PLI Advertising Law Institute 2016 A PUBLISHER S PERSPECTIVE

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1 PLI Advertising Law Institute 2016 HOT TOPICS IN THE DIGITAL ADVERTISING ECOSYSTEM: A PUBLISHER S PERSPECTIVE ALISON PEPPER

2 Digital Revenue Continues To Grow First Quarter U.S. Internet Ad Revenues Hit Record-Setting High at Nearly $16 Billion, According to IAB 21% Rise Over Same Time Period in 2015, Marks Highest Year-Over-Year Q1 Uptick in the Last Four Years NEW YORK, NY (June 9, 2016) The Interactive Advertising Bureau (IAB) today announced that U.S. internet ad revenues have set a new first quarter high at $15.9 billion in Q1 2016, outpacing last year s Q1 record-setting $13.2 billion, according toe the IAB Internet Advertising Revenue Report conduced independently by PwC US. That 21 percent year-over-year jump represents the largest spike in four years when compared to other first quarter earnings. Source: IAB/PwC US, June 2016

3 Digital Advertising: What Is It? SEARCH DISPLAY

4 Sounds Simple, But..

5 Despite The Complexity And Size Of the Market, Market Leaders Have Emerged Online advertising revenue in the U.S. reached a record of $59.6 billion last year, up 20 percent from 2014, the Interactive Advertising Bureau said in its annual report on the business. Google, the leading Internet search provider, and Facebook, the biggest social network operator, claimed 64 percent of that revenue, according to Pivotal Research analyst Brian Wieser. Google scooped up $30 billion and Facebook gathered $8 billion, while other smaller companies lost market share, the analyst noted. Source: Bloomberg Technology, April 2016

6 Clouds On The Horizon AD BLOCKING FRAUD PROGRAMMATIC VIEWABILITY NATIVE ADVERTISING

7 Ad Blocking: What Is It? Basically, Ad blocking is a type of software that can remove or alter advertising content from a website or a mobile app. Ad blockers are available for a range of computer platforms, including desktop and laptop computers, tablet computers and smartphones. Ad blocking software is available from several different providers, and is usually offered for free to the end-user.

8 Why Do Users Ad Block?

9 Users Ad Block Because: All users, but especially consumers using ad blockers, want uninterrupted, quick browsing and a streamlined user experience. Among those that already use an ad blocker on their PC, the top reason for using it on a computer is the perception that sites are easier to navigate without ads. Among those that already use an ad blocker on their smartphone, the top reason for using it on a phone is the perception that ads slow down browsing. Consumers that use ad blockers tend to blame ads for slow loading pages, while those not currently using ad blockers tend to blame the content for slow loading pages.

10 Publishers Are Feeling The Pinch, Although Nobody Knows Quite How Much But the effect of the latest adblocking software, alongside those programs already available on PCs and laptops, could have ruinous implications for the companies that rely on digital advertising, such as online publishers. Estimates over precisely how ruinous vary wildly: UBS said last week that adblocking would cost the advertising industry $1bn, while a report in recent months from PageFair and Adobe put the figure for 2015 alone at $22bn. Source: Financial Times, October 2015

11 And Not All Publishers Are Impacted Equally Websites that skew younger and male, particularly gaming and technology media websites, have far higher rates of users utilizing ad blockers.

12 How Are Publishers Responding? 1. Implementing New Technologies to Reduce Load Time 2. Creating Paywalls 3. Asking Users To Whitelist Their Websites 4. Blocking Users That Don t Turn-Off Ad Blocking Software 5. Litigation

13 Publisher Responses To Ad Blocking

14 Meanwhile In Germany.

15 Fraud In The Digital Advertising Ecosystem The Association of National Advertisers (ANA) and WhiteOps released a study in 2015 showing the scale of the fraud in digital advertising problem. Key findings included: Fraud varies by buy type. Direct buys had lower fraud. Programmatic buys had greater fraud. Programmatic video ads had 73 percent more bots than the study average. The annual financial impact of bot fraud ranged between $250,000 and $42 million for the 49 participating advertisers and averaged about $10 million per participant. The advertising industry overall could lose approximately $7.2 billion globally to bots in 2016.

16 What s An Example Of Fraud? As programmatic buying and selling has some of the highest rates of fraud, it s worth taking a step back to explain how programmatic works, and why programmatic can be more susceptible to fraud.

17 Programmatic 101

18 So Why Can Programmatic Be More Vulnerable To Fraud? Programmatic buying takes place via automated platforms, at a large scale, at rapid speeds. Unlike direct buys, where both the buyer and seller are oftentimes dealing with a single point-of-contact and a known publisher, programmatic buys often happen without the buyer knowing where the inventory is going to be located, or what publishers they might be dealing with to place their ads. In other words, there s less opportunity for upfront verification.

19 How Can Publishers Help To Protect Against Fraud In The Ecosystem? Consider adding language to insertion orders that notes there will be no charge for proven fraudulent impressions. Use third-party monitoring to monitor all traffic. Ensure that your anti-fraud policies are followed by all external partners. Work with the Trustworthy Accountability Group (TAG) and their recommendations. TAG was established by the IAB, the 4As and the ANA as an industry program to help eliminate digital advertising fraud and malware. Source: ANA and WhiteOps 2015 Fraud Study

20 Trustworthy Accountability Group (TAG) Trustworthy Accountability Group (TAG) is a first-of-its-kind cross-industry accountability program to create transparency in the business relationships and transactions that undergird the digital ad industry, while continuing to enable innovation. A joint marketingmedia industry program, TAG was created with a focus on four core areas: eliminating fraudulent digital advertising traffic, combating malware, fighting ad-supported Internet piracy to promote brand integrity, and promoting brand safety through greater transparency. TAG was created by the American Association of Advertising Agencies (4A s), Association of National Advertisers (ANA), and Interactive Advertising Bureau (IAB) and works collaboratively with companies throughout the digital ad supply chain. 4 core areas of work are: Eliminate Fraudulent Traffic Combat Malware Fight Internet Piracy Promote Transparency

21 A Joint Effort Between Agencies, Advertisers and Publishers

22 Viewability: What Is It? (Or What Isn t it?) Viewability does not guarantee that an ad will be looked at, or that an ad will be appealing, or have an impact or generate awareness or change brand perception, said Sherrill Mane, SVP of research, analytics and measurement at the IAB. Viewability has nothing to do with how well an ad works. What it is, Mane said, is the opportunity to be seen, and the opportunity to be seen can t tell you if an ad worked or not.

23 Making Measurement Make Sense (3MS)

24 Goals Of Making Measurement Make Sense (3MS) The overall intent of 3MS is to revolutionize the way digital media is measured, planned, and transacted across the advertising industry in order to make it a more valuable medium for everyone involved in brand advertising. The 3MS initiative is driven by a need across the marketing and advertising industry for clear standards-based metrics for interactive advertising that are comparable to legacy media and based on the fundamental opportunity for consumers to see online ads. Define, across the marketing ecosystem, clear standards-based metrics for interactive advertising that are comparable to traditional media. Work with the Media Rating Council (MRC) as they set and implement measurement standards.

25 Viewability Standards DESKTOP AND MOBILE* Display Minimum of 50% pixels for minimum of 1 second. Video Minimum of 50% pixels for minimum of 2 seconds. *Mobile standards released by the MRC in June 2016.

26 Current State of Viewability Finding: A majority of panelists are now using vcpm as a trading metric, and the number is rapidly growing. Despite progress, different ad platforms and formats, along with inconsistencies across vendors, create measurement challenges. Buyers and sellers are working toward becoming able to measure all ad formats. With technical and measurement discrepancies existing across different platforms and formats, the industry is not yet ready to transact accurately on the vcpm model. Our findings indicate two main limitations of the current viewability standard. Vendors are not yet adequately addressing non standard units needs: A fragmented vendor scene has led to discrepancies in campaigns and to confusion about viewability in-market. Challenges exist in the measurement of non standard formats: Inconsistent vendor standards means viewability does not play out consistently, especially outside of standard display and mobile formats. As a result, non standard units that perform best for branding campaigns aren t being leveraged to their fullest. Source: Theorem + Sublime Skinz Study 2016, The Viewability & Brand Metrics Study

27 Native Advertising: What Is It? Native advertising is a concept encompassing both an aspiration as well as a suite of ad products. It is clear that most advertisers and publishers aspire to deliver paid ads that are so cohesive with the page content, assimilated into the design, and consistent with the platform behavior that the viewer simply feels that they belong. IAB Native Advertising Playbook

28 Native Advertising Primer There is a renaissance underway in digital advertising that is driving brands, publishers and consumers to communicate with each other in more personal and natural ways. Native advertising is an important piece of this evolution. The IAB Native Advertising task force set out to provide guidance based on the state of the industry today while leaving room for flexibility to inspire innovation and growth." - Patrick Albano, Yahoo

29 Types Of Native Advertising

30 What Should Publishers Be Aware Of Regarding Native Advertising? FTC Issues Enforcement Policy Statement Addressing Native Advertising and Deceptively Formatted Advertisements FTC Staff Also Releases Business Guidance on Native Advertising December 22, 2015 The particular forms native advertising takes in the digital marketplace may be new, but the FTC s Enforcement Policy Statement makes clear that the FTC applies the same truth-in-advertising principles it has used for decades to evaluate whether the format of an ad is deceptive. In the context of native advertising, if the source of the content is clear, consumers can make informed decisions about whether to interact with the ad and the weight to give the information conveyed in the ad. However, an ad is deceptive if it promotes the benefits and attributes of goods and services, but is not readily identifiable to consumers as an ad. Thus, as the Policy Statement explains, the FTC will find an ad s format deceptive if the ad materially misleads consumers about its commercial nature, including through an express or implied misrepresentation that it comes from a party other than the sponsoring advertiser.

31 Native Enforcement Actions

32 And Finally. Thank You! QUESTIONS? Alison Pepper