Changes at Group M Reflect Industry Shifts

Brian Lesser, who runs Group M in North America, is a great resource to talk about how the agency business is going to change. He arrived at Group M five years ago when it acquired his firm 24/7 Media, and then got promoted to run Xaxis, the Group M Trading Desk. After he built that to a billion dollar business, he moved on to run all of Group M, which although it has tremendous power, is only thirteen years old itself — a symbol of how quickly the ad industry has already changed with the advent of online advertising.

No wonder traditional industry executives are still pulling their hair out. You can imagine how they must feel when someone like Brian comes in and changes the game, the rules, and the compensation schemes. It’s Lesser’s view that although agencies used to gain leverage from the size of their ad spends, they now will only gain it from the quality of their customer data. That’s why GroupM is changing itself from a holding company that sits on top of a group of agencies to a platform that sits underneath all of them and provides the new infrastructure for leverage — better consumer data.

One of the reasons for this is what we’ve been talking about — the changing definitions of reach and frequency. Nielsen, which measures both digital and TV advertising has discovered that younger people will not accept the same ad load that their elders sat through. Although that’s not surprising, having the data allows both brands and networks to see the magnitude of the change. Younger people been brought up on ad skipping technologies in the TV world, and as they shift to OTT, they do not want to see many ads. Of course many would rather see no ads at all.

Nielsen is trying to develop basic metrics for the OTT industry the way it has for TV. Digital sites have been slow to come on board Nielsen’s measurement system, preferring to claim differentiation based on their internal customer data, but they’ve been forced to allow in third party measurement by advertisers and agencies.

The big question is about how sales outcomes get linked back to advertising spend: to media impressions or any other proxy. Nielsen is trying to find a way to link media buys to sales ROI. Part of that effort involves an investment in Nielsen Catalina, which provides ROI measurement against retail store purchases. An agency that doesn’t have the technology, either internal or through partnerships, to measure real ROI (sales) will quickly lose its ability to get and keep accounts that are becoming more and more sophisticated about how to measure their online advertising efforts.

–For much of the information discussed in this post we are indebted to AdExchanger’s new podcast series AdExchanger Talks, which is excellent. You should be listening to it if you aren’t already.

 

CES and the Future of Advertising

As we speak, the future of advertising is being debated in Las Vegas at the Wynn Hotel by a cast of characters including Sir Martin Sorrell, WPP Global CEO, Brian Lesser, North American CEO of Group M, and Brian Gleason, [m]PLATFORM Global CEO. In the past few years, marketers and advertisers have had an increasingly large presence at the Consumer Electronics Show, signaling the pervasiveness of technology in marketing efforts.

But perhaps CES and the agency world isn’t where the discussion needs to happen. Perhaps it needs to happen at the marketer level. After all, programmatic techniques have allowed individual marketers to exercise the same media buying power they used to have to outsource to agencies. Back in the good old days, before people hated advertising, media buyers had to use agencies because the agencies had better buying power than any individual brand, and they got the best prices.

Not so anymore. Or if they do, they don’t pass those prices back to the customer. Last year, in the face of the ANA report,  some forward-thinking companies began to build their own attribution models and take some of their buying in house. They also began advocating for transparency into their media rates.

Although the ANA report didn’t appear to make much of a dent in last year’s buying trends, it has slowly been building momentum in the minds of advertisers, because at the end of the day they pay the bills. Besides, the more they know about how their own media buying works, the more strategic their planning can become.

The report, conducted by research firm K2, disclosed:

  • Cash rebates from media companies were provided to agencies with payments based on the amount spent on media. Advertisers interviewed in the K2 Intelligence study indicated they did not receive rebates or were unaware of any rebates being returned.
  • Rebates in the form of free media inventory credits.
  • Rebates structured as “service agreements” in which media suppliers paid agencies for non-media services such as low-value research or consulting initiatives that were often tied to the volume of agency spend. Sources told K2 Intelligence that these services “were being used to obscure what was essentially a rebate.”
  • Markups on media sold through principal transactions ranged from approximately 30 percent to 90 percent, and media buyers were sometimes pressured or incentivized by their agency holding companies to direct client spend to this media, regardless of whether such purchases were in the clients’ best interests.
  • Dual rate cards in which agencies and holding companies negotiated separate rates with media suppliers when acting as principals and as agents.
  • Non-transparent business practices in the U.S. market resulting from agencies holding equity stakes in media suppliers.

So meeting at CES to discuss the future of advertising had best begin with a fundamental change in business practices between agencies and their clients. So many trends threaten the future of advertising that now’s not the time for agencies and marketers to be working at cross-purposes.

 

A Happier New Year for Advertisers

Last year the IAB Leadership Council, which holds its meeting early in the new year, was all about ad blockers. This year, the theme for that annual conference is Publishers and Platforms: What’s Next, from which we’ve gathered that people are more worried about Facebook, Google and Snapchat than about the death of the entire industry. How quickly we forget, although not much as changed.

Last month IAB released a study on ad blocking in Australia and found that, as in most other parts of the world, about 28% of Australian customers used ad blockers. Although that was a higher number than anyone had anticipated, if you read down further into the study you will find that only 6% of mobile users had installed them.

Australia is both similar to, and different from, Europe, North America, and Asia. It’s got similar numbers of ad blocking consumers, but it has one big difference: the reason why Australians install ad blockers.

Critically different and thus important, one in five people in Australia are only . blocking ads because they’re afraid of viruses and malware rather than because the ads are intrusive. The Australians seem not to mind seeing advertising messages. So it’s not surprising that when asked by a site to turn off their ad blockers 44% of consumers did so, and still more consumers whitelisted the site.

Of the 70 per cent who have been asked by a site to turn off the technology to access content, 62 per cent have either turned off or deleted their blocker, or whitelisted a site in response.

This should give advertisers and publishers a pretty happy new year, because IAB’s conclusion is that what’s needed to put the ad blocking apocalypse to rest is communication from a publisher to its visitors. In other words, teach the visitors a bit more about how the industry works, and they will make the decision to preserve free content and turn off their ad blockers.

While we are obviously happy about this news, we also think something more is needed: less intrusive advertising formats and more highly targeted messages to the right audience at the right time. We’ve been talking about the changing definition of “reach” — from reach out to everyone we can find who might be a buyer, to reach in to people whose choice of site visits has already indicated their interest in the marketer’s message. That’s on the messaging side. And on the format side, we of course recommend our “polite” outstream offering, InArticle, which consistently outperforms the competition.

Is Facebook Taking Too Much Credit for App Installs?

One of the last missing pieces in the online advertising puzzle is ROI. How can you decide whether your ad campaign was really successful? In the case of app developers, this would seem to be a simple matter, because in theory you can use Facebook’s own tools to track your app installs, and then backtrack to figure out your cost of customer acquisition and run your numbers from there.
Facebook has developed some very sophisticated methods of attribution, especially for app installs, since it is the primary advertising mechanism for app developers. For example, its App Event Optimization will let app advertisers target people by bidding on one of 14 possible actions users have taken, like added an item to a shopping cart or a wishlist, initiated a checkout, purchased something, viewed content or unlocked an achievement.
Facebook believes that because so many people engage with its ads across Facebook, Instagram and the Facebook Audience Network, it’s uniquely able to determine whether someone is likely to take action based on historical data and people with similar characteristics.
And it has also partnered with some tracking companies such as Apps Flyer and adjust,  that specialize in measurement and business intelligence.
AppsFlyer introduced a special Facebook integration last year, which it claims solves the problem of mobile Facebook ROI for app install ads:

By combining in-app activity and lifetime value data with ad cost and other campaign details from Facebook, AppsFlyer can deliver real-time ROI reports on Facebook app install campaigns.

However, there may be something still lacking in the analytics available to app developers: information on whether all ads on Facebook are viewable by all Facebook visitors. We know, for example, that some Facebook users run ad blockers, and that Facebook strictly controls the number of ads within a user’s feed.

Since Facebook counts impressions, rather than viewable impressions, it counts any app installs as driven by Facebook whether the installer has seen the ad or not. If the ad was somewhere on Facebook– even if the user never saw it–and the user later installed the app, Facebook takes the credit and charges for it.

We found it unusual and amusing that Facebook was counting actions taken by users who might not have even seen an ad and charging for them. This used to happen in the old Wild West days of online advertising, where an advertiser paid when an ad was served. Lately, on most other publisher platforms, brands can buy on guarantees of viewability.

To sort this out will take more complex analytics involving mobile ad viewability because almost everyone who installs apps is also on Facebook. In the mean time, it is wise to monitor your campaigns carefully to see if they are really working.

New Metrics “Adjustments” for Facebook

Facebook may get coal in its Christmas stocking this year.

It may take Facebook a while to begin to suffer visibly, but we predict, and have written in our ZEDO blog,  that we’ve passed peak Facebook. This is the third time Facebook has had to admit to brands that its numbers were off: the first time was in estimating how long visitors viewed video ads on the giant social network; the second was in calculating how many monthly visitors saw a brand page, and the third is in estimating the audience size for new campaigns.

There is also speculation that Facebook may be taking too much credit for app installs.

How many times can Facebook admit errors before brands lost faith in it as an advertising platform? Although it is tempting for a marketer to feel that there’s a single solution to media buying, it’s also possible that such solutions, like most anticipated panaceas, are just too good to be true.

Facebook certainly seems like one of those cases. Facebook has now begun to allow MOAT and Integral Ad Sciences to examine some of its numbers, but when advertisers lose trust, it’s tough to win it back. Moreover, Mark Zuckerberg, Facebook’s founder, recently sold a major stake in the company, supposedly to free himself up to go on to the next event in his own life, which is rumored to be government.

Some publishers have already drawn back from their all-but total commitment to the platform, concluding that they are not getting the revenue they were promised and yet were giving up too much of their brand.

Especially since the US election, consumers have also express distaste for Facebook, holding it somewhat responsible for distributing fake news. Although we haven’t yet seen a consumer survey, there is anecdotal evidence that people burned out by political polarization, vitriolic attacks from friends who disagree, and the evidence that Facebook may bear some responsibility for fake news without being willing to take responsibility have begun to spend less time on the site, withdrawing to other news and networking sources.

A sophisticated marketer can see this coming, and has already begun to cover her bets by buying in niche publications where she knows the audience will retreat after Facebook burnout. The combination of better programmatic marketing tools such as header bidding and developments in the world at large may have made Facebook less desirable as the only digital spend.

 

Agencies Blend Creative, Programmatic, and Media Planning

Last quarter the advertising industry gathered at Cannes, and one of the things that was discussed was programmatic creative. Although “programmatic creative” seems like a contradiction in terms, it’s time to discuss how better creative and more precise targeting can help the industry fight the onslaught of ad blockers.

Ad agencies at Cannes always stress the creative, and the ad tech companies that gave the parties on their rented yachts talk about data. But letting the media planner into the discussion about data and creativity will get the right message to the right customer.

It’s one thing to do customer research and know what your messages should be, and to design creative based on good storytelling for that customer. But if the media planner is only buying to hit targets for reach and frequency, without adequate input into the process by which the story finds the customer it was created to find, the process will break down at the level of programmatic buying.

We look for media buying to become far more complex in the near future, as media planners learn about what goes on in the other departments of their agencies. And where media is bought almost wholesale by large agency trading desks, changes will also have to occur. No amount of good data and great creative will save a poorly designed buy. The buy may have to be broken down into smaller, more targeted pieces, and the creative changed for each piece.

… it’s important to distinguish between the “big idea” on the one hand, and dynamic creative optimization (DCO) on the other. DCO is widespread in display, though unevenly implemented, and is now coming to new formats like native and video.

“The next phase will be dynamic video capabilities,” said Jos Pamboris, chief product officer at Flashtalking. “The idea that you can run thousands of variants of your preproduction video has been available but hasn’t been hugely successful yet.”

So, a more nuanced take might be that the question of who owns “programmatic creative” is not a zero sum game. DCO can be reasonably handled by the marketer’s agency and technology partners, while creative agencies can incorporate customer data and known segments into their ideas. Creatives may also choose to alter their pre- and post-production workflow to allow for dramatically more versions of a video ad, for example. But that will take work.

Creatives are usually on a separate floor in agencies, or at least in a separate room. But that practice has only produced silos, as creatives often have no clue what is going on with either the customer data side or the media planning side. It only makes sense that if you re-organized agencies into cross-functional ad hoc teams, perhaps by account, perhaps by project, we’d get less intrusive, more effective advertising,

Ads Coming to VR Next Year

One of the benefits of being around Silicon Valley is hearing about new trends in media before they a happen. Although advertisers already know about virtual reality, they are only using it now in limited ways compared to how it will be used next year when Apple unveils its VR program, which is expected to include glasses and a new iPhone that will be VR ready.  Experts agree that Apple’s iPhone 8 will sell more VR than all others combined.

In the mean time, if you are hoping to launch something in VR with Apple, those same experts suggest developing for the HTC Vive, which is available now and is the de facto development environment for the Vive. For those of you who are technicians, or have them, available to you, build in Unity 3D software for the Vive and it will port to what Apple is doing in iPhone 8.

Another option is to build for Oculus Rift, which is also available now. And if you aren’t even playing with VR, you will be too late. Android will take off when Apple does.

Remember, Apple is amazingly secretive. However Robert Scoble, who knows everything before anyone else because he travels around the world looking at new technology, says “remember, next year’s iPhone announcements will be the 10th anniversary of the iPhone and also the first it’ll do in its new headquarters. This is VERY important for Tim Cook. Probably the most important introductions of his life.”

In the meantime, there is already one company, Virtual Sky , that promises to deliver targeted, immersive advertising at scale on all virtual reality platforms. Post Fruity Pebbles launched a VR campaign on Virtual sky last summer, in an immersive 360 degree preroll spot that takes the viewer through a series of colorful, vibrant activities like painting a mural and jamming with a garage band.

Past VR experiences

drop the user into an environment and let them explore” for an unlimited amount of time, Pebbles created an edited ad featuring 360 visuals, according to Brian Hurley, creative lead at agency Public Works. Few other brands have limited themselves to shorter VR ads in order to complement users’ real-life experiences, Mr. Hurley claimed.

It’s too soon to know whether consumers will accept advertising in the midst of a true VR experience, but here’s what we know now: ad blockers don’t exist for virtual reality yet, so we have a chance to do it right.

 

Why the Hype About Analytics Could be Wrong

The Holy Grail for marketers has always been finding a customer just at the moment before a purchase and influencing the customer’s choice. During my entire lifetime, better targeting has seemed like the best way to do that. The crudest targeting tools, first introduced during the Mad Men era, were demographics and psychograpics: finding consumers in the right age, income, and aspirational range.  Before that, advertising was just spray and pray.

The use of data has only grown more complicated since its early deployments.  Companies like Facebook, Amazon and Google have so much information about us that if they could just use it or sell it, advertising would be an exact science (if indeed anything is an exact science). But somehow that hasn’t happened. The ability to know the customer and use that knowledge effectively has both increased and decreased over the past fifty years. Digital advertising, especially, has reached new levels of precision. That’s where the increase has occurred. The decrease has occurred because we chose performance as our first objective, thinking digital advertising should be measured like direct mail, by the percentage of opens, or by the number of people who used the coupon to make a purchase.

Using performance as a metric means we have evolved to the consummate level of targeting: retargeting a unique customer who has already made a purchase. And boy, is the customer angry when we do that to her. So angry that she may even have installed an ad blocker, or learned how to browse in incognito mode.

Now, just at the point where we ought to be re-examining our strategies and tactics, we are being offered new ways to slice and dice data — data lakes, integrated analytics, and a few other buzz words.

It is possible that “better” analytics will only make things worse, because the more consumers sense that their privacy is being violated  — and Millennials are the worst offenders, because they say they don’t care about privacy but they download all the ad blockers — the less open they are to messages from marketers.

Even the ones they used to welcome, like news of a sale, information about the specs on a car, or the premiere of a new film.

Until we have built back the trust of consumers, we believe that many advertisers should focus on brand awareness, using premium publishers to target for them. The publishers have their own data, and have hopefully not antagonized their readers with too many interruptive ads. As marketers, the industry should stop putting pressure on publishers to negatively impact the user experience with interruptive ads. If we do that, we can get back to where we were before all this data, and before 25% of our potential customers became unavailable to us online.

 

Outstream is In

As we head into an era of better analytics, more precise targeting, and redefinition of reach, more and more media professionals are becoming aware of the power of outstream advertising. Because outstream is video in the midst of other non-video content, it is in a better position to drive online purchases and target consumers without driving them away. More and more brands are using mobile outstream video ads to generate targeted awareness.

As Marketingland reported back in April,

Digital video ad spend in the US is on the rise, with eMarketer expecting it to reach $9.84 billion and represent 19.6 percent of total digital ad spending this year and reach $16.69 billion by 2020. But as this channel grows to account for 13.3 percent of total digital ad dollars, advertisers are stifled by the limited supply of true pre-roll inventory available in the marketplace. Enter out-stream.

Out-stream impressions are video ad units unaccompanied by content. While a pre-roll or mid-roll ad requires a publisher’s video to wrap around, an out-stream ad is a video ad unit not tied to any piece of publisher video content. Instead of running within a standard video player, these high-quality impressions can run within standard ad placements, on the corner of the page, or even within the content of a written article. They are designed to be 100 percent viewable, only deploying and playing when the unit is onscreen and the consumer is moving the page around.

But there are special issues involved in video advertising that the industry must deal with. Viewability is a big one, as is the smaller screen size and shorter attention span of the mobile consumer. Less often discussed is the difficulty of reaching large premium audiences without harming the user experience.

That’s where the unique combination of ZEDO and ZINC can help. ZINC’s  innovation formats perform measurably better than comparable ad formats, even others in the outstream category. That’s because we have a “special sauce” in our secure platform and our unusual methods of serving ads, the result of almost two decades of experience in serving ads for publishers. We also have a highly curated network of publishers, eschewing the garbage and sticking to premium audiences.

Our non-intrusive outstream video advertising solutions are entirely respectful of the user experience, as IAB’s L.E.A.N. standards propose. They launch only when the user scrolls down to where they are, and they never use auto-play sound.

Our customers include premium publishers throughout the world.

But most important, we allow you to use your existing creative, saving time, effort, and dollars.

 

 

 

 

Agency Creative Structures Need to Change

We’ve long thought the agency business needed an overhaul in favor of more and better creativity. The industry now has the technical tools to target messages to the correct consumers, and the video formats (such as our inArticle video) to produce higher viewing and completion rates. On the workflow side, we’re pretty streamlined. But nothing would raise completion rates as much as standout creative.

Most agencies know this, and have figured out ways to re-combine teams for specific clients. But that might not be good enough. It might be time for agencies to do more than just use existing teams in different ways, especially since agency life has such churn anyway.

We think the entire model of internal teams is outdated, and that creative teams should consist of the best people both inside and outside an agency. This may mean forming an agency entirely out of a network of free agents on call for specific assignments. Some small boutique agencies already do this: their corporate staff is mainly account executives, finance people, and media buyers, and their creative is almost completely outsourced.

Grace Caffyn’s recent article about how the Grey Agency in London has reorganized its offices to provide more unstructured space and changed its recruiting policies so it can look at outside candidates informally at office parties before it’s time to make a hire shows some of the differences. And there are perks at Grey that used to be available only at tech companies, such as ” free beauty treatments and weekly treats, which range from bacon sandwiches to fruit smoothies. There’s also a cafe-bar downstairs that serves free drinks from 6 to 9 p.m. every Thursday.”

Apparently, the Grey Agency’s London office is taking its inspiration from Pixar, whose president, Ed Catmull, has written a book about his experiences called “Creativity, Inc.”

However, there’s only so far you can go with existing staff, because sooner or later they begin to reflect the culture of the agency, which may not be the culture of the world outside. Although agencies complain about churn, we suspect that churn is actually the salvation of agencies, because it allows them to take in new talent.

Agencies, go further: reach out to people who may want to remain independent and pull them in on specific projects where you know they can shine. Partner more often, collaborate more often, especially on the creative side.