system is between 5 and 10%. And when using open ad exchanges, the fraud is probably 20% higher.

4. The “Long Tail” Of Trash: More than 60% of web traffic isn’t human. There are countless websites out there, and as Hoffman says, “Programmatic systems see low prices on these junk sites and fake sites and bid on the worthless ad space they are selling to meet CPM goals.”

While Hoffman cites “math illiteracy” as a problem faced by many modern marketers, I disagree. The trap marketers fall into all too often isn’t that we don’t know how to do the math, but rather one of not wanting to devote the time to do the harder math. The largest problem with adtech (and in particular, online advertising) is that it provides us with a never-ending supply of data and metrics, many of which are, by themselves, easy to measure and easy to understand. They connect instantly into dynamic dashboards, which makes it very impressive to demonstrate that as a marketer, you’re creating activity. The better equations need to be compounded with other data sources. We should be asking how spend relates to gross profit more than we wonder if our cost-per-lead is declining. (What good is lower cost of audience if that audience is not one of high quality?)

In the next year, I suspect the debate around efficiency versus effectiveness will be more hotly debated. Too many dollars are being wasted by activities the customers do not ever see. Hoffman is right, “the adtech ecosystem — and its evil spawn of tracking and surveillance — are a dangerous and corrupting influence on advertising and on society.”

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