Unholy trinity undermines a $235bn global industry
If you thought ad blocking was bad, just you wait for ad fraud and ad viewability - the latest scourges of the global online advertising industry
The global online advertising industry has found itself up to its neck in an almighty and unsustainable mess and, unless it changes its ways, it is in grave danger of hurtling towards extinction in its current format.
There. I've said it!
This may not be a view that is widely shared in ad land, but it's one that I've formed after several years' observation of the fragmented online advertising ecosystem and the labyrinthine supply chain of ad networks, ad brokers, agencies, publishers and ad tech companies.
It's also a view that is gaining traction within marketing departments the world over as they watch a channel that promised so much, crack under the weight of unsustainable practices while potential customers hide from their marketing messages.
Let us not forget that these are very important stakeholders. Without the estimated $235bn investment in online advertising this year, it is difficult to see how the advertiser-funded internet as we know it could survive.
Three issues in particular are threatening to strangle the online advertising industry and unravel a lot of the progress that has been achieved over the relatively short 21-year period that online advertising has existed as an industry. Combined, these three issues - ad blocking, ad viewability and ad fraud - have the potential to undermine the financial viability of agencies, publishers and a host of other players involved in the ecosystem.
Ad blocking, as we know, has attracted a lot of attention ever since the Dublin-based company Page Fair blew the lid off the industry last year when it estimated that ad blocking cost the publishing industry around the world nearly $22bn in 2015.
With nearly 200 million active ad blockers around the world, the existential threat that it poses to the online industry and all its constituent elements is a gravely serious matter.
While publishers have every reason to be concerned, advertisers too are wondering why people are blocking their ads en masse and whether or not they need to change their digital strategy or shift their online budgets to platforms like Facebook where, for the time being anyway, it is harder to block ads.
The industry needs to do a lot more to address ad blocking in a collective and meaningful way while at the same time be mindful of the sensitivities and needs of the end-user. After all, the whole purpose of advertising is to engage with consumers - not to upset them.
Ad viewability, meanwhile, is also a growing issue amongst advertisers concerned about how and where their advertising appears on a web page, what constitutes an actual 'view' and how much they should actually pay for it.
While it is a problem that is easily solved in a desktop environment, the big challenge in the post-PC era is how the rules will apply in the mobile environment and the implications these will have for advertisers, the agencies that create the ads, and of course the publishers.
These challenges are surmountable and a lot of work, in terms of ad formats and standards, is under way in the background but again, all the stakeholders will need to be mindful of what is realistic, achievable and end-user friendly. Not an easy task in online advertising.
Ad fraud, however, is the seedy underbelly of the online advertising industry. It's the dirty little secret that the industry doesn't like talking about. While it has been quietly and secretly simmering away in the background over the last 21 years, the full extent of the secret has been laid bare for all to see in recent years. And it's not a pretty sight.
Ad fraud comes in different guises and through the use of malware, phishing, ad stacking and pixel-stuffing, two particular types of fraud - click fraud and impression fraud - have prevailed. In the US, it is estimated that as much as 40pc of ad inventory traded is never actually seen by a human being, but instead by web-bots deployed by fraudsters operating around the world. Despite this, advertisers have been duped into paying for it.
In recent years, following the arrival of programmatic ad buying, the rise of video-on-demand and, more worryingly the shift to mobile, the stakes have been raised even higher.
The full extent of the problem was highlighted in a report by the Association of National Advertisers (ANA) in the US last November when it claimed that a range of fraudulent practices - ranging from ad fraud and ad blocking to content piracy - had cost the industry around the globe a staggering €5.5bn last year. It also warned that this was likely to rise to €6.3bn this year.
At the time, ANA chief executive Bob Liodice noted that "the level of criminal, non-human traffic literally robbing marketers' brand-building investments is a travesty - and it underscores the need for the entire marketing ecosystem to manage their media investments with far greater discipline and control against a backdrop of increasingly sophisticated fraudsters".
It would, of course, be wrong to think that nothing is being done to eradicate ad fraud, or for that matter ad blocking and ad viewability. It would also be wrong to suggest that online advertising's effectiveness has been diminished by these issues. It hasn't
Behind the scenes, many of the large international advertising agency networks have been working hard at trying to eradicate supply-chain fraud through rigorous verification processes for anyone involved in the supply chain. Elsewhere, organisations like the Internet Advertising Bureau (IAB) has been leading the charge towards greater accountability, transparency and better user-friendly advertising formats.
In addition, Google, which has a substantial presence in the online advertising market through its own exchanges and automated platforms, took the fight to the fraudsters last year by banning 780 million 'bad' ads and closed down hundreds of fraudulent websites.
How does the industry pull itself out of this mire? Depending on who you talk to, there are many solutions to the problems.
Perhaps a good start would be to re-imagine how the online advertising ecosystem should work - from the stakeholders that should be allowed to be part of the supply chain, the types of ad formats that are permissible, right through to the expectations of advertisers, publishers, agencies and, most important of all, the end user who may or may not buy something from an advertiser.
At the end of the day, that's what it's all about.
Sunday Indo Business