This is the second article in a three-part series examining the digital media industry’s challenges to balance the need for buying efficiency with the drive for quality ad placements.
The digital media world, led by Google and a bevy of venture capitalists, has made a multibillion-dollar bet on ad buying mimicking Wall Street trading. But that vision might be derailed if it doesn’t deal with the raft of toxic inventory that buyers are sometimes stuck with buying through ad exchanges.
It’s no secret that ad exchanges are filled with inventory from small, obscure sites, or sites with editorial quality a few notches below The Economist. But the bigger problem is an abundance of garbage ad inventory — ads that nobody ever actually sees. Fueled by long-tail publishers who get paid by ad networks for every impression delivered, a host of bad actors load Web sites with dozens of ads, many of which live below a user’s range of sight (or worse, are buried behind content where no one can see them). Even big-name publishers place ads on their sites below the fold, which they unload on exchanges as part of a gimmick to claim a piece of credit for transactions under the last-ad-seen attribution standard.
According to the verification firm AdExpose, half the ads on the big exchanges are not viewable. Frequent exchange buyer Zach Coelius, CEO of Triggit, estimates that just 20 percent of exchange inventory is viewable. A startup verification firm RealVu reports 90 to 95 percent of inventory on exchanges is not viewable. In other words, if you believe RealVu’s data just 5 percent of the inventory in Google’s exchange is worth a damn.
That hasn’t been a major concern to date, as the industry is currently enamored with tactics like audience-based buying and real-time bidding, which is bringing needed efficiency to online ad buying. What’s more, despite promises that these methods will cater to brands, they are at the moment nearly entirely the preserve of performance marketers that are laser focused on the bottom line of clicks, online sales and leads.
“Literally, the exchanges are a cesspool,” said Coelius, who buys frequently on the exchanges. “They are loaded with junk and below-the-fold stuff. Now, there is a lot of high quality stuff in there, you just have to find it. But the vast majority of stuff you would never want to be associated with.”
Junk ad inventory, which is nothing particularly new to the Web ad industry, may be on the outs.The ad industry’s most powerful trade organizations, including the Association of National Advertisers, the American Association of Advertising Agencies and the Interactive Advertising Bureau, have banded together to find a better way of tracking online ads. The drive would take the simple but radical step of only counting ads people actually have a shot of seeing. It could have a profound effect.
Wading Into the Exchange Cesspool
There are lots of ad exchanges in the online ad space. Yahoo’s Right Media has existed for years. Microsoft has paired off with AppNexus. There’s AdBrite and OpenX and others. But to hear experienced buyers and sellers tell it, Google is the whole enchilada. “They completely dominate,” in the words of one buyer.
The idea behind exchanges is to eliminate waste. For years advertisers have bought plenty of chaff with the wheat they want. By using data to pinpoint audiences in huge pools of ad inventory gathered by exchanges, advertisers should, in theory, be able to eliminate this waste. The unspoken assumption of the exchange world is “one man’s trash is another’s treasure.” It doesn’t always work out that way. Sometimes trash is just that: trash.
One industry veteran, who has often bought and sold inventory on most of the big exchanges, told Digiday that exchanges can be scary places — places where most buyers don’t even know what they are buying. Even when buying impressions using a super-targeted pool of cookies, this buyer found that “all of the inventory I’d end up buying was on social networking sites. Gaming apps showing five banners at once that most people would never see, or lesser quality sites like MyYearbook and Hi5. Stuff that is maybe worth 5 cents at most. It’s the kind of stuff that maybe works for other social game advertisers or dating sites. That’s it.”
According to Alan Edwards, RealVu’s evp, the company’s research found that 2 percent of the inventory in exchanges are not just low value, but fraudulent. The rest is composed of all sorts of hidden ads. “The exchange world is starting to look a lot like the financial industry,” he said.
Adnetik, a trading desk unit spun off from Havas, found it needed to take major preventative steps when buying in exchanges. Its AIM Index technology creates quality scores for millions of sites, factoring in how many ads sites carry at once and whether they feature below-the-fold ads. For example, according to a hypothetical online campaign Adnetik produced for Digiday, among a set of 20 million potential sites culled from two different exchanges, Adnetik would have eliminated half of those sites from an ad buy since they carried five or more ads at the same time (many of which were likely below the fold).
Below-the-fold ads are a particular frustration to Sunil Sharma, Adnetik’s director of trading. He believes that because so many advertisers are hung up on crediting the last ad a users sees before they convert in a direct-response campaign, below-the-fold inventory, because it is often the last thing to load on a page, scores a lot higher than it should. So publishers are incentivized to place all sorts of ads below the fold — even big-name publishers.
“I’ve even seen CPMs for below-the-fold inventory that are higher than above the fold,” said Sharma. “That it is even close is ridiculous. Publishers are being incentivized this way, and advertisers’ money is being wasted. The more they spend the more they waste.”
Most agencies and clients employ verification tools such as AdSafe or DoubleVerify in an attempt to prevent their advertising from ending up alongside low-quality or offensive content. Several other trading desks are looking to implement systems to make exchange-buying more brand safe.
Exchange proponents say such problems aren’t unique to algorithmic buying or a major challenge. Google executives pointed out that it provides buyers and sellers with a multitude of tools and safeguards. For example, buyers can opt to buy only above-the-fold ad impressions, or only below the fold for that matter. What’s more, the feeling inside the company is that definitions vary widely over what constitutes a ‘viewable impression’ — and where below the fold begins and ends. “There is no merit to reports suggesting that a majority of exchange inventory is not viewable,” said Google in a statement. “The technology to measure whether impressions can be seen is still limited, and there isn’t even industry consensus around how to define what inventory is ‘above the fold.'”
The other argument often heard is that with enough data, the quality problem goes away. There is relative value to every impression — if it is priced correctly.
“Junk is a relative term. At the right price, including $0, almost every impression is valuable depending upon the metrics of the campaign,” said Anthony Katsur, general manager at MediaMath. “To call the exchanges filled with garbage is hyperbole.”
The quality issue isn’t relegated to programmatic digital buying, others argue. After all, the amount of wasted impressions in traditional media is staggering — commercials unwatched by the Nielsen estimates, newspapers left on doorsteps, and magazines that weren’t really passed along as much as guesstimated.
“Let’s be honest, these issues are not limited to digital media,” argued Scott Knoll, CEO, of the verification firm AdSafe Media. “You don’t know if someone is present in front of a TV ad, or ever sees a print ad. It’s just that in this medium you can track it.”
Making Measurement Make Sense
It can sometimes seem as though half the digital media industry is sitting on a committee of some sort. Since its inception, the online ad industry has struggled to balance the need of innovation with the basic mass-media requirement of standardization. On the one hand, innovation is what separates digital media from traditional mass media. On the other, without standardization, the industry can’t grow.
There’s one committee that could have a drastic effect on the digital media world’s trajectory. The Making Measurement Make Sense initiative, a joint effort of the powerful ANA, 4A’s and the IAB, is pushing towards radically redefining the way that online ads are bought and sold. One major goal of the initiative was to put online ad inventory on a level playing field with other media, particularly TV. Its top aim is to move away from tracking bulk ad impressions to tracking only “viewable” impressions: real exposures. Traditionally online ad impressions have been counted at the ad-server level — when an ad is requested — not necessarily when it actually fully appears on a page. MMMS is moving toward changing that.
If the Web’s biggest advertisers suddenly insist they’ll only pay for ads that can be seen, that could radically shake up the online ad marketplace. As one seller explained, “This isn’t just an IAB thing. You’ve got the advertisers, the money people behind this.”
Publishers could end up reducing the amount of ads they serve. That could choke off a significant source of inventory for the exchanges. If the majority of top publishers on the Web start selling only ‘viewable’ impressions, the exchanges have the potential to shift from being a bargain bin to becoming a garbage dump.
“The goal is to get to a currency that works better than the one we have now, one that travels across platforms,” said Mike Donahue, evp of 4A’s. “We want to make sure a user has an opportunity to see an ad, that makes it analogous to TV. We haven’t had that yet.”
While MSNBC.com has taken perhaps the boldest step in the industry, eliminating below-the-fold ads, you can find them all over the Internet if you look. Yahoo does it. So do Forbes.com and NYTimes.com. And not everybody sees it as some kind of deceptive, evil practice.
“Different advertisers have different goals, and below-the-fold offers some advertisers a unique opportunity to be on premium content pages without paying premium content prices,” said Ken Mallon, vp of Yahoo AdLabs. “These ads are not invisible. A certain percentage of people will scroll down the page and be exposed to the advertising. My recommendation to advertisers is that they measure the impact of these ads compared to others, calculate the cost-effectiveness and make buying decisions based on the data.”
Even MSNBC.com’s sister site MSN.com runs below-the-fold ads. “Like most publishers, MSN offers advertisers both above and below-the-fold ad placements,” said a MIcrosoft rep. “Advertisers know whether the ad will appear above or below the fold on MSN before they purchase the MSN placement. Below-the-fold ads have lower CPMs than above the fold ads.”
Donahue acknowledged that lots of things have to happen for the MMMS group’s goals to have any impact. Publishers have to unite. Technology needs to improve. Companies will have to accept serious disruption to their businesses. It’s going to cost money if tons of publishers decide to redesign their sites. Nothing is going to happen overnight. But by the end of the summer, the group should be able to announce a plan of action for the industry, said Sherrill Mane, svp industry services at the IAB.
What Happens Next?
Industry consensus on even the smallest issues take time. Just ask the IAB about its efforts years ago to define what an impression is.
However, imagine if brands like General Motors or Procter & Gamble could start issuing RFPs that require only viewable impressions that meet the MMMS standard. If viewable impressions became a true standard, all that remaining non-viewable inventory in the exchange would suddenly look even cheaper, if that’s possible. It would have the effect of hardening the divide between brand-friendly advertising in clean, well-lit places and direct-response placements through exchanges. This could prove particularly challenging at at time when Google is trying hard to attract big-name publishers to programmatic buying. Witness the $400 million it spent on Admeld.
Sharma would like to see Google take more responsibility. Some in the industry have even intimated that Google knows it’s got a quality problem and doesn’t want to upset the status quo. Others argue that Google needn’t worry; while big publishers can make all the changes they want, the exchanges will always have plenty of inventory thanks to the Web’s near-infinite suppy of Web pages.
MediaMath’s Katsur says that while Google needs to continue to push for more transparency in its exchange, it is really a matter of caveat emptor. “This is a buyer’s problem,” he said. “There is no question we want to make exchanges a lot more brand safe, but the industry is already moving in that direction.”
Tomorrow: Why MSNBC decided to buck the industry trend of stuffing more ads on pages. See the first part of this series profiling ad verifier RealVu.
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