The High Cost Of Online Trash

The online advertising ecosystem is impossibly complex. Today, I will try to provide a highly simplified overview written for non-media-savvy, non-tech-savvy readers. The idea is to give civilians like copywriters, marketing managers, and auto dealers a big-picture view of the online display ad environment and a point of view on its pitfalls. I have tried my best to write it in plain English and make it so simple even a CEO can understand it.

As a copywriter, I am not an expert on media buying so be warned. To account for that, I have bounced this off some digital media experts who have assured me that it is as accurate as you can reasonably expect from a dumbass blogger. This is excerpted from my forthcoming book "Delusional: How Marketers Waste Billions on Fraud and Fairy Tales" which will be published later this year. Okay, here we go...

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“...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.” Bob Liodice, CEO, Association of National Advertisers

There are basically two ways to buy online display advertising.

• Contextually — Buying “contextually" means you buy the old-fashioned way. If you’re trying to reach golfers, you buy ads on the Golf Digest website. The context of the website determines the buying criteria.

• Behaviorally  — Buying behaviorally means you don’t buy ads on a specific website, you follow presumed golfers wherever they go on the web and buy ads wherever they land e.g., a beer website or an airline website. The behavior of the target determines the buying criteria, not the nature of the website. 

The big difference between traditional advertising and online advertising is that previously we could never know the behavior of individuals. Now, with "tracking" we can follow people across the web as we were never able to do with TV, radio, or print and reach them wherever they go.

The advantages of buying behaviorally are presumed to be…


Economy: Behavioral targeting reduces costs by allowing you to find those who are presumed to be golfers at cheaper locations than Golf Digest. By following a golfer to someplacecheap.com you can show her the same ad you might have shown her on the Golf Digest website, but at a lower cost. This results in lower CPMs (costs-per-thousand.) Keep this in mind because it will become important later.

Precision: Adtech helps you identify not just golfers in general, but left-handed women golfers over 35. Presumably, this results in "more relevant" advertising.

The concept of behavioral targeting has been widely adopted by the advertising industry. As a general rule, behaviorally targeted ads are bought programmatically (by software.) Programmatic buying currently represents about 80% of online display advertising.

On the other hand, for the most part contextual advertising is bought directly from the publisher or the publisher’s network. While it may employ the use of some software, it is most often not bought programmatically.* 

The question for advertisers is this -- is it more efficient to buy behaviorally or contextually? Because of the complexity of the system, it is almost impossible to compare apples to apples. But let’s try our best.

There are at least four aspects of behavioral targeting that are problematic:

• Accuracy: How accurate is the targeting data? Behavioral advertising is only as good as the data that informs it. 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. A cat flipping a coin would be right 50% of the time.

• The “tech tax:” According to the World Federation of Advertisers and others, adtech, the technology that drives behavioral buying, costs about 60% of every ad dollar. In other words, buying, managing, and verifying the data that is needed for a programmatic buy eats up about 60¢ of every ad dollar. This means that of every dollar spent on behaviorally targeted advertising, only 40% is “working media.” Said another way, every ad dollar buys 60¢ of technology and 40¢ of advertising.

• The “fraud tax:” The web is riddled with ad fraud. The actual amount of fraud in the system is controversial, with estimates running from 5% to over 50%. Experts would agree that in open ad exchanges web fraud is probably at least 20% greater than it is when buying direct. Many would say it is far higher.
   
• The "long tail" of trash: There are tens of millions of websites. Many of them are pure junk. Many of them buy fake traffic to appear successful. Many of them aren't even real but are software that mimics a website for the purpose of attracting ad dollars. But they all sell ad space very cheaply. 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. A famous case history involves Chase bank. They were advertising on 400,000 sites every month. They reduced the number of monthly sites to 5,000 (a reduction of almost 99%) and saw no difference in performance. An astounding number of the sites they were buying from programmatically were worthless.

One of the big problems in marketing today is math illiteracy. Too many people in advertising simply don’t know how to “do the math.” Let’s do some simple math and see where it leads us.

- We know adtech eats 60¢ of every programmatic ad dollar. This means when we buy programmatically we have 40¢ left for working media.

- If fraud takes another 20% of our 40¢, it means we have 32¢ left for working media.

- So, if directly-bought (contextual) advertising delivers 100% working media, and programmatically-bought (behavioral) advertising delivers 32% working media, behavioral advertising has to perform at about three times the level of contextual advertising to be a break-even proposition.** Put another way, the technology we are paying for only pays out if the resulting media buy is three times as effective.

Experts I have spoken to tell me that it is highly unlikely that behavioral ads can perform at three times the level of contextual ads. In fact, it is not unusual for them to perform at a lower level.

There are other reasons why programmatically-bought behavioral advertising is questionable:

Brand safety: When you buy directly you know where your ad is going to run. When you buy programmatically it can run almost anywhere.

Data abuse: When you buy directly you greatly reduce the need for the adtech industry to collect the massive amount of data that drives behavioral targeting and leads to data abuse and privacy abuse.
 Additionally, the data you use to target and track your most likely customers programmatically are fed into the adtech system and become easily available to your biggest competitors. It's called "data leakage."

Fraud abatement: When you buy directly you greatly reduce the potential for fraud. You usually pay directly to a publisher which means there is much less opportunity for fraudsters to insert themselves into the complexity of the process.

Transparency: The complexity of the programmatic ad ecosystem makes the tracking of ad dollars grossly opaque. This has resulted in scandal after scandal and is now the central focus of an FBI investigation. Directly bought advertising is far more transparent. You know who and what you are paying for and you know what you’re getting.

Behavioral targeting and its cousin, programmatic buying, are flawed concepts that have been sold to the marketing industry by people who have invested billions in systems designed to extract money from the ad buying industry. The more these people can complicate the system and insert themselves between the advertiser and the publisher, the more money they can extract.

Why is 80% of online advertising now bought programmatically? One very simple reason -- the "extractors" have convinced marketers that lower CPMs equal better value. As we said earlier, behavioral targeting often results in lower CPMs. But credible studies on this subject show that lower CPMs are not necessarily the result of more efficient buying. They are often the result of bottom-feeding -- more trash, more waste, more bots, more fraud and less value.

In traditional media -- where you know exactly what you're buying and the ecosystem isn’t drowning in trash and fraud -- using CPMs to evaluate efficiency is sensible. But online, where tens of millions of worthless and imaginary websites compete for your ad dollars by offering very low costs, using CPMs as a measure of efficiency is a mistake. Low CPMs are a truer indication of how much trash you're buying than how much efficiency you’re getting.

As regular readers know, I believe the adtech ecosystem -- and its evil spawn of tracking and surveillance -- are a dangerous and corrupting influence on advertising and on society. I hope this piece has demonstrated to the uninitiated that it is also bad business.

* There are hybrid ways to buy (e.g., programmatic direct) but we're trying to keep things simple here.

** In an effort to compare apple-to-apples and keep the math simple, I have given programmatic a working media number of 40% and direct buying 100%. In reality, direct buying doesn't produce 100% working media and programmatic buying doesn't produce 40% working media. The Association of National Advertisers says that programmatic buying only produces 25% working media I don’t know where that other 15% of “waste” for programmatic goes, so to be fair I’m going to assume that it is applicable to both programmatic and direct buying methods. In other words, direct buying probably results in something like 85% working media and programmatic something like 25% working media. But to keep the math simple I have given them both a 15% percent promotion to 100% and 40%.

How Brand Advertising Became Synonymous With Bullshit

It has become a generally accepted truth in the marketing industry that we are too focused on short term results and not focused enough on brand building. Field and Binet have done excellent work to demonstrate this. Everyone from Byron Sharp to Martin Sorrell have commented on it.

Despite our recognition of this issue, we continue down the destructive path of short-termism.

A recent post on LinkedIn by Prof. Marc Ritson bemoaned this. Ritson included a graph in his post showing that short-termism is not just continuing, it's accelerating.

"Its incredibly depressing to see that this trend of short termism is not just going to continue, it’s getting worse," said Prof. Ritson.

If we know that continued investment in short-term tactics at the expense of long-term brand building is counter-productive, why do we continue to do it? Some of the reasons are obvious:

• Short-term activities show instant results: And there's nothing marketers like better than instant results.

• Brand building efforts yield soft measures: Even if you're doing a great job of brand building, how do you demonstrate it? Indications of brand strength are not the measures that impress CFOs or Boards. They want sales, and they want 'em now.

• The web: Online advertising has become the dominant form of advertising and it has been used almost exclusively as a short-term (direct response) medium. As Tom Goodwin says, "Why has there never been a brand built with digital advertising? There are many answers, the main one is that we've never tried to."

• The brief life of a CMO: When your shelf life is measured in months, there is little incentive for you to think in years.

But there is another reason for our discomfort with so-called brand building activities - and no one likes to talk about it. In some circles "brand advertising" has become synonymous with bullshit. And, sadly, in some circles it is bullshit.

We have frittered away substantial credibility by allowing anything that doesn't have a cogent sales message to be called brand advertising. Much of what we call brand advertising has become squishy and free of strategic discipline. We've become flabby and self-indulgent.

Brand advertising has come to mean pretty much anything we can put a logo on. There is almost no frivolous marketing activity that can't be excused as "branding." Put your logo on a pair of socks? Branding.

In reality, there are two kinds of things we call "brand" ads -- those that are specific to a product and actually help sell something, and those that are someone's hobby horse with a logo pasted on at the end. The unfortunate part is that our dreadful vocabulary defines them both as the same thing -- "brand" advertising. They are not.

Pretty pictures and a nice track is not enough. Pounding your chest for world peace is not enough. Buying a pop tune and having people jump around is not enough. Successful brand building is difficult work and requires advertising that says something.

The ads that best build brands are those that have a clear and specific message about a product and deliver it in a memorable way.

Just because your ad is image heavy and free of a sales message doesn't mean you're building a brand. Not selling is not enough.

The Simple-Minded Guide To Marketing Communication

We marketing people have a dreadful habit of taking the obvious and making it incomprehensible. So today I would like to go against the grain and take the obvious and make it more obvious.

If you are someone who has to make decisions about how to spend marketing dollars, here are some principles I believe in for simplifying and clarifying your thinking.

The first thing we have to understand about marketing communication is that there are no absolutes. There are just likelihoods and probabilities. When making communication decisions, our job is to assess likelihoods and probabilities. In other words, precision guessing. We need to reckon which of the many alternatives we are faced with has the highest probability of producing the result we are looking for with the budget we have.

A second principle is to understand the limits of what we do. We don't have as much power to create business greatness as we think we do. There are too many important aspects of business success that are out of our control. We don't control the product; we don't control the pricing; we don't control the distribution; we don't control the employees -- we only control the message. We have to be realistic about the limits of what the message can impart to a poorly made, badly designed, overpriced, hard-to-find, product. Or a product that has any one of those characteristics.

Third is perhaps the most obvious. But it is the big secret that is hidden in plain sight. Brands that are in the spotlight have a much higher likelihood of being successful than brands that are not in the spotlight. This is where we have leverage. For this reason alone all marketing communication should have a common objective -- to find a piece of the spotlight.

This is also one of the reasons that our industry's current obsession with precision targeted, one-to-one advertising is misguided. Precision targeting may be valuable for direct response. But history shows us that direct response strategies have a very low likelihood of producing major consumer facing brands. Building a big brand requires widespread attention. Precision targeted, one-to-one communication has a low likelihood of delivering widespread attention (see this from last week.)

The spotlight is not a guarantee of success, but it creates a much higher likelihood of success. It is a simple calculation: you are more likely to be more successful if you are more famous and more visible. You may not like this calculation or approve of its ramifications, but it should be self-evident to anyone who wants to look at marketing with a clear eye. Do you think Donald Trump would be President if The Apprentice had been a webinar?

There are many ways to attempt to find the spotlight. Some brands find it naturally because the media fall in love with them. Tesla is a perfect example. So are Amazon, Google and Uber. The amount of free spotlight these companies have enjoyed because of press attention is incalculable.

These brands make achieving high visibility seem easy. It is anything but.

Sadly, you have a very low probability of being a Tesla, an Amazon, a Google, or an Uber. Maybe one in 10,000 brands are that interesting. The belief that you can use one of these companies as a model for your communication strategy is a delusion. It has a minuscule probability of happening for you. Most of us have to think or buy our way into the spotlight.

Finding the spotlight can be attempted in a number of ways. There is no "right way." You can do it with PR, you can do it with social media, you can do it with advertising. Your job is to find the most likely strategy for getting a piece of the spotlight at a price you can afford.

Once you decide on your strategy, there is one other principle you must employ. There is nothing that creates a greater likelihood of attaining high visibility than creativity. The probability of your efforts shining a light on your brand is enormously higher if you have a imaginative idea behind it. I will say it again - regardless of what communication or media strategy you employ, there is nothing more likely to garner you a piece of the spotlight than a great creative idea.

So let's recap:

     - Your most under-acknowledged job is assessing likelihoods and probabilities.
     - You must be realistic about the power of marketing communication.
     - One of the most essential characteristics of a successful brand is high visibility.
     - One of your strategic imperatives is to produce fame and visibility by garnering a piece of the spotlight.
     - Achieving a place in the spotlight is extremely difficult.
     - You are more likely to attain the spotlight by being widely seen rather than narrowly focused.
     - Splitting hairs over words in briefing documents is largely a waste of time. Most of the distinctions you draw between your brand and your competitors' are lost on consumers. A much more productive discussion is, "Which strategy or execution is most distinctive and has the highest probability of making us famous?" In the long run, the strategy with the most value for your brand is the one that is most likely to buy you high visibility.
     - A key question you must answer is whether you have the assets to achieve a piece of the spotlight? The assets that have the highest probability of garnering that are money and creativity. There is rarely enough money.

As a simple-minded guy, all of this seems perfectly obvious to me. However, our industry appears to be in such a state of confusion that the obvious is no longer credible.

Please do not send me your favorite example of a big brand that was built outside the lines of these principles. Of course there are some. There are no rules. Just likelihoods and probabilities.

Why Online Ads Haven't Built Brands

This post is adopted from a podcast I did last year.

One of the questions I’ve been wrestling with for years is why online advertising seems to be incapable of building major consumer-facing brands.

We’ve had 20 years of phenomenal growth of online advertising and yet I have trouble coming up with one example of a major consumer-facing physical brand that was built by online advertising. I can think of no examples of major brands of beer, soda, cars, toothpaste, paper towels, candy bars, soap, fast food, peanut butter — you get the picture — that were built by online advertising.

After 20 years of existence radio and TV had built hundreds - if not thousands - of consumer brands.

There are some who would argue that there are very big web-native brands that have been built by online advertising - e.g., Amazon, Google, and Facebook. I’m not so sure that advertising played a major role in the building of any of those brands, but let’s leave that argument for another day and just focus on brands that are physical and not web-native, which probably constitute somewhere around 95% of the products we buy every day.

What’s the issue with online advertising that has rendered it ineffective at advertising’s most important job — building a major brand?

For years I fumbled around trying to answer this question but I’ve never really understood it. I have blamed an absence of creativity. I have blamed the fact that it’s mostly direct response style advertising, but I’ve never really evolved a comprehensive theory of what the problem is.

But someone else has. A while back I received an email from Richard Shotton, a very smart guy and author of the wonderful book, The Choice Factory, directing me to a piece from 2014 called “Ads Don’t Work That Way” by a guy named Kevin Simler on a blog called Melting Asphalt. I’m going to do my best to summarize Simler’s argument, but reading the original is highly recommended as my interpretation of his argument is likely to be flawed at best.

Simler starts by quoting some standard explanations of how advertising works at building brands. Let’s borrow some terminology from subatomic physics and call these “standard models.” Here are some examples from standard models:

“An ad succeeds at making us feel something and that emotional response can have a profound effect on how we think and the choices we make” 

Or

“By creating positive associations between the advertised products and feelings like love, happiness, safety, sexual confidence... these associations grow and deepen overtime making us feel favorably disposed toward the product and ultimately more likely to buy it“

Or

“advertising rarely succeeds through argument or calls to action instead it creates positive memories and feelings that influence our behavior over time to encourage us to buy something at a later date.” In other words, “if Coke shows us enough images of people beaming with joy after drinking that product we’ll come to associate Coke with happiness and then sometime later will be more likely to purchase coke"

Simler is not happy with these explanations. He says it portrays us as far less rational than we actually are. “While we may not conform to a model of perfect economic behavior, neither are we puppets at the mercy of every Tom Dick and Harry with a billboard. We aren’t that easily manipulated.”

Instead he offers an alternative to the standard models that he calls "cultural imprinting.” Don’t be turned off by the awkward terminology. The theory underpinning his cultural imprinting idea is that in some way we all want to be part of what is culturally acceptable.

As he says, brand images are "part of the cultural landscape we inhabit. They provide cultural information. When we ignore brand messages we’re missing out on valuable cultural information and alienating ourselves from the Zeitgeist." He says this puts us in danger of becoming outdated,  unfashionable, or otherwise socially hapless. We become like "the kid who wears his dad’s suit to his first middle school dance." In other words, in some way brand choices send messages to others about who we are. And no one wants to send the wrong messages.

This is not new thinking. When I first started working in the advertising business 1,000 years ago we used to call products that were most responsive to advertising “necktie products” -- products that are used or consumed in public and are plainly visible to others. Why are products like beer and soda and cars so responsive to advertising? Because these products are used in public and are highly visible. Whether we care to admit it or not, those of us who are not sociopaths prefer to be socially acceptable among our group.

So what does all this have to do with the online advertising problem? Here is the connection I’ve been missing. In Simler's words “cultural imprinting relies on the principle of common knowledge.  For a fact to be common knowledge among the group, it’s not enough for everyone to know it. Everyone must also know that everyone else knows it.” 

In other words, part of our purchasing calculation is not just our belief that X is an acceptable product, but our expectation that other people believe this brand is acceptable because they know what we know.

Here is an example he uses to describe purchasing behavior using the standard model…

We see a Nike ad that makes an association between Nike and athletic excellence. Over time we internalize this association and feel good about Nike, and when it comes time to buy some sneakers at some later date we are more likely to buy Nikes.

In the cultural imprinting model it starts the same…

We see a Nike ad that makes an association between Nike and athletic excellence. 

But here’s what’s different. Over time we understand that everyone else has seen Nike ads and they also associate Nike with athletic excellence. So at some later date when we buy a pair of Nikes we don't have to worry that our group will think we're idiots.

Of course, this does not guarantee we will buy Nikes, but it makes the likelihood greater. And as I have written ad nauseum, marketing is about one thing only -- likelihoods and probabilities.

For advertising to be effective in the "cultural imprinting" model, it’s not enough for it to be seen by a single person or even by many people. Someone has to know that everyone else has seen it, too.

This may very well be why online ads have been largely ineffective at brand building. In the online world, everyone lives in his or her own little digi-world. I have no idea what my friends are doing online and what ads they may be seeing. Even if they watch the same YouTube videos as me, I don't know what ads they are being served.

In mass media, I know what my friends are seeing. I know that if they’re watching football they’re seeing the same ads I am. Consequently I have reasonable confidence that my friends believe that Nike makes acceptable running shoes, Ford makes acceptable pick-up trucks, and Coors makes beer I don’t have to feel weird about.

But I have no idea what my friends are seeing online. Even if they go to the same sites I do, I have no idea what ads they are seeing. Consequently, I have no frame of reference for “cultural imprinting.” I don’t know if they will think me an idiot for buying these headphones I saw on Whatever-dot-com.

In a nutshell, this may very well be why thus far mass-market advertising is demonstrably more effective at brand building than precision targeted, highly individualized advertising.

Highly individualized, personalized advertising -- the obsession of online advertisers -- makes advertising a private, rather than public, experience. It keeps us from knowing what advertising our friends are seeing. Which in some way keeps us from knowing what brands may be culturally acceptable.

For years I’ve known that online advertising has been mysteriously ineffective at brand building and now I think I finally understand why. By the way, Kevin Simler, the person who connected the dots for me, isn’t a marketing or advertising person — he’s a tech guy. But I believe he understands marketing better than most of the so-called professionals.

If he's right, the current obsession of advertisers to make their advertising perfectly individualized and perfectly personalized may be perfectly wrong.

(There is probably not a singular reason for the phenomenon of online advertising not having built major consumer-facing brands. But if you combine Simler's "cultural imprinting" hypothesis with the "signaling" hypothesis, I think you have a pretty good explanation.)