Misintermediation

One of the early principles of online marketing was disintermediation -- a typically dense and obnoxious word that digi-dweebs used to mean "eliminating the middle man."

The thinking went like this: Levi's makes jeans. People buy jeans. The web will allow people to buy jeans directly from Levi's and eliminate the unnecessary costs of distribution, promotion, and retailing that are necessitated by middlemen.

Before the tech crash of 2000, it was widely believed that online economic activity would overtake traditional brick-and-mortar activity by allowing disintermediation.

This belief -- still held widely by simpletons who have no idea how humans or business work -- is still floating around.

As usual, in the delusional world of modern day marketing, the fact that online commerce constitutes just 6% of retail activity (US Dept. of Commerce, Q2 2014) and good old brick and mortar retail activity constitutes 94% of retail business activity is of no consequence. Facts don't mean much these days.

To a large extent, the web has not disintermediated anything. Amazon doesn't manufacture clothes, books, bicycles, cameras, CDs, and wine. Neither does eBay. They're just a different kind of middle man that happens to be on line instead of at the mall.

So disintermediation has turned out to be largely a pile of hooey.

Now let's cut to an interesting piece I read this weekend by a guy named John Stoughton. Stoughton's piece is called "Disintermediation and the Curious Case of Digital Marketing – revisited."

Stoughton is a communications planner at a UK agency and seems to know his material very well. I say "seems to" because I could only understand about 1/3 of his piece, but what I understood seemed smart.

Stoughton made several good points, but the one that interested me most was his point that for a medium that was supposed to disintermediate everything it touched, the web has misintermediated the living hell out of advertising. (By the way, misintermediate is my term, don't blame him.)

In fact there is so much misintermediating going on -- so many middlemen in the buying, selling, bidding, and placing of online ads -- that no one even knows what the hell they are buying or where the hell it is running.

Traditional advertising is pretty simple. I buy the back page of the NY Times news section and I see my ad on the back page of the NY Times news section.

When I buy a banner ad, on the other hand, the astonishingly arcane black box of adtech kicks in.

According to a video called "Behind The Banner" here's what happens when a web page loads (I have taken the liberty to edit some of their copy):

• When a person visits a web page, a request is initiated for an advertising impression

• An impression request is generated based on what the web page knows about the person

• The impression request is forwarded to the publisher's ad server

• The publisher checks to see if this impression matches any of its pre-sold ad inventory

• If the impression hasn't been fulfilled, it is sent to one of several ad exchanges

• Servers looking to bid on the impression may communicate with other servers to augment the data they have on the person visiting the site

• Next, an auction takes place in which third parties bid on the chance to fulfill the impression

• The impression is sold to the highest bidder, for the second highest bid price

• The banner is then sent to the web page and appears to the user. The selection of one of the advertiser's banners can trigger a whole new process

• This whole thing takes less than 1/4 of a second

And what is the result of all this misintermediation?

• Nobody knows where their ads are running

• Almost half of online ad impressions may be fraudulent

Which just goes to prove, once again, that the advertising industry can complicate the shit out of anything.