Digital must rebuild trust as it confronts challenges
It's probably fair to say that many people working in the digital advertising industry will be glad to see the back of 2017. And for lots of reasons. To say that 2017 was an annus horribilis for the industry is perhaps an understatement. Barely a month passed by without an eyebrow-raising story about dodgy metrics, ad-blocking, domain spoofing, ad fraud, publishers being ripped off and brands being compromised online.
The writing was on the wall from early on when a dire warning was sounded by Marc Pritchard, P&G's marketing supremo. He told an IAB gathering in January: "The days of giving digital a pass are over. It's time to grow up. It's time for action."
Pritchard has been a critic of the advertising ecosystem for a number of years and has lambasted the industry for being unnecessarily complex, opaque and at times murky.
As part of a wider plan to cut as much as $2bn (1.6bn) from its annual marketing spend, Pritchard put his money where his mouth is by slashing the company's digital spend by $140m in the first quarter of the year.
While digital agencies, publishers and planners may have looked on in horror, the cut to its digital advertising spend didn't appear to have any impact on the company's bottom line. In fact, organic sales rose by 2pc in the first quarter of the year.
When the world's largest advertiser can slash its digital ad spend and boost its sales at the same time, what kind of a message does this send out to the wider marketing industry?
To many in the industry, this was one of several wake-up calls during the year and once again it reinforced increasingly widely-held beliefs within the marketing world that digital really needs to get its house in order if it is to deliver on the glittering promises of effectiveness and transparency that it once proudly boasted.
And who remembers the hullabaloo mid-year when ads for leading brands were appearing alongside jihadi training videos on YouTube? Why YouTube - which is owned by Google - would even have allowed these videos to appear in the first place beggars belief, because if they appeared on the website of a daily news brand there would be national outrage.
And then of course there were several issues over Facebook's metrics being flawed and the fact that it profited from ads bought by Russian operatives in an attempt to influence voters in the US presidential election late last year.
Compounding the many issues that the digital advertising industry faces is ad fraud, a problem that is endemic within the global industry. According to the Association of National Advertisers (ANA) in the USA, ad fraud will have cost advertisers around $6.5bn this year. Although this is down from the estimated $7.2bn reported in 2016, it is still a very big problem and one that is not going to go away any time soon.
But advertisers are not the only ones to lose out to ad fraud, as many publishers are also becoming victims. Just last week, a major study of 16 international publishers, including The New York Times and the The Wall Street Journal, found that they are losing up to $3.5m a day to counterfeit video inventory that has been manipulated by criminals.
While the industry is fighting back with measures to weed out fraud through the introduction of ads.txt - an initiative proposed by the IAB to promote and improve transparency in programmatic advertising - where there's money to be made, criminals won't be too far behind.
"The results of this study confirm that ads.txt needs to be adopted as rapidly as possible to cut off the flow of counterfeit website inventory," says Dennis Buchheim, senior vice-president and general manager at IAB Tech Lab. "It is critical that the industry comes together to put a stop to criminal activity and secure the health of the supply chain," he said.
Why does any of this matter?
Digital's share of advertising investment will continue to rise as more and more marketing budgets shift online and next year the total global online ad spend is forecasted by GroupM to surpass $200bn. This will account for around 36.4pc of the total global expenditure of $558bn in 2018, according to GroupM.
That's a lot of money sloshing around in the global digital ecosystem.
Given the marketing and advertising industry's predilection for chasing the next shiny new thing - which for 2018 will most likely be artificial intelligence and augmented reality - it would be remiss of it to ignore the many existing problems that it has created for itself, including rebuilding trust and transparency, before moving on to something else.
While some of the challenges can be sorted with relative ease through greater collaboration and a genuine desire to clean up the often tainted and murky supply chain, the biggest challenge of all facing the digital industry is how to prepare for a future that is going to be unpredictable and where uncertainty is the only certainty.
But it's all to play for.
Sunday Indo Business