Doomed: Why The Current Model Of Online Advertising Can't Survive

The current model of online advertising -- based on the 3-headed monster of tracking, surveillance marketing, and ad tech -- is unsustainable and will not survive.

The forces against it are building and will shake up the advertising and marketing industries. Here is why it is doomed:

• It is too abusive of consumer rights and personal privacy.

As of today, most people are not aware of how effectively the online ad industry is using questionable technology (ad tech) to track their every move. They are not aware that they are the targets of constant and unrelenting surveillance by the advertising and marketing industries. But over time this will change. If nothing else, clever politicians will adopt this as a cause célèbre and, because it is a non-partisan issue (all sides of the political spectrum oppose erosion of privacy), it will resonate with the public.

Smart companies with Corporate Social Responsibility initiatives will get ahead of this wave and insist that their media partners and agencies not utilize ad networks and publishers who secretly track their customers. They will promote this to the public and unlike so many Corporate Social Responsibility initiatives that are tiresome clichés, it is one that will have traction.

• It is too laden with fraud and corruption and too wasteful of advertising dollars.

Ad fraud is currently responsible for many billions of dollars of criminal theft. The WFA (World Federation of Advertisers) says that within 8 years ad fraud may become the second largest source of criminal revenue in the world, after drug trafficking. While naive marketers are being told that ad fraud is being controlled, knowledgeable insiders say it is metastasizing.

A large component of ad fraud is enabled by ad tech and programmatic buying. Every credible study I've seen demonstrates that programmatic ad buys (those powered by tracking and ad tech) are far more encumbered by traffic fraud and click fraud.  

Sooner or later CFOs and CEOs will come to realize how much money they have lost to online ad fraud and will demand that asleep-at-the-wheel CMOs get off their asses and insist on a better model.

• You can't fool all of the people all of the time.

The online ad industry has had a 10-year free ride in which its preposterous assertions and absurd metrics have been swallowed whole by a naive and enchanted advertising industry. Those days are coming to an end.

Although ad agencies are supposed to be protectors and defenders of their clients' media dollars their venal malpractice in promoting and defending the corrupt and fraudulent practices of the online ad industry have been a disgrace. However, grown-ups on the client side are starting to ask the right questions and demand sensible answers.

All the powerful forces (Google, Facebook, Amazon, the 4As, the ANA, the IAB) are currently aligned in favor of tracking. But sooner or later someone with integrity will conclusively demonstrate to advertisers how insanely convoluted and immensely wasteful the current ad tech model is. They will show advertisers how little value they are getting for their ad tech dollar. 

• It is too dangerous to democratic societies

We were taught to fear totalitarian governments. We feared they would know everything about us, follow us everywhere, track our every move, and keep secret files about us which could be used to influence our lives in ways that were only vaguely visible to us.

We are well on our way to such a nightmare. Except it isn't our government that knows everything about us, follows us everywhere, tracks our every move, and keeps secret files about us. It is the marketing industry.

“Today in the United States we have somewhere close to four or five thousand data points on every individual... So we model the personality of every adult across the United States, some 230 million people.”
-Alexander Nix (Chief Executive, Cambridge Analytica), October 2016.

In May the GDPR regulations and perhaps the ePrivacy Regulation will go into effect in Europe. This will make it much more difficult for online advertisers and media entities to collect personal private information about people without their prior consent.

I expect this will create a period of chaos in Europe until the regulators figure out what is working and what isn't and adjust the regulations accordingly. But in the long run it will set a precedent for balancing the privacy rights of individuals against the power of online media and marketers.

It may take a while to raise the consciousness of people here in the US about the dangers of the 3-headed monster, but ultimately it will.

Like a stock market melt down, it's easy to say it's coming, but it's impossible to say when. It could be five months or five years. One thing I'm certain of, however, the current idiotic, wasteful, and corrupt model is doomed.

In Other News...
BadMen is now available as an ebook here for just $2.99.

Battle Of The Century

Get ready for what could be the PR, lobbying, and regulatory battle of the century as the Goobook (Google and Facebook) duopoly start to realize what the new regulations of the EU (European Union) may mean to their businesses.

In May, a new regulation, called the GDPR (General Data Protection Regulation) will go into effect. More importantly, something called the ePrivacy Regulation may also go into effect. These regulations will seriously limit the collection of personal information by online entities. In fact, they may cripple substantial parts of their businesses.

Right now, Goobook are essentially in the surveillance business - a business that yields tens of billions of dollars in revenue annually. By tracking us across the web, collecting information about us, and monetizing that information by selling it as targeting data to advertisers, Goobook have essentially taken over the online advertising industry, reaping 77% of online ad revenue in the US.

But things are going to change. Many commentators have suggested that the new EU rules will not materially effect Google and Facebook. Not so says an opinion from a law firm hired by Digital Content Next (DCN) to analyze the likely effect of the ePrivacy Regulation on the duopoly (the doo-wops?)

I have had a look at the opinion and it is startling.

Below are quotes from the legal opinion as well as quotes from the SVP for Government Affairs at DCN.

"... much of the... data on which Facebook and Google currently sit could lose its value because it could not be used for online behavioral or targeted advertising purposes..."

"...Google and Facebook’s ability to collect and use consumer data will be dramatically curbed. They would be restricted from targeting advertising based on data from electronic communications services such as WhatsApp, Gmail and Messenger unless they receive consent from all parties involved in the communication. As currently drafted, Facebook would likely be prohibited from using data transmitted from the clicking of a “like” button for the purpose of targeting advertisements."

"...Google and Facebook would be required to get separate consent from consumers before attempting to collect and use browsing history or “personal” data...What’s more – companies would not be allowed to bundle consent for multiple purposes nor require consent as a condition for using a service."

"...companies that collect and use data at smaller scale (such as solely on their owned and operated domains) are likely to be less impacted by this Regulation. These companies will be significantly less challenged in getting the required consent for their limited purposes. As a result, companies that create trusted, premium digital experiences, enjoy direct relationships with consumers and do not rely on tracking consumers at such a large scale may find new leverage and opportunities in the marketplace." 

"...the ePrivacy Regulation could conceivably prohibit any data transmissions by Facebook or Google between connected IoT (Internet of Things - BH) devices."

"...no matter what happens, it is highly likely Facebook and Google will need to make major changes to their online behavioral and targeted advertising practices in order to comply with forthcoming EU privacy laws and regulations."

One thing to keep in mind is that the ePrivacy Regulation is currently in draft form, the final language has not been approved, and the regulation has not yet been adopted.

As I said in BadMen, 

"The key thing to remember is that most of the major players in online advertising have a big stake in surveillance marketing. They will fight like hell to protect tracking."

I expect that in the next six months we will see a battle royal. Google and Facebook will use every trick in the book to try to influence European regulators to take the teeth out of the ePrivacy Regulation. Get ready for an avalanche of horseshit about it being anti-democratic, anti-American, anti-free speech (it's already started) and every other spurious argument they and their advertising industry apologists can pull out of their asses.

When confronted with the unprecedented power and influence of Goobook, we will discover if the European regulators really have balls or if they're just grandstanding.

Meanwhile advertisers, who are already in shock over the fraud, corruption, waste, and non-transparency in online advertising, and have flocked to Google and Facebook as presumed "safe havens," are going to get another shotgun blast to face. They've been living in a fantasyland and it will soon start crumbling.

This is gonna be the best show in town.

Apple Right, Ad Industry Wrong

This piece from the Type A Group Newsletter was very popular this week. I am reprinting it here today.

As usual, the tin-eared aristocrats of the ad industry are on the wrong side of an important issue.

Apple is planning to release a new version of its Safari browser with new cookie-blocking technology, called "Intelligent Tracking Prevention."  It will put strict limits on the ability of websites and advertisers to track us across the web.

According to digital expert Don Marti it looks like Safari has built a set of features that will help protect us from the kind of tracking we don't like, while not screwing up features we like such as single sign-in to favorite sites (my words, not his.)

Apple has said  

“...users feel that trust is broken when they are being tracked and privacy-sensitive data about their web activity is acquired for purposes that they never agreed to.”

Damn right. I even know a guy who wrote a book about that.

Of course, all the major advertising trade bodies are soiling their shorts at the thought of not being able to spy on us everywhere and know everything we do online. They are not satisfied that people are so disgusted with online ad practices that 600 million web enabled devices are now armed with ad blockers.

Listen to this horseshit from a consortium of ad trade groups including the 4A's, ANA, and IAB:

“Apple’s unilateral and heavy-handed approach is bad for consumer choice and bad for the ad-supported online content and services consumers love...Blocking cookies in this manner will drive a wedge between brands and their customers, and it will make advertising more generic and less timely and useful."

What planet do these imbeciles live on? Do they really believe anyone is going to buy that crap?

Here is a study published last year that reports that of 13 different forms of advertising studied, the top 8 most disliked were all forms of online advertising.



Furthermore the argument that Safari's "Intelligent Tracking Prevention" is "...bad for consumer choice..." is laughable. Any idiot who prefers to be followed around the web by assorted squids and slugs is perfectly welcome to download dozens of free web browsers that are more than happy to spy on everything we do.

Every impartial study I've ever seen says the same thing: Online advertising is the most disliked and most distrusted form of advertising. One of the primary drivers of this situation is tracking.

When are the "leaders" of our industry going to get their heads out of their asses and realize how they are destroying the integrity of web advertising by not supporting initiatives like Apple's that are trying to establish responsible guidelines for online advertising?

Why Online Advertising Needs To Be Regulated

Last week I did a video interview with Australian ad site Mumbrella. Here is an excerpt from that interview that discusses the issues raised in my new book BadMen: How Advertising Went From A Minor Annoyance To A Major Menace. 

To watch it, click here.

The Pritchard Problem

Marc Pritchard -- chief brand officer at the world's largest advertiser, P&G -- has done the advertising industry a great service over the past 15 months.

He is the first grown-up to acknowledge head-on the awfulness of online advertising as it is currently being practiced. Of course, some of us less-than-grown-ups have been writing about it for years, but very little attention is paid to the chirping of people without a $2.4 billion ad budget.

Pritchard has spoken unambiguously about the problems of a murky and often corrupt system of buying and selling online advertising; the scourge of ad fraud; the problem of viewability; the opaque financial dealings of agencies; the issue of brand safety; the head-spinning number of third-party toll takers standing between advertisers and publishers; and the arbitrary and unreliable methods used for measuring ad delivery. He has done an admirable job and deserves praise.

If you're an astute reader you probably feel a "but" coming, and here it comes.

But as far as I can determine Mr. Pritchard has neglected to say a word about the single factor that enables most of these issues - tracking.

Essentially, there is only one thing that differentiates online advertising from all other forms -- and makes it both susceptible to the types of appalling mischief we've experienced and dangerous to a free society -- the relentless tracking of every one of us online.

Advertising used to be about imparting information. Online advertising has become equally about collecting information.

In a recent article, Marketing Week says "Pritchard believes that next generation will be mass one-to-one marketing. That is the promise digital has always held, but so far it has failed to live up to it."

We know what 'mass one-to-one marketing' means, don't we? It means more surveillance marketing, more tracking, more despicable "ad tech."

If Mr. Pritchard really wants to do something valuable -- not just for our industry, but for society -- he will put his influence behind this issue.

Will Facebook Ever Stop Bullshitting?

You'd think by now Facebook would have learned.

For years anyone with a brain has known that Facebook "metrics" are a joke. They make shit up, imbeciles at agencies believe it, dimwit clients fund it, and - bingo - more ad money. Most famously, not long ago they inflated video viewing time on their site by as much as 80%.

Recently in my newsletter, I recounted this story...

Facebook Discovers 300,000 Invisible Swedes

Facebook "metrics" have a long illustrious history of being laughable bullshit. Anyone who believes their numbers is an idiot. Here's a lovely example.

According to a recently published report, Facebook says they reach 1.5 million Swedes between the ages of 15 and 24. The  problem here is that Sweden only has 1.2 million of 'em. If Facebook reached 100% of them, they'd still be 300,000 short. Sometimes I think Facebook's calculations are done by bloggers. 

But today we have something even more delicious.

According to Brian Wieser of Pivotal Research Group, one of the industry's most respected media analysts, Facebook is at it again.

Facebook's Ads Manager says that the website is capable of reaching 41 million Americans between the ages of 18 and 24. The problem is there are only 31 million Americans of that age. But hey, what's 10 million people here or there?

You have to admire Facebook for their ability to reach 10 million imaginary 18-24 year olds. But as well as they do against imaginary 18-24 year olds, where they really excel is against non-existent 25-34 year olds. They reach 60 million of them. Unfortunately, there are only 45 million alive.

So it looks like, if your media target is the highly coveted imaginary American between the ages of 18-34, Facebook is the medium for you.

We always knew that Facebook was an amazing company, but their ability to reach non-existent people sets a new standard for the online ad industry -- which has always prided itself in imaginary advertising accomplishments.

Perhaps the only area in which Facebook can exceed its amazing use of metrics is its amazing use of language. When they were asked to explain the bullshit they were peddling, they had this to say about their numbers...

"They are designed to estimate how many people in a given area are eligible to see an ad a business might run. They are not designed to match population or census estimates."

Oh.

Gunfight At The Ad Tech Saloon

Reprinted from Sunday's Newsletter

My new book has just been released. It's called: BADMEN: How Advertising Went From A Minor Annoyance To A Major Menace.

Maybe it's just me, but I think surveillance marketing, the collection and selling of personal information, online tracking, and ad tech are existential dangers to free societies.

I think the monopolistic powers of some tech giants have gotten way out of control.

I think the idea that "the consumer is in charge" is the stupidest, most naive bullshit we've been fed since some dimwit decided that people wanted to "join the conversation" about their frozen fish sticks.

The book is about all these things.

 It is also about how ad agency holding companies have turned into lapdogs for the corrupt and unsavory online ad industry and have, in the process, squandered their credibility.

Oh, and it's also about fraud, terrorism, hacking, fake news, kickbacks and everything else that makes the online ad business such a golden ray of sunshine. Best of all, it's under a hundred pages and under 6 bucks. If you're looking for advice on...

   - Where to find the best cheesecake in Pyongyang
   - President Trump’s surprising secret for longer lashes
   - What to do if Gary Vaynerchuk calls your sister

... I'm afraid this ain't it.

But if you want to get pissed off about how we're being screwed blind by creeps, squids, and slugs, this just might be your ticket. So, here's what to do...

1. Go here now
2. Click "Add to cart"
3. Read the book
4. Go to Amazon and write a glowing review
5. Send a copy of the book to all your clients, friends, and dumb-ass colleagues who have bought into the online ad industry's horseshit
6. Fix yourself a martini
7. Fix yourself another martini

UPDATE:

BadMen was selected by Amazon as #1 "Hot New Prospect" in advertising and also #1 "New Release" in advertising. On its first day it got to be the #5 best seller in advertising. Thanks, people.

 A few questions I've been getting:

1. Yes, it will be released in ebook format in a few weeks. But it's ok to buy the paper version. Amazon needs the money.
2. Yes, it will be available in the UK. Apparently it takes a few days for US titles to get fully integrated into the UK system, but they assure me it will available by the end of the week.
3. Same in European countries.