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Facebook and the Future of Advertising

Doc Searls was right fifteen years ago. Markets are now conversations. Publishers and advertisers can no longer collude without the omnipresence on the scene of the customer. The customer is now in control, although publishers and advertisers still don’t want to realize this.

This is online advertising’s #MeToo moment, the moment when the insatiable hunger for more data will encounter the resistance of consumers who are increasingly voting with their wallets.

And marketers are beginning to realize this. Publishers ought to as well.

If you think anything is going to be the same in online advertising after Cambridge Analytica, you’re dead wrong. This is even bigger than GDPR. especially because #SESTA also passed yesterday, making platforms responsible for what is published on them and invalidating Section 230 of the Communications Decency Act, which had protected them up until now.

The first advertiser to publicly defect from Facebook after Mark Zuckerberg‘s appearance on CNN last night was the Mozilla foundation. Mozilla is not a big advertiser but because it is a foundation and not a for-profit corporation it may have greater ethical responsibilities than many other for-profit marketers. It also really doesn’t need Facebook the way other marketers do.

But its defection drives home a number of interesting points. First, Facebook is a publisher. It doesn’t matter who generates the content, the content is published on Facebook.

Second, as a publisher, it has been remarkably exempt from the economic problems of other publishers because of its enormous scale and targeting capabilities. Hiding behind user-generated content won’t fly after #SESTA,

Now Facebook and its advertisers will have to face the same music all publishers will face with the coming of GDPR.

In general, the public has been more sanguine about political advertising than about consumer advertising, but that may be about to change. Some consumers would probably much prefer their data be used by P&G or Unilever than by Russia.

And besides, it isn’t the advertising, it’s the tracking. In consumer advertising, no one cares if a Mercedes Benz driving down a mountain road floats by on the TV, because we can all leave the room for a beer. But they care if that now ubiquitous pair of shoes follows them around the internet. What advertisers don’t seem to realize as they ask for more and more data, is that consumers hate tracking more than ads.

And that’s because even the most sanguine and least informed person on the internet knows that tracking requires the use of personally identifiable data that they have probably given freely in exchange for some convenience, or the ability to read some article, that is now being misused.

And it’s important how Facebook handles this, because otherwise it will just go away. For example, in response to issues around discriminatory targeting, Facebook recently turned off the ability to target by sexual preference. But they did it without consulting the LBGT community, and now groups that run suicide hotlines for gay teens cannot communicate with those teens to save their lives.

Facebook must learn to face the bigger questions surrounding the pile of data it collects. The answer might not be to collect less data. It might be to undertake a more careful study of how collected data can be used.

Mark Zuckerberg’s incredible discomfort last night on CNN was proof that he knows how important this is. After all, he doesn’t just have to deal with American elections and Cambridge Analytica, he must deal with global issues — elections in India, Brazil, and other places where the government could just turn off Facebook altogether.

It’s the trifecta for Zuck this week: GDPR, SESTA, and Cambridge Analytica. No wonder he looked more like an acne-ridden teenager caught in a prank by the principal than a global CEO .

Advertising with a Human Touch Will Win

In the advertising industry we sometimes lose track of the fact that consumers aren’t users;  they are human beings.  They’re not an audience that wants to be shouted at with no input. The best brands know this. They treat their customers with respect online and off.  That means they don’t foist ads on customers at inappropriate times. It means they use every customer interaction as a way to help a consumer rather than bludgeon her.

As a real life example of how a successful brand operates I offer you Starbucks, one of the most beloved brands of this century and the last. I have been to Starbucks all over the world, and am always treated as if I mattered.

Can that be translated to online behavior? Shouldn’t it be?

This morning I ordered from my usual Starbucks using my mobile app. I frequent the same store every day, and they know me. I used to order in person, but now I order online. I order the same drink every day. This could mean I’m no longer a face, just a data point. A “Doppio” at 6:30 AM.

This morning I changed my order.  With a typical brand, this factoid might go into a database somewhere, and be part of a later calculation. But Starbucks is different because there’s still a human interface, and my deviant behavior  apparently threw my baristas into an existential crisis.  Had I made an error? Or was this a real change? They responded by preparing two drinks: the one I had ordered and my “usual” drink. I could not have been more impressed. Clearly I’m not a data point to Starbucks, even though my commerce with them has increasingly become digital.

Let’s take this with us into the world of in-app advertising. When someone is using an app — to play a game, to pass the time, or to pursue a passion, an in-app ad can be distracting and unwelcome.

But we’ve developed a form of interactive sponsorship that can be part of whatever the player is doing at the time, will help rather than interrupt them, and will also help an advertiser who wants branding that’s remembered. We think this is a fair exchange for game players that is not just one-sided.

This is not easy to do, and has involved years of research into changing consumer sentiment about online advertising.  We have learned from industry organizations, from discussions with thought leaders, and with tests on consumers.

As a result, we do none of the things with our formats that consumers hate about advertising: we do not retarget, we do not track, and we do not hold data. Instead, we try to offer online visitors a fair exchange for their time and attention.  It isn’t technology that governs our ad formats, it is respect for humanity.

 

 

 

 

 

 

 

 

Winning Ad Formats for the New Environment

As Facebook continues to grow its power in the ad world, concerned brands and publishers who don’t want to rely on a single supplier are putting on their thinking caps about what ad formats will work best in the mobile, hyper-connected, information overloaded world we inhabit these days. We were listening to a podcast recently called “The Talk Show,”  in which Apple expert John Gruber, whose Daring Fireball site is supported by minimal ads,  was interviewing Stratechery analyst  Ben Thompson, whose work is supported by subscription. These were  two real experts having a conversation about advertising. The conversation, as you might have guessed, was moderate and intelligent –no freaking out about ad blockers or wild predictions that advertising will go away.

Instead, the discussion was mostly about what works and what doesn’t in online ads, and why. First, the two agreed that what’s really wrong with most online advertising is that it has been too closely derived from newspaper ads without truly being rethought for such a transformative medium as digital has proven to be. Early online publishers, eager to be on the internet but without much insight into the new medium, created space for ads that was much like the space they had created for print. That’s how web sites became so burdened with ads that the content was difficult to read and the pages were slow to load. Two decades later, little has changed, except the CPMs and the ROI.

Facebook finally solved its own problem with in-feed ads, still considered the least offensive, most effective form of online advertising, especially on mobile. But Facebook has a built in advantage; when people are looking at their Facebook feeds they’re not focused on finding information immediately to solve a work or health related problem, or even get an updated  ballgame score. No, they’re largely relaxing, bored, procrastinating, looking for connection, or otherwise receptive to advertising. Many other premium sites do not have the luxury of receiving visitors in a leisurely mode.

The advent of video advertising has made things somewhat better for advertisers who use it correctly. Video ads are sometimes quite effective, but both our experts agreed that 30-second no skippable pre-roll isn’t the answer. They both spoke highly of Geico’s pre roll ads, which are 4-second buys that simply say that by the time you skip this ad it will be over. The ads show, in their very brevity, knowledge about and respect for the customer.

Gruber and Thompson much prefer video in the feed, which we call ” inArticle” and the industry calls “out stream.” And they prefer it not auto run sound. So how does an advertiser know if his message has gotten across if a viewer doesn’t complete the video? How about  taking a cue from Snapchat, whose users often overlay text comments on their video snaps?

In sum, we need to evolve advertising beyond translating print ads into online banners and squares, and begin to understand and create formats that are, to use an often misunderstood word, native to the new media.

Mobile Digital Ads to Grow Through 2020

Are we ready for the next five years in mobile video?  We are learning how to make it viewable, and how to make it measurable. But do we know how to make it effective?

A new BusinessInsider report gives a very rosy picture of digital ad spend over the next five years, especially on mobile . Highlights from the full report (which is behind a pay wall) are here:

  • Mobile will be the fastest-growing advertising channel and buoy spending on each of the digital formats. US mobile ad revenue will rise by a 26.5% CAGR through of 2020.
  • Digital video ad spending is rising faster than search and display. US digital video ad revenue will rise by a CAGR of 21.9% through 2020. 
  • Mobile search will overtake desktop search ad revenue by 2019. Mobile search ad spend will rise by a 25.2% CAGR, while desktop search ad revenue will decline during the same period.
  • Mobile display ads, including banners, rich media, and sponsorships, will overtake desktop display-related spending even earlier, in 2017. 
  • Social media ads, which cut across display and video, are seeing fast adoption. US social media ad revenue, which includes video and display ads, will grow by a CAGR of 14.9% through 2020.
  • The rapid embrace of programmatic ad-buying tools is fueling a dramatic uptick in the share of digital ad spending coming through programmatic channels. Programmatic transactions will be a majority of total US digital ad spend this year. 
  • Unlike digital, traditional ad revenue will remain flat overall through 2020. Total traditional ad revenue will rise by a CAGR of just 0.4% between 2015 and 2020. 

You can couple this with the fact that Facebook has added features to its site that make it the fastest growing place to watch video. The most attractive of these seems to have been auto-play, which launched in 2013. Facebook users view 4 billion (that’s with a b) of these videos annually — up from 3 billion a year ago.

It’s obvious which way the wind is blowing. YouTube is still in first place as a site to upload and watch video but Facebook has emerged as a major competitor; the number of videos each user posts to the site has grown by a startling 94% and the number of paid and unpaid videos grew by 360%.

As we move to mobile, expect the amount of video watching on all sites continue to increase. For brands, the big question becomes not whether to use video, but how compelling you can make your video content for a customer on the move.

 

 

What Does L.E.A.N. Mean?

In response to a rising swell of consumer complaints about annoying advertising and the growing use of ad blockers, the IAB had to reverse its previously holier-than-thou position that consumers would just have to endure ads if they wanted free content. In a post on its blog, IAB admitted that it had messed up in not putting user experience first all along, and for being complicit in making  the mobile web especially a terrible experience larded with slow-loading pages, endless retargeting, and data trackers. Oh, and unwanted expense. It has been estimated that up to half of a mobile user’s data plan dollars could be spent on viewing unwelcome ads.

Thus will be born a new set of standards, appropriately named L.E.A.N. LEAN stands for light, encrypted, ad choice supported, non-invasive advertising. The specifics of these standards will be determined, of course, by a working group with industry input, and later with input from consumer rights groups as well. Needless to say, we’v already volunteered to be on the working group, as user experience has always been a prime focus of our business.

User experience is why our inArticle video format does not autoplay audio, and why our InView unit only loads when a viewer is there to see it. We’ve always been conscious of page load times, and since we only work with premium publishers, we have for years partnered with them to preserve the user experience when our ads appear.

IAB is going to target what we feel might be the single most annoying part of digital advertising: retargeting. It will probably be suggested in the guidelines that a consumer who has already made a purchase not be retargeted at all. It will also be suggested that video ads not autoplay in all contexts, and publishers will probably have to re-design their sites once again for a lower volume of ads.

The volume of third party data trackers on some publisher sites will also go down.

Nor will IAB abandon its crusade for viewability, about which it set standards last year.Lower numbers of ads on pages should make the issue of viewability better.

IAB can’t force the industry to adhere to these standards, but it is going to offer them as an alternative or additional set of guidelines for making digital ads. It will roll them out during the next six months,, suggesting that publishers (for their own good) not accept ads from any advertisers who do not adhere.

We are looking forward to the implementation of these new guidelines, because we see them as a win-win for publishers, who will have better performing sites, advertisers, who will have increased ROI from targeting users who aren’t angry, and the users themselves, who will regain the kind of ad experience they enjoyed in the golden age of print.

Autoplay Video and Viewability: When to Pay

Facebook is testing an option for advertisers to pay for video ads if they’ve been played for ten seconds.

Under the test that’s rolling out to Facebook’s own and third-party firms’ Facebook-equipped ad-buying tools on Tuesday, advertisers can still pay once their video ads come into view — meaning on a cost per thousand impressions basis — or they can choose to only pay once their ads have played for at least 10 seconds, or on a cost-per-view basis, as Facebook is referring to it.

Twitter’s latest test is charging for video that’s  100% in view for three seconds. In Twitter’s test, users who want to avoid surprise data charges and opt to have autoplay turned off if they’re not on wifi. Low bandwidth users can also turn off autoplay, which raises the question of whether users will opt to turn off autoplay in large numbers.What does this mean for how ads will be charged in the future?

No one knows how the pricing will end up, and it is difficult to compare prices. It took us a decade to figure out how to charge for display ads. We’ve moved somewhat off CPC to CPM due mostly to RTB. We’ve just added viewability and fraud detection to the “traditional” pricing matrix.

Video is relatively new, mobile video is newer, native video is a wild card. It will take a while to come to an agreement as to how video ads should be paid for that makes sense for brandsOne complicating feature is autoplay video vs click to play.  Both Facebook and Twitter, as well as many other publications, use autoplay with or without audio as a matter of course. If a video ad is not autoplayed, however, when will advertisers be charged?

Our advice is to buy video direct on a private exchange like the ZINC. On the web, your should be charged only if the user sees the full 30 second video. On mobile we charge if the user sees 15 seconds or more of the video ad. Brands love it.

Transparency in the Advertising Business

No wonder it has been so difficult to establish transparency in the advertising industry. From its very inception  advertising’s business model was based on secrecy. A history of more than 150 years is difficult to erase.

The first advertising “agent,”  Volney Palmer, opened a shop in Philadelphia in 1843. Palmer essentially worked as a lead generation service for local publishers, sending ad copy written by the advertiser along with collected payment to the newspapers for which it was intended. There was no copy-checking, and no “truth in advertising” standard, and no creativity. If you paid for the space in the newspaper, the ad ran.

Palmer did not work on behalf of the advertiser at all. However, some time later, a man named Samuel Pettingill opened an agency in New York and changed the model to one of an independent space broker, taking his payment as a commission on the fees paid to publishers. Naturally the agent wanted to buy space from the publisher as inexpensively as possible and sell it to advertisers for as much as possible, without revealing the numbers to either party.

Because of this lack of transparency, neither side trusted the advertising agent in the 19th century. In The Mirror Makers , Stephen Fox says that the early agents only “owed their lives to the fact that their was a law against killing them.”!

For the publishers, the ad agent was a nuisance to be tolerated; newspapers then derived about a third of their revenues from advertising and national magazines even less. For the advertiser, things were even more murky; a business risked its credit rating by advertising. It was seen as a sign of potential financial weakness. Only suspect businesses advertised.

To compound ethical doubts about advertising, many of the early advertisers were the 19th century equivalent of pharmaceutical companies, only they were patent medicines like Lydia Pinkham’s vegetable compound whose claims had never been tested. The biggest advertisers at the end of the century were “quack” doctors who advertised their preparations in the newspaper and traveled the country holding events at which they sold directly.

But in the 20th century all that changed when emphasis shifted from the publisher side and the size of the budget to the quality of the ad itself. That’s when agencies began to get creative, and the modern agency format evolved — the one in which an agency was a trusted counselor to advertisers. J. Walter Thompson invented the account executive and we all know the rest. The job of the account executive was to keep the advertiser happy and keep him spending.

Unfortunately, ad tech so far has not served to uncloak the mystery of ad budgets — where they go and what ROI they produce. In fact, because there are now so many vendors between buyer and seller (the buyer now being the agency) things have only gotten more obscure. In the early days of programmatic, many media buyers didn’t even know where their ads were appearing.

But things are looking up. More and more testing and reporting mechanisms have evolved, and it’s now possible for someone who really wants to know what things cost, who gets a piece of the action, and whether that cost is ultimately “worth it”  to examine the data and arrive at an opinion. Vendor consolidations in the space this year and next, along with stiffer requirements by the people with the money (marketers) to know where and how that money is spent will yield better information and better decisions by marketers.

 

 

Breaking News: A New Format for Mobile App Users

 

The alert for a Breakiing News ad on a user's Home Screen.

The alert for a Breakiing News ad on a user’s Home Screen.

One of the most difficult challenges for mobile advertisers is to decide what is potentially engaging and what constitutes a violation of privacy or trust. After all, the smart phone is a wearable device almost constantly in our possession. This presents a big responsibility for an advertiser.

The number of ads anyone can tolerate in a day without respite is limited. And yet consumers are moving faster and faster toward mobile.  Because we are consumers ourselves, and saw the potential problems involved with mobile advertising, including blowback from customers who don’t want to be bombarded with advertising,  we took it as a company challenge to develop technology that can reach mobile consumers at scale without angering them.

We had a brainstorming session that began with the question “What kind of ad would a consumer tolerate on a mobile device? We came up with the idea that a typical phone user would be okay with being interrupted by breaking news.

That is how we came up with one of our first specifically mobile products,  the “Breaking News” format, which is used with mobile apps and games. In order to prevent “Breaking News”  from being interruptive, we designed this ad format so that it launches only when a consumer quits an app or finishes playing a game. No interruption.  Only when the  game is over or the app closes, a bubble with the name of a publication appears on the user’s home screen. Tapping the bubble reveals a news story accompanied by a video ad; the video ad remains as the user scrolls down through the breaking news story.

Some of the key features of the Breaking News format include its ability to engage the mobile user with video, the existence of an alert for user interaction, and the ability to keep the ad in view even on a scroll. To make doubly sure these ad formats aren’t too interruptive, the ads are frequency capped and run only on our premium sites.

The Breaking News format can use your existing video creative. It expands to the width of the device, shows in either 16:9 or 4:3, and can take mp4, .3gp, .mkv and .webm video files. There is a file size limitation, however, of 20MB.Screen Shot 2015-04-07 at 1.58.34 PM

 

 

Re-defining Scale

Advertising had its glory days during the age of mass media. But with the advent of cable TV and digital publishing twenty years ago, audiences began to fragment. It’s safe to say that there is no more animal called mass media, since viewers who have cable or satellite TV have 200-500 channels to choose from, and increasing numbers of younger viewers are choosing to watch video “over the top” anyway. That makes audience fragmentation even worse.  The same is true of the genre formerly known as “print.”  If advertising is going to work as well as it did in the past, it is going to have to change, and we’re going to have to give up the idea of sheer scale for better targeting and deeper relationships. Either publishers or advertisers can take the lead on this, because both have pieces of the data puzzle. Most publishers have good data on their visitors, and most advertisers have equally good data about their customers. Shouldn’t it be easy to connect the dots?

Apparently not. But it has to be done before marketers give up on advertising and publishers who depend on it go out of business.

We didn’t make this up. A foremost authority on the future of media, Professor Jeff Jarvis of CUNY’s journalism school, is writing a book called “Geeks Bearing Gifts.”  He’s walking his talk by publishing the book a single chapter at a time on Medium, the new publishing platform started by Twitter and Blogger co-founder Ev Williams. Medium does not yet sell ads, although we’re sure it will once it acquires enough users. But Medium will never be a “mass medium” as in the old days, because it exists to surface quality writing, much of it long form.  Its audience, mostly writers, will be of interest only to certain brands, and those brands will engage deeply with the platform.

Jarvis believes that publishers who want to avoid the commodification of what they’re selling need to adopt a relationship strategy:

…the relationship strategy gives us the opportunity to increase the value of what we sell to advertisers. By knowing more about who our users are, we can sell and deliver more targeted advertising that is more relevant to their customers and thus more effective. Rather than serving only one-size-fits-all “impressions” to anonymous “eyeballs” by the thousands as advertisers and media companies do now, we can offer more productive measures of value like attention, engagement, action, impact, and even sales. We can serve specific groups of users to advertisers who value them highly. With privacy properly protected, we have the opportunity to become a trusted broker of data we gather about our users. And if we get good at the relationship business, we have a brief window of opportunity to teach and sell these skills to advertisers as a service — presuming they don’t wake up and learn them before we do. We also have the opportunity to move past selling advertising to selling products and services directly to users, venturing into commerce — which really is just a truncated form of marketing and advertising. The relationship strategy is one defense against the commodification of media’s old content business by new competitors and new technologies.

In Jarvis’ opinion, publishers have to start the revolution in marketing. But we think it can’t be done by publishers alone. ZINC high impact video formats do allow us to reach users at scale, but that’s because we also have a network of quality publishers. We’re not depending on an outmoded concept of mass media to give marketers their scale; we’re depending on your good data about your customers to govern your choices on our network. Then your creative provides the engagement you need to drive sales. It can’t be simply a one-sided game.

 

Inventing the Future of Online Ads

Three years ago the ad server I founded in 1999, ZEDO, started a division to create fundamentally better advertising opportunities. We saw the need for something that went beyond the banner ad, which was no longer exciting to most brands. Like the rest of the industry, we were wrestling with the issues of viewability, engagement, and of less than spectacular results for brands. Fortunately, our product and dev teams took up the challenge to produce new formats that would have higher impact.

The ad formats would be sold through a special online platform (ZINC) created to help advertisers, separate from the publisher side ad server we ran for more than a decade. The new division, named ZINC, has enjoyed rapid growth with ATDs since it was founded.

To us, better advertising meant bigger, more viewable, with higher completion rates, more impact on users, and higher CTRs. The challenge was to create formats that do all this from existing creative, and scale the ads using our huge worldwide publisher technology base.

Trading desks that focus only on buying and not on new or edited creative love our strategy. It allows them to use their creative in which they’ve already invested, and helps them run cross-channel campaigns. It easily scales to all their buys and all their clients, and helps them get better advertising opportunities with the same ease as simply buying banners from a DSP
All our new formats get better results than the industry standards. For example, for our newest format we deliver a 0.5% CTR compared to an industry standard of 0.1%. For InView display ads, the industry standard is again 0.1% and we deliver 0.3%. For two of our best performing formats, there really is no industry standard: our InArticle video format delivers 2.5% with a decent completion depending on targeting, region, and mobile vs desktop. The newest format, Breaking News Video, has delivered 3% CTRs.
We’re analyzing every campaign and reporting the results back to the ATDs for their clients. In Q4, in a campaign we ran for Bridgestone in which we delivered more than two million impressions, the campaign achieved a CTR of 0.31% on some of the leading news, business, finance and auto websites.
A huge remaining industry issue is how to measure the success of video ad formats that make up an increasingly large part of online viewing. How, for instance, do we measure the value of pre-roll, where the user is forced to complete the ad before going on to the content he wishes to see, against something like our InArticle, which is not a forced completion, but a very polite large video ad that scrolls into view only when a visitor is there to see it? And how do we measure long v. short-form video?
We’re in the early days of measuring the effectiveness of video ads, and we have only early industry benchmarks to go on. We ran a campaign for a large financial client at the end of 2014, and that client saw completion rates 8% higher than industry standard on Long Form video. The brand also saw a 23% lift in brand favorability when they applied this High Impact strategy.

ZINC also delivered impressions that scored 20% higher than industry benchmarks on MRC (Media Ratings Council)-defined viewability metrics, thereby maximizing efficiencies for the client and yielding optimal ROI.

As the industry continues to evolve, we will continue to keep ahead of it.:-)