LUMA Digital Brief 008 - Scape of Cards
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Digital advertising is doing great. Revenue from this channel grew 20% in 2015 and is set to surpass TV advertising next year as the largest category of ad spend. But you wouldn’t know it from the press. Everywhere you look from trade publications to industry conferences and now the general media, all you hear about are the problems with digital advertising. It’s no secret that the sector suffers from a fragmented ecosystem of intermediaries (as depicted by our eponymous LUMAscapes) and such a convoluted supply chain has been blamed for a series of issues that plague the sector. These issues haveimplications forall the key constituents from marketers to agencies, tech intermediaries, publishers and consumers. It’s a scape of cards!
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Transcript of LUMA Digital Brief 008 - Scape of Cards
Digitaladvertisingisdoinggreat.Revenuefromthischannelgrew20%in2015andissettosurpassTVadvertisingnextyearasthelargestcategoryofadspend.Butyouwouldn’tknowitfromthepress.Everywhereyoulookfromtradepublicationstoindustryconferencesandnowthegeneralmedia,allyouhearaboutaretheproblemswithdigitaladvertising.It’snosecretthatthesectorsuffersfromafragmentedecosystemofintermediaries(asdepictedbyoureponymousLUMAscapes)andsuchaconvolutedsupplychainhasbeenblamedforaseriesofissuesthatplaguethesector.Theseissueshaveimplications forall thekeyconstituentsfrommarketerstoagencies,techintermediaries,publishersandconsumers.It’sascapeofcards!
Weforcerankedtheissuesbasedontheirimpactontheecosystemasawholewithincreasingimportancefromserioustocritical toexistential.Thefirstfourissuesareeitherbetweenconstituents(Transparency,HeaderBidding)orareuniversalproblemsthatwilleventuallygetsolvedviatechnologyorconsolidation(Measurement,Latency).ThePrivacy/Trackingissueisabigonewithconsumergroups,especially inEurope.Itiscritical totreatconsumers’datafairlyandsofartheindustryhasnotexactlydeliveredonitspromiseofabetteruserexperiencefromincreasedadrelevancy.Mostly,weseeretargetedadsoftheproductwealreadypurchased!Theindustryneedstodobetterandasclosedloopattributionbecomesmorepervasive,thisproblemshouldimprove.
Thenthere’sthebottomhalfofthelist.Theseissuesarecritical ifnotexistential.Let’stakeacloserlookatthese.
ToassesstheimpactofViewability,FraudandAdBlocking, considerthelifecycleofamediaimpression.Everyloadofawebpageorvideocreatesanadopportunity (denotedinblue).However,adblocking (nowestimatedat22%inNorthAmerica)preventsadsfrombeingservedtoaperson(a“consumer”inournomenclature).Oftheadsserved,someareseenbybots(machines thatrecordfraudulent impressions)andanotherportion isdeliveredtohumansbutnotseen.
Whetheranadis“viewable”ornotdependsontheviewabilitystandardsthatvarybyplatform.Forexample,invideo,YouTubecounts4 secondsasaviewwhereasFacebookis3secondsandSnapchatonesecond.
Oftheadsactuallyviewed,asmallportionoftheseinstigatesengagementbyconsumersandanevensmallerportionresultsinaconversion toapurchase.Theselasttwoelementsareprimarily relevantfordirectresponseadvertising(demand fulfillment)whereasbrandadvertising’sobjectiveistohelpbuilddemandgenerationorpreferenceovertimeandmaybenefitfromanimpressionalone.
Ifyouanalyzetheseissuesfromaneconomicperspective,thereissignificant valueleakage.Marketers’“lostvalue”isthesumoffraudandnon-viewableimpressions.Inbothinstancestheypaidforanadthatwasneverseenbyapotentialconsumer.Publishersontheotherhandlosevaluefrombothfraudandadblocking.Needlesstosay,thisistoomuch leakageforasupplychain insuchanimportantandgrowingmarket!
Whilewedon’tpurporttohaveanswerstoalloftheseissues,wewouldsuggestthatwhateversolutionsappliedbedonesowithconsiderationofthetwoprincipalsofthemarketingequation:themarketerandtheconsumer.Onadblockinginparticular,webelievethatthebestwaytopreventfurtherproliferationofsuchsoftwaredownloadsistocreateabetterconsumerexperience.Whilewesympathizewiththepublishers’predicamentandvaluetheeconomicconstructthatsupportsjournalism,forcingtheconsumers’handwithdraconianmeasuresisnotthewaytogo.Consumerchoiceisheretostay!
Thetrendtowardsperformancemetricsinadvertisingservestomitigatesomeoftheseissues.Whenmarketersarepayingforbusinessoutcomesandnotproxieslikeimpressions, italleviatesmanyillsfrommeasurementtofraud.Ifthemarketerisnotpayingbasedonimpressions, it’sirrelevantthatimpressionsarenotseen.Thisisanaturalandhealthytrendforbothmarketersandconsumers.It’snowonderthecompanies thatdeploythesemodelshaveseenhigherratesofgrowth.
TheWalledGardenissuerelatestothegrowingdigitalduopolyenjoyedbyGoogleandFacebook.Arecentanalystreportsuggeststhattheircombinedshareofallincrementaladspendhasexceeded85%,afrighteningfigureforthethousandsofcompaniesvyingfortheremainder.Wewouldcallthisissueexistential!Thisdominancehashelpedfuelabovemarketrevenuegrowth.Andthefinancialmarkethasrewardedthisgrowth:Google’sandFacebook’smarketcapshaveincreased$250billioninthelastyearalone!
Finallythere’stheparamount issueoffragmentation, acondition thatisunsustainableforboththeprincipalsandintermediaries.Marketersandpublishersstrugglewiththecomplexitycausedbythemyriadofpointsolutions ontheLUMAscapes.Fortheintermediaries,it’saconstantchallengetodifferentiateandgrowwithsomuchcompetition,whichhasledtoapullbackinventurefunding.Tovaryintoanotheranalogy,Winterishere!Theobvioussolution isindustryconsolidation, andLUMAisdoingallitcantohelpoutinthisregard!
LUMAhasrecentlylaunched theLUMAInstitute,thedivisionthatincorporatesourresearch,contentandeventsinitiatives.ThemissionoftheLUMAInstituteistoprovideeducation,insightsandsupporttoallconstituentsofthedigitalecosystem.Wepartnerwithmedia,marketingandtechnologycompaniestoprovideadviceandeducationatleadershipoff-sitesandcustomereventsonacustomizedbasis.IfLUMAcanhelpyourorganizationsortthroughthiscomplicatedanddynamic sector,[email protected].
