PROGRAMMATIC AD FRAUD TRANSPARENCY REPORT
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1 QUERYCLICK PROGRAMMATIC AD FRAUD TRANSPARENCY REPORT THE VIEWS OF TODAY S BRANDS AND PUBLISHERS QUERYCLICK - PASSIONATE ABOUT PERFORMANCE 2017 REPORT
2 EXECUTIVE SUMMARY The rise of digital advertising has brought unparalleled opportunities to target ads and improve performance. With programmatic campaigns, computers can manage ad placements across thousands of sites to target the right audience, at the right time, right across the web. Or so goes the theory. In practice, programmatic advertising is wide open to abuse. High profile studies have shown that bots are responsible for a quarter of all "views" of video based ads, highlighting a profound weakness in the process. The best advert in the world cannot deliver results if nobody sees it. And that s just one of the problems plaguing the industry. We are seeing fraud impact the cost of adverts, where they appear and whether the visitor is even a person rather than a program. It s costing advertisers billions every year. To explore the issue, we surveyed 150 Heads of Marketing, ecommerce and Digital at major brands, each with a revenue of over 100million a year, and hosted an indepenent industry roundtable, bringing both major advertisers and publishers together to discuss the findings. Not surprisingly, many are losing faith. Our survey of the marketing C-suite shows four out of ten (41%) have lost trust in programmatic advertising as a result of fraud. Their fears are wide ranging: Only 40% are confident that more than half their adverts placed online in the last twelve months have been seen by people, with just 7% saying they thought the proportion viewed by humans rather than robots was 80% or more Eight out of ten are worried that their current programmatic processes could lead to their adverts appearing on web pages related to terror activities as has recently happened to big brands such as Waitrose, Marie Curie and Mercedes-Benz The industry is facing a crisis of confidence. Yet the technology to address many of these concerns already exists. Google s Doubleclick is rolling out automatic refunds for page views that look suspicious; some programmatic platforms also offer real insights into performance and protection against fraud. The problem is not technological ability, but the will to deliver. Nine out of ten say there is a lack of transparency in their programmatic ad campaigns because their ad buying platform is owned by their advertising agency. Without more stringent checks on agencies, publishers and platforms, brands remain exposed. As one big advertiser who attended our roundtable put it There is no verification. They can literally say whatever they want and get away with it every time. Changing this won t be easy. Many would like increased regulation: 85% say independent trade bodies such as the Interactive Advertising Bureau (IAB) should have more power to penalise those committing fraud. For now, though, many feel tied to programmatic campaigns. With the audiences they want increasingly found online and the big agencies snapping up much of the premium ad space, buyers feel they have little choice but to continue. Some are also tied into contracts. Perhaps that s why, for now, 70% of advertisers are still planning to maintain or even increase their programmatic spend. There are things that they can do to protect themselves, though. First, where possible, separating their programmatic campaigns so they are given the consideration and performance measures their growing size warrants. Secondly, unbundling their agency relationship from the programmatic platform, to enable them to seek out independent providers that offer true transparency and protection from the risks of current programmatic campaigns. In doing so they will not only significantly reduce their exposure to waste and damage to their band reputation from fraud, but also start to see programmatic begin to deliver on its promise. More than one in five (22%) are already planning to decrease their spending on this still developing industry because of concerns over costs or performance PAGE 1 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 2 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
3 HALF THE MONEY I SPEND ON ADVERTISING IS WASTED; THE TROUBLE IS I DON'T KNOW WHICH HALF, - Marketing pioneer John Wanamaker is widely held to have said. Today, many advertising buyers must marvel: Only half? INTRODUCTION Online advertising promises unprecedented opportunities to tailor and target advertising to particular audiences, and, as people have moved online, it has seen astonishing growth. In 2017, digital advertising is forecast to account for 77% of all new spending; television for just 17%1. Including existing spending, digital investment has already surpassed TV in a number of major markets, including the UK, and overall, digital s share of ad investment is about a third.2 On the one hand, that enthusiasm shows little sign of waning: In the US, 2017 saw the strongest ever start to the year for digital advertising with first quarter earnings of $19.6 billion, according to the Interactive Advertising Bureau (IAB).3 It s testament to interactive s ability to attract audiences and the marketing dollars that follow, as one involved in its report put it.4 Other estimates forecast worldwide digital ad spending will reach $ billion this year.5 Digital advertising is not merely mainstream but on its way to being dominant. As one advertiser at our roundtable remarked, the term itself is becoming questionable: I don't see a distinction; digital marketing is marketing, and marketing is digital. Yet the rise of digital advertising has also brought with it unprecedented waste and unparalleled opportunites for fraud: advertising that is not merely ineffective but unseen; audiences that cannot be converted because they are concocted; and spending that is not so much wasted as stolen. PAGE 3 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 4 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
4 UNPRECEDENTED FRAUD Advertising fraud is an industry in its own right. The IAB s first benchmark report in 2015 put the cost of digital advertising fraud in the US alone at $8.2 billion a year.6 Other, more recent studies estimate the figure is as high as $31 billion.7 That makes digital ad fraud not just more costly than any form of cyber crime, but more costly than offline crimes such as counterfeit goods and payment card fraud.8 The World Federation of Advertisers (WFA) argues ad fraud is second only to the drugs trade 9 as a source of income for organised crime. By 2025 it expects the cost to brands to be more than $50bn on a conservative basis.10 This is in no small part facilitated by the rise of programmatic ad buying. Like digital advertising generally, programmatic advertising promises significant benefits to advertisers: There are over 1 billion websites;11 by automatically choosing where to place digital ads and how much to pay, computer programmes not only make placing adverts across thousands or even hundreds of thousands of different sites manageable, but also make placement more targeted and effective. Instead of simply having the advert appear frequently on a smaller number of big-name websites, programmatic spending can in theory seek out the right audience, at the right time, right across the web. IT PROVIDES THE POSSIBILITY TO TARGET THE MULTITUDE OF CUSTOMERS THAT WE HAVE ACROSS THE LIFECYCLE. said the advertiser. PROGRAMMATIC PROBLEMS In practice, though, programmatic advertising is wide open to abuse like digital advertising generally, only more so. The computer algorithms that determine how sites are chosen and how much to pay; the range of participants involved, including publishers, agencies, demand side platforms (DSPs), supply side platforms (SSPs) and data management platforms (DMPs). The acronyms; and the thousands of websites involved: All add to a complexity and lack of transparency that make programmatic advertising particularly susceptible to fraud. And it s not just an issue for advertisers. Even now when agencies and clients book direct campaigns it is very simple; there s only two or three people involved. That s not the case with programmatic. - Commented one publisher at the roundtable. There s all the different parties involved DSP, SSP, ad exchanges, DNPs loads of different tech providers, third party data providers and verification tools We don't know who s got access to our data, even though we pride ourselves on being transparent. - He continued The well-established and widespread influence of bots (non-humans) boosting advertising viewing figures12 and public complaints from big buyers13 have brought the issues to the fore. As Procter and Gamble s Chief Marketing Officer Marc Pritchard put it earlier this year: We have a media supply chain that is murky at best and fraudulent at worst. We need to clean it up, and invest the time and money we save into better advertising to drive growth. 14 To help understand how that can happen, QueryClick commissioned a survey of 150 Heads of Marketing, ecommerce and Digital at major brands with a revenue of over 100 million. It captures their views on digital and programmatic ad buying, their fears of fraud and waste, and, ultimately, offers, we hope, some clues as to the way ahead. PAGE 5 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 6 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
5 FORCED BUYERS Our survey shows that advertisers are heavily invested in programmatic advertising. Seven out of ten spend more than 40% of their ad spend on programmatic. Roughly one in five (21%) spend more than 60%. WHAT PROPORTION OF YOUR ADVERTISING SPEND IS ASSIGNED TO PROGRAMMATIC? IN LIGHT OF RECENT FIGURES SUGGESTING THAT AD FRAUD WILL COST BRANDS $16.4 BILLION GLOBALLY THIS YEAR, WHAT PROPORTION OF YOUR ADS CAN YOU CONFIDENTLY SAY WERE SEEN BY HUMANS AND NOT BOTS OVER THE PAST 12 MONTHS? 61-80% - 21% LESS THAN 20% - 5% 41-60% - 49% 20-30% - 14% 20-40% - 21% 31-50% - 28% LESS THAN 20% - 5% 51-70% - 21% 71-80% - 12% That reflects industry figures showing the rapid growth in the importance of programmatic advertising. Globally, programmatic ad spending is estimated to have grown from $5bn in 2012 to $39bn last year, an average of 71% a year.15 That growth is not matched by faith in the medium, however. Most obviously, there is widespread concern about bots, reflecting well-publicised studies such as that of the Association of National Advertisers last year.16 It determined that bots cause 23% of all video impressions and 11% of display ads resulting in $6.3 billion of losses for advertisers in That s had a profound effect on advertisers confidence in programmatic spending. Asked what proportion of their ads they could confidently say were seen by humans rather than bots over the past 12 months, only four in ten put the figure at more than half. Just 7% said they thought the proportion viewed by humans was 80% or more. MORE THAN 80% - 7% UNSURE - 13% It s also a big problem for legitimate publishers who are trying to do the right thing. Publishers work hard to establish a reputation that fraud unravels, even where they are not responsible for it as another publisher at the event said. Highlighting that publishers are victims of ad fraud as well as brands, another publisher at the event said, Fraud is not something we want to be seen to be connected to. PAGE 7 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 8 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
6 POINTS OF WEAKNESS In fact, bots are just one of the problems facing programmatic advertising. The risk of computers being used to artificially inflate or entirely manufacture viewing figures for websites is a simple concept for advertisers to understand and a real problem. In its calculations of the losses resulting from advertising fraud, the IAB estimated non-human traffic accounted for about half the figure. However, advertisers and others face a range of other issues from plain fraud to sharp practice that all result in substantial waste: Domain spoofing The Financial Times recently warned advertisers of jaw dropping levels of fraud. It found display ad space on FT.com fraudulently offered by 300 accounts on 10 separate ad exchanges and video ads on 15 exchanges.17 The publisher doesn t even sell video ads programmatically, and only uses two platforms to sell its space. The industry continues to waste marketing budgets on what is essentially organised crime, said the paper s digital advertising operations director. Arbitrage or overcharging for the cost of the ads, with evidence of the actual cost of advertising sold to agencies clients being just pennies on the pound. This is not new, and overcharging, deliberate or careless, predates the rise of online advertising.18 However, it is made more difficult to detect by programmatic advertising, and digital has increased the potential scale. Last year Japanese firm Dentsu admitted it had overcharged more than 100 clients for digital ads.19 Viewability and unseen ads Bot-based traffic, along with stacking, pixel stuffing and other scams that render adverts effectively invisible, is only the most extreme example of ads that are paid for but never seen. Whether it is counted as fraud or not, adverts that load but are never seen by the web user (simply because they fail to scroll down to where the ad is displayed, for example), are undoubtedly wasted. Furthermore even where ads are displayed, buyers may sometimes wish they weren t. The Times discovery20 of adverts by big name brands appearing next to highly offensive content published by extremist groups on Youtube earlier this year was a wake up call for the industry. WE ASKED BRANDS: IN LIGHT OF BRANDS SUCH AS MERCEDES-BENZ, WAITROSE AND ARGOS HITTING THE HEADLINES RECENTLY BECAUSE THEIR ONLINE ADS HAD UNWITTINGLY APPEARED NEXT TO CONTENT PUBLISHED BY ISLAMIC EXTREMISTS, HOW CONCERNED ARE YOU THAT THROUGH YOUR CURRENT PROGRAMMATIC AD PROCESSES, YOUR BRAND S ADVERTS COULD APPEAR ON WEBSITES RELATED TO TERROR ACTIVITIES? VERY CONCERNED 31% SOMEWHAT CONCERNED 50% NOT CONCERNED 19% Our survey found that 80% of online ad buyers were concerned that current programmatic processes could lead to their adverts appearing on websites related to terror activities. PAGE 9 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 10 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
7 TRUST AND TRANSPARENCY At the heart of all these issues is a lack of transparency over costs, sites used, performance and strategies: all factors cited by those who say, like big names such as Procter and Gamble, that they are planning to cut their programmatic spending. WE ASKED BRANDS: IF YOU ARE CONSIDERING DECREASING YOUR SPEND ON DIGITAL ADVERTISING IN THE NEXT 12 MONTHS WHICH OF THE REASONS CITED BELOW APPLY? LACK OF TRANSPARENCY OVER HOW MUCH PROGRAMMATIC ADS COST 41% LACK OF TRANSPARENCY OF WHICH SITES THE ADS WILL BE PLACED 39% PERFORMANCE ISSUES WITH THEIR CURRENT AD BUYING PLATFORM 26% INEFFECTIVE AUDIENCE TARGETING STRATEGY 19% The lack of transparency is at least partly the result of complexity, skills gaps and scale. Of those questioned, 35% said there was a lack of consultative expert knowledge and expertise from third party suppliers. A similar proportion (30%) said they lacked the budget to investigate changes. The client side is reasonably naive as to what can be done while the agencies and trading desks on the tech side are very knowledgeable and have a lot of visibility, said one advertiser at our roundtable. It's very easy to pull the wool over the clients eyes. They don t know what questions to ask, agreed another present, this time a publisher. I could count on one hand how many times I've been questioned about where our data is from, what DMP we use, whether it is cookie related, if it s GDPR compliant PAGE 11 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 12 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
8 Much of this is symptomatic of another problem, however: A lack of accountability due to the dominance of the biggest advertising agencies. Between them, the big five agencies own about 200 companies and brands right across the advertising value chain. They are not only the go-to names for big brands to place their advertising campaigns (online and offline); they also own most of the platforms and technologies used for placing programmatic ads. The result is that the agencies, who have the power to demand transparency from the programmatic ad platforms, have no incentive to do so because they own them. Their faults and vulnerability to fraud therefore remain undiscovered except by the fraudsters. This problem is widely recognised. Close to half (46%) in the survey complained that there is a lack of alternative technology options (alternative DSPs) in the market. Nine out of ten also say the lack of transparency in their programmatic ad campaigns is because the ad buying platform is owned by their advertising agency. WE ASKED BRANDS: ARE YOU CONCERNED THAT THERE IS A LACK OF TRANSPARENCY ABOUT THE COST OF YOUR PROGRAMMATIC AD CAMPAIGNS BECAUSE YOUR AD BUYING PLATFORM IS OWNED BY YOUR ADVERTISING AGENCY? FIXING A BROKEN MARKET The current state of the market is unsustainable. By definition, it won t last. In fact, we ve been here before. The programmatic market today echoes the early days of paid search advertising, itself beset with problems of fraud. In that space Google largely solved the problems through technology and, consequently, has come to utterly dominate the market with a market share approaching 80%.21 Unlike paid search, programmatic adverts are not based on Google s own site. Nevertheless, it is not difficult to see the company achieving the same dominance in the market through its subsidiary DoubleClick. Its recent introduction of automated refunds for invalid traffic detected for inventory purchased through its ad partners is a significant development in the industry.22 Further increasing the dominance of Google does little to help develop a competitive market we should want to see, however. Together with Facebook, the company already accounts for a fifth of global media advertising revenue.23 The two are also responsible for more than two-thirds of the global ad spend growth we saw from 2012 to That s despite the fact that those dealing with Google, whether as advertisers or publishers, don t always find it the most responsive or accommodating to clients needs: It s whatever works for Google, as one at the rountable put it. Yet if Google alone offer advertisers confidence that spending is not being wasted, it will continue to gain market share in programmatic, as elsewhere. Google has so much opportunity to really take over the entire sector., said one advertiser. VERY CONCERNED 21% SOMEWHAT CONCERNED 60% NOT CONCERNED MY AD BUYING PLATFORM IS NOT OWNED BY MY ADVERTISING AGENCY PAGE 13 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE 18% The only alternative is that other providers offer real transparency. A number of industry initiatives are promoting this: IAB s recently launched Gold Standard scheme (to which Google and Facebook have signed up)25, the joint industry committee JICWEBS in the UK and Ireland,26 and the Trustworthy Accountability Group,27 among others. Such developments have value in themselves: A key call from those at our event was that there should be greater collaboration between those in the industry. Most buyers in our survey, though, want to see regulation with some teeth: 85% say independent trade bodies such as the IAB should have more authority to monitor and penalise those knowingly committing ad fraud. 1% PAGE 14 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
9 TO WHAT EXTENT DO YOU AGREE WITH THE FOLLOWING STATEMENT: IF INDEPENDENT TRADE BODIES (SUCH AS THE IAB) WERE GIVEN MORE AUTHORITY TO MONITOR AND PENALISE THOSE KNOWINGLY COMMITTING AD FRAUD AND DEFRAUDING ADVERTISERS, IT WOULD HAVE A POSITIVE IMPACT ON THE DIGITAL MARKETING SECTOR STRONGLY AGREE 29% AGREE 55% DISAGREE 8% STRONGLY DISAGREE 2% UNSURE 5% Should this come, experience elsewhere suggests it needs to be applied intelligently. In the finance industry, there are fewer and fewer traders and more and more compliance people, and I don't want to see that ever happen here, even if I do want some regulation. We need to find a way to regulate the industry without killing it. - said one publisher. PAGE 15 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 16 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
10 PURCHASING POWER In the meantime, however, buyers must begin bringing pressure to bear themselves. To do so, educating themselves on the programmatic landscape will be vital: Another key call from our event. As a useful first step, though, advertisers should look to separate their programmatic advertising spending from their offline campaigns. Too often, it is merely a line item in the contract focused on TV and other offline ads. While that persists, it remains difficult to define or even measure performance. Going further, buyers should look to unbundle their DSP from their agency relationship. There are already admittedly few independent programmatic platforms available in the market offering genuine transparency and defences against fraud. It is worth buyers time to seek them out. Doing so could allow more ambition in programmatic campaigns. To date, 46% of buyers say half or more of their digital advertising budget is assigned to retargeting, rather than prospecting: focussing purely on those who have already visited their site. It s hard to escape the conclusion that the preference for this low hanging fruit reflects a lack of confidence in current programmatic spending to deliver new customers. The flipside to removing fraud and increasing transparency in programmatic spending is that buyers can begin to focus once more on core marketing questions: Whether an advert is effective, not just whether it was seen; focussing on perfecting the message, not just trying to navigate the complexities of the medium. Only then, will we really see programmatic and digital advertising overall really begin to realise its potential. PAGE 17 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE OVER THE PAST 12 MONTHS, WHAT PROPORTION OF YOUR DIGITAL ADVERTISING BUDGET HAS BEEN ALLOCATED TO DRIVING ONLINE SALES THROUGH A RETARGETING FOCUSED STRATEGY (DISPLAYING ADVERTS TO PEOPLE WHO HAVE ALREADY VISITED YOUR SITE) OVER A PROSPECTING STRATEGY (TARGETING CONSUMERS WHO HAVE NOT YET VISITED YOUR SITE BUT DISPLAY SIMILAR DEMOGRAPHIC CHARACTERISTICS AND BEHAVIOURAL PATTERNS TO YOUR EXISTING CUSTOMERS)? MORE THAN 80% 3% 60-79% 6% 51-59% 19% 50% 17% 40-49% 21% 20-39% 26% 1-19% 5% 0% - NO BUDGET ALLOCATED 0.70% I DON'T KNOW 1.30% PAGE 18 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
11 Finally, it is worth noting that the industry itself should accommodate and support efforts to improve programmatic campaigns. Ultimately it is in its own interests. Moreover, the proportion saying ad fraud has led them to lose trust in the programmatic advertising industry is much higher: Four out of ten (41%). So far, relatively few buyers are willing to give up on programmatic: 22% say they plan to decrease their spending in the next twelve months, while 37% intend to increase it. However, other findings in our survey suggest significant support for the complaints of those who are cutting back: a lack of transparency over costs, poor performance, and ineffective targeting. It seems unlikely these buyers will remain committed to spending unless they can be convinced that it brings results and that they are not vastly over-paying. After all, It s up to us all to help programmatic make a better impression than it has to date. Advertising pioneer, Bill Bernback, once remarked: IF YOU ARE CONSIDERING DECREASING YOUR SPEND ON DIGITAL ADVERTISING IN THE NEXT 12 MONTHS WHICH OF THE REASONS CITED BELOW APPLY? LACK OF TRANSPARENCY OVER HOW MUCH PROGRAMMATIC ADS COST 41% LACK OF TRANSPARENCY OF WHICH SITES THE ADS WILL BE PLACED 39% WE ARE NOT CONSIDERING REDUCING OUR PROGRAMMATIC AD SPEND 29% PERFORMANCE ISSUES WITH MY CURRENT AD BUYING PLATFORM 26% PAGE 19 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE NOBODY COUNTS THE NUMBER OF ADS YOU RUN; THEY JUST REMEMBER THE IMPRESSION YOU MAKE. PAGE 20 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
12 REFERENCES ibid See also ibid Although three quarters are inactive PAGE 21 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE PAGE 22 - QUERYCLICK - PASSIONATE ABOUT PERFORMANCE
13 QUERYCLICK PASSIONATE ABOUT PERFORMANCE 7 Castle Street, Edinburgh, EH2 3AH 1 Mark Square, London, EC2A 4EG
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