CURBING AD FRAUD HOW TO ENHANCE TRUST IN DIGITAL ADVERTISING IN CHINA SMALL TRICKS COSTING A FORTUNE?
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1 CURBING AD FRAUD HOW TO ENHANCE TRUST IN DIGITAL ADVERTISING IN CHINA SMALL TRICKS COSTING A FORTUNE?
2 EXECUTIVE SUMMARY Advertising fraud is a growing challenge that not just impacts companies financially but also tarnishes their brand reputations. The Chinese digital market, though making phenomenal progress currently, is witnessing an increase in ad fraud-related cases. Invalid traffic is on a high and ad viewability is decreasing on personal computers and mobile websites of China. The reasons for such a scenario are quite evident a non-transparent ecosystem, invalid traffic and technological limitations. An opaque and biased media supply chain is resulting in potentially undermining brands interests and yielding financially damaging results. Unavailable or inadequate technological capabilities are making it tough for companies to fully capture Invalid Traffic (IVT). In such a challenging landscape, China requires a comprehensive strategy to combat and overcome the ad fraud menace and its consequences. Accenture offers the following recommendations to protect brands and ad investments based on our deep knowledge and experience in the digital marketing space: Optimize the media team s operating model Develop in-house capabilities Build internal ad technological capabilities Leverage latest technologies Adopt Open Source Industry SDKs recommendations 2
3 INTRODUCTION Global consumer goods companies are cutting down on their ad spending due to slow growth rate. The repercussions are being felt among advertisement and media companies worldwide. According to a Financial Times article dated August 25, 2017, Magna Global, the media buying agency [is] forecasting global growth of 3.7 per cent to US$505 billion this year as compared to 5.9 per cent in According to P&G s Chief Brand Officer, the media supply chain is having its own share of challenges caused by fraudulent and unethical practices. 2 The L2 Insight Report 2017 recommends that brands must emphasize more on quality and viewability metrics to understand ad viewing patterns, prioritize where to place ads and seek better conversion opportunities. 3 However, even in this difficult scenario, the Chinese digital market is witnessing unprecedented growth it is expected to double in the next three years. China s overall ad market is the second biggest in the world and is growing at a high 56.5 percent. It is expected to reach US$122 billion by the year 2020 from the current year Of this, a large part is digital: 53 percent of China s population as on December 2016 about 731 million people are active Internet users; and the digital ad market is growing at 56.5 percent. 4 Brands are constantly increasing their advertisement budgets, especially on digital platforms, to maintain market share and capture new consumers in China s fast-growing market. The share of digital ad spending in proportion to total ad budget is set to increase from 52 percent in 2016 to an estimated 68 percent by 2020 (see Figure 1). In keeping with this trend, advertisers are leveraging data-driven, programmatic marketing techniques to improve brand engagement and personalization with consumers on popular social media platforms such as WeChat. Empowered by digital channels, the new digital consumers have access to wide range of choice, and tend to have low brand loyalty. Big advertising companies such as P&G, Coca-Cola and L Oréal are therefore keen to not only spend on digital advertising, but also ensure its effectiveness. Chinese Advertising Market - Digital vs. Traditional Figure 1 Digital Traditional Source: March emarketer ( 3
4 AD FRAUDS A GLOBAL REALITY Though the future looks promising, there are some concerns on how ad frauds are hampering ad effectiveness in China. Challenges such as non-transparent ecosystem, invalid traffic and technological limitations are posing hurdles in the growth rate of China s digital advertising market. ADBUG s 2017 Q1 China Media Report states that out of 12 billion impressions verified in the Real Campaign, China saw an average of 29.5 percent invalid traffic (71.5 percent direct purchase) and only 25.5 percent viewability rate (4.9 percent direct purchase) on personal computers and mobile websites. 5 These figures reveal how the profit and brand reputation of companies with investments in digital advertising in China can get impacted. Programmatic digital advertising was ntended for brands to reach out to target consumers and promote the ads at the right moments, in the right spaces. However, with such umbers, it is quite evident that programmatic or other marketing tactics are facing hurdles in achieving ad goals and may require additional competencies. So, the question arises, why are the results not visible? The answer lies in the manner in which the digital advertising market works. To understand this, let us break the problem into three main points: Non-Transparent Ecosystem Invalid Traffic and Brand Safety Unavailable or Inadequate Technological Capabilities 4
5 NON-TRANSPARENT ECOSYSTEM Charlie Wang, Chief Operating Officer of ReachMax, in his four-part online article, Practical Guide to Programmatic Planning in China, throws light on how the buying platform could be biased towards its own inventory pool selection. China s Demand-side Platforms (DSP), due to its initial resistance to transition into an exchange inventory, adopted a hybrid model, DSPAN. This type of model allows to pick from a fixed ad network publisher list to fulfil the needs of an advertiser, while also buy inventory through the exchange for performanceoriented advertisers. As a result, DSPs were given preference to sell their own ad network inventory to buy on the exchange, undermining brands interests and yielding financial losses. Besides, non-transparent transactions also jeopardize companies' investments and commercial reputation when it comes to dealing with DSPs. For example, artificially inflating the CPM (Cost per Mille) to falsify payments from advertisers. Companies can avoid such embarrassing situations by encouraging transparency and taking preventive measures. Jasmine Xu, president of P&G s E-Business & Branding in Greater China region, in the China Mobile Marketing Association (MMA) Forum in Shanghai of August 2017, urged companies to look beyond the excessive commercial interests and bring in more transparency in the digital advertising industry. INVALID TRAFFIC AND BRAND SAFETY As many as 78 percent of ads seen on the screens are invalid traffic that does not meet the quality or completeness criteria, and are artificially inflated impression counts that the advertisers pay for. 6 Unlike the general nonpurposeful invalid traffic, Sophisticated Invalid Traffic (SIVT) deceptively manipulates the ad serving process. Some of the different types of SIVT are: 7 A study by the Association of National Advertisers once found 85 ads on a single page, of which very few were visible to consumers. 8 This means massive ad inventory spaces on ad networks/exchanges were unavailable but sold nevertheless. This violates the rules laid out by the Interactive Advertising Bureau (IAB) in the Media Rating Council s (MRC) Viewable Ad Impression Measurement Guidelines. According to the AdMaster s White Paper, The World Federation of Advertisers, estimates that 10 to 30 percent of online advertising slots are never seen by consumers because of fraud, and it forecasts that marketers could lose as much as US$50 billion a year by Brand safety is another challenge companies face on a regular basis. For example, an airline company's ad injected into a webpage about a piece of aircrash news, or worse, placed in a pornographic website will tarnish the brand reputation tremendously. UNAVAILABLE OR INADEQUATE TECHNOLOGICAL CAPABILITIES Accurate measurement of viewability gives both the demand and supply sides a clear picture on the actual impact of ad spending, and thereby bringing transparency to the entire operations. The IAB has suggested that brands utilize: front-end and back-end techniques requiring sources of information made from multidatapoint assessment of transaction sets. 10 However, the reality is that most of the current ad-verification solutions have severe limitations. Pixel can only receive limited information and can be easily manipulated. Similarly, IP addresses can only provide third-party information, which can be manipulated on the device that the ad is being viewed (network interface identification). Multiple tracking tags: multiple tags on a single creative ad results in the real number being multiplied by the number of tags. Ad stacking: multiple ads stacked onto each other with only the top-most ad visible. Pixel-stuffing: ads stuffed in a 1x1 pixel that are invisible to a human eye. 5
6 CHALLENGES PLAGUING THE CHINESE DIGITAL AD SPACE 1 Non-Transparent Ecosystem 3 Lack of Viewability Measurement 5 Lack of Adequate Cyber Security 2 Invalid Traffic and Brand Safety 4Unavailable or Inadequate Technological Capabilities China s ad market expected to reach US$122 billion by the year 2020 In 12 billion impressions, China saw 29.5% average invalid traffic and 25.5% viewability rate on pc and mobile websites 10 to 30 percent of online advertising slots are never seen by consumers because of fraud, and it is forecasted that marketers could lose as much as US$50 billion a year by 2025 HOW COMPANIES CAN IMPROVE THEIR DIGITAL MARKETING OPERATIONS Optimize the media team s operating model Develop in-house capabilities Build internal ad technology capabilities Leverage latest technologies 6
7 CAPABILITIES REQUIRED 1 Create new products and business models to optimize the efficiency and effectiveness of their internal operations. 2 A strong cybersecurity approach using deterministic proof and threat modeling to prove human exposure on an impression level. 3 Leverage the expertise from digital marketing strategy and transformation to improve customer experience, operating models and on-going operations, organizational design, and technology strategy and platforms. 4 Align with organizations such as Accenture that offer services through the core capabilities of their media management and digital marketing teams in addition to their patented technologies and strategic partnerships. Encourage industry leaders to support Open Source Industry software development toolkits (SDK) Align with certified publishers to improve a brand s marketing campaigns Collaborate with trusted partners to adopt a new digital advertising approach Keep an eye on emerging technologies in the digital space 7
8 THE ROAD TO TRANSFORMATION China needs a comprehensive strategy to combat the challenges caused by a non-transparent ecosystem, invalid traffic, lack of viewability measurement and brand safety, and inadequate technological capabilities. MMA has recommended to actively develop and promote its software development kit in China. Accenture offers the following recommendations based on our deep knowledge and experience in the digital marketing space: Optimize your media team s operating model Michael Tiffany, CEO of White Ops, says you need to make sure your own house is in order first. We have found huge media companies buy traffic because someone at that organization is going to third parties to buy traffic. 11 All stakeholders must jointly formulate a foolproof strategy and mechanism to fight against these unethical practices. Develop in-house capabilities China must build a long-term programmatic strategy, insource technology, adjust the operating model, improve internal capabilities, build COEs and upskill staff through trainings to increase internal ownership of digital strategy and strengthen governance of agencies. Build internal ad technology capabilities Design a global ad technology stack and bring contracts in-house to increase direct control of digital marketing costs and strategy, while increasing transparency and ownership of data. By doing so, companies can reduce the complexity of the ecosystem and eliminate parts of the opaque fee structures and rebate systems. Adopt the right technology JavaScript is a function-based scripting language and an effective tool to help counteract IVT, measure viewability and find ads around brand unsafe context. It actively gathers information such as page appearance, visitor information and much more that are cross-referenced to find true viewability. Though JavaScript technology exists in China, it is yet to be widely accepted. As compared to Pixel and IP, JavaScript is the most effective technology in preventing IVT, measuring viewability and ensuring brand safety (see Figure 2). Comparison Chart JavaScript, Pixel and IP IVT Brand Safety Viewability Figure 2 JavaScript Pixel Embrace the industry s fraud-fighting resources Companies must register with the Trustworthy Accountability Group (TAG) and become TAG-certified. At a minimum, verification vendors should be accredited by Media Rating Council (MRC), while publishers must have the Demand Alliance for Audited Media (AAM) Quality Certification. The Ad Fraud practices and their implications need to be addressed based on the recommendations of Open Source Industry SDKs. IP 8
9 PROTECT YOUR BRAND AND AD INVESTMENTS 9
10 HOW COMPANIES CAN IMPROVE THEIR DIGITAL MARKETING OPERATIONS Unethical and fraudulent practices are not just making Chinese companies lose considerable revenue, they are also eroding their trustworthiness in the market. The lack of appropriate technological capabilities has always been a concern for Chinese companies in bringing transparency and efficiency into the country s media buying space. Inadequate collaboration between companies and media partners along with the absence of credible certifications for publishers is resulting in an opaque system that is complex and full of malpractices and conflict of interests. Accenture s deep knowledge and expertise in the digital marketing space enables companies to overcome their diverse challenges and help them deliver powerful and innovations solutions to their customers. Our recommendations will help companies drive better transparency into the complex digital advertising processes, weed out invalid traffic and other fraudulent practices, improve credibility and bring technical prowess to build a robust and transparent system. 10
11 COLLABORATE WITH TRUSTED PARTNERS TO ADOPT A NEW DIGITAL ADVERTISING APPROACH Companies must leverage capabilities in the areas of marketing services, analytics services, mobility services and digital transformation to bring overall transparency to the media supply chain. A new media buying model with an inhouse or trusted partner managed service can bring huge benefits, such as taking partial ownership of your agency work that includes its DMP and trading desks, bringing innovation to traditional core models. LEVERAGE JAVASCRIPT TO MANAGE IVT, BRAND SAFETY AND VIEWABILITY Companies need to support safer programmatic purchasing and promote global standards in the Chinese market through technologies such as JavaScript. JavaScript tags are especially coded to measure programmatic campaign viewability. Companies can complement this technology with smart strategies such as contextual analysis to yield the best outcome. ALIGN WITH CERTIFIED PUBLISHERS TO IMPROVE A BRAND S MARKETING CAMPAIGNS Companies need to align with certified publishers to achieve greater transparency in the system. In China, agencies usually hire thirdparty vendors to verify content and processes. However, instead of self-auditing, industry must move toward third-party vendors with credible certifications, bringing better transparency and a new level of trust among publishers and advertisers. ENCOURAGE INDUSTRY LEADERS TO SUPPORT OPEN SOURCE INDUSTRY SDKs In one of the highlights of Shanghai s MMA forum, leaders from various parts of the media buying chain, stemming from agencies to publishers, stood together to form a commitment to better the ecosystem. The result is for example the MMA-approved SDK project toolkit. The toolkit contains documents, technological processes and standards to increase transparency. Mobile media embedded in SDK provides an effective approach for ad validation, helping media outlets prove their own value while building confidence for advertisers media purchase. Industry leaders should enhance transparency in mobile ad ecosystem through advocating SDK, so as to break false prosperity and establish a fair and equitable media evaluation and purchase mechanism. Case Study: How Accenture Optimized a Hotel Group s Programmatic Digital Marketing Capabilities Accenture set up and managed an inhouse trade desk for one of the world s largest hotel groups and managed to achieve a 25 percent higher ROI from programmatic digital marketing compared to external trading desks. We built a new global marketing team, added advanced technologies, leveraged our partnerships and implemented tools to ensure all decisions are revenue-driven based on an ROI model. Accenture played the role of a DSP/DMP/Ad exchange/ network and resolved the hotel group s ecosystem and technological problems. 11
12 TRANSFORM YOUR BUSINESS THROUGH DIGITAL TECHNOLOGIES Accenture Digital has the capabilities in digital marketing, analytics and mobility to help clients unleash the power of digital to transform their businesses. We help clients use digital technologies to deliver more meaningful and relevant customer experiences across all channels and customer segments, as well as to create new products and business models and to optimize the efficiency and effectiveness of their internal operations. We are one of the world s largest end-to-end digital providers with more than 36,000 digital professionals serving clients in 49 countries. With 50 Accenture Interactive design studios, R&D offices and Centers of Excellence, we have developed more than 1,000 mobile applications for 400+ clients in the past three years. We help companies with a multitude of services through our capabilities in Media Management and Digital Marketing, such as Content Development and Management, Consumer Data Management and Analytics, Digital Campaign Optimization, Digital Media Audit, MROI Optimization, Digital Innovation, Analytics as a Service, Technology Implementation and Accenture Assets. Accenture is unique in its ability to bring together leading digital and industry expertise from digital marketing strategy and transformation to customer experience, operating models and on-going operations, organizational design, and technology strategy and platforms. We are number one 12 in world s 15 largest digital agency networks and the world s 25 largest consolidated agency networks. We offer our services through the core capabilities of our media management and digital marketing teams in addition to our patented technologies and strategic partnerships. 12
13 GLOSSARY 13 Impressions: An event where the audience views an ad on the web page. Cost per Mille (CPM): Unit of price for 1,000 impressions on a web page. Programmatic purchase: A process of aggregating and analyzing data to optimize the best target audience for advertisers to reach consumers through digital automation or physical agencies. Direct/Programmatic Direct Buy (PDB), where advertisers purchase impressions directly from the publisher and are measured by CPM. Real Time Bidding (RTB), where online impressions are the bought and sold through real-time auctions that occur in the time while a webpage is loading. impressions. impressions): intentionally deceptive practices that were designed to manipulate legitimate ad serving processes. Viewable impression: a served ad impression that is contained in the viewable space of the browser window based upon pre-established criteria such as pixel size and length of the time the ad is shown. Demand Side Platform (DSP): A software used to purchase advertising in an automated fashion. They are most often used by advertisers and agencies to help them buy display, video, mobile and search ads. Trading Desks: Optimizes strategy and helps advertisers by using the information from DSPs. DSPs and trade desks usually have annual contracts in which the former need to guarantee a certain level of performance. Ad Networks: A market between ad exchanges, publishers and advertisers. It acts as an online platform of arbitrage that aggregates available publisher inventory and sells them to advertisers. The key difference between ad exchange is mostly bulk selling from publishers side and is much more enclosed; usually only a certain group of publishers will use ad networks. Ad Exchanges: A digital marketplace that enables advertisers and publishers to buy and sell advertising space, often through real-time auctions. They are most often used to sell display, video and mobile ad inventory. 13
14 NOTES P&G s Chief Brand Officer at the Interactive Advertising Bureau s Annual Leadership Meeting L2 Insight Report TechCrunch ( 5 China Media Report done in Q1 of ADBUG 7 Advertising: Digital Advertising Fraud (Innovation in Magazine Media ) 8 Advertising: Digital Advertising Fraud (Innovation in Magazine Media ) 9 AdMaster WhitePaper 10 Invalid Traffic Detection and Filtration Guidelines Addendum 11 FIPP Innovation in Magazine Media , Advertising: Digital Advertising Fraud article 12 Advertising Age Agency Report 2016 and All definitions sourced from IAB, Digiday and ADBUG 14
15 15
16 Author CHRISTIAN REQUENA Accenture Consulting, Customer & Channels Managing Director ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions underpinned by the world s largest delivery network Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Accenture has been operating in Greater China for 30 years. Today, the Greater China practice has around 15,000 people serving clients across the region and has offices in Beijing, Shanghai, Dalian, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei. As Chinese economy experiences the new normal, Accenture will bring more innovation to the business and technology ecosystems and help Chinese enterprises and the government to embrace digitization and enhance global competitiveness to succeed in the new age. For more information about Accenture, please visit its corporate homepage and its Greater China homepage Copyright 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
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