CFOs, You Paid For What In Digital Advertising?

Getty More CFOs are looking into how digital advertising dollars are being spent, and whether those budgets are driving measurable business outcomes. Up till now, CFOs have accepted reports from CMOs that their digital campaigns were working well, and there was low fraud (digital ad fraud, where bots view […]

The ISBA (trade body representing the largest British advertisers) published a report in May 2020 that showed 50% of advertisers’ dollars went into the pockets of ad tech middlemen instead of towards the showing of ads (“working media” as they call it in TV advertising). This study perfectly corroborates two previous studies that found the same result. The WFA (World Federation of Advertisers) study in 2015 and the ANA (Association of National Advertisers) in 2016 both found that between 40 – 60% of every dollar went to middlemen in the supply chain instead of to showing ads.

These ad tech middlemen were selling all manner of services, from data collection and brokering, audience segmentation and targeting, brand safety and fraud detection, and other special sauce tech that had cool acronyms like AI, ML, RTB, DMP, NLP, etc. But they couldn’t explain to you how it worked, even though they reassured you that it worked. But is all of this programmatic ad tech worth the 50% cut? Of course some vendors are adding value, but others are just selling shiny objects marketers were tricked into buying. These are the ones CFOs should look into more closely.

In digital advertising, it’s common to expect “leakage,” sub-optimal characteristics in campaigns that are not malicious, just a waste of money. After all, we are at the bleeding edge of the tech, and sometimes things just mess up. It’s kind of like “breakage,” where retail stores just assume that a certain percentage of their sales will be lost to theft or other forms of fraud.

In digital advertising, leakage includes things like “out-of-geo” ads, where the ads are shown to users not even in the right countries. Other ads went to the wrong target or audience segment — oops, from errors in the set up or due to bad algorithms. Remember ad tech algorithms are buying and selling billions of ads and spending your money for you. Other wasteful ad spend includes “over-frequency” where your ad shows too many times to users and annoys the heck out of them; or day-parting issues, where the entire quantity of ads was blown out between 12 midnight and 4a, leaving none to serve during the rest of the day when humans are actually awake and online.

Most big marketers followed the advice of their media agencies to buy more digital ads through programmatic channels. They said, the marketer could get much larger reach and frequency and lower prices by showing ads on millions of long-tail sites no one ever heard of before. Of course the prices were lower, because those were fake sites. Your ads shown on these fraudulent sites would be shown to bots, not humans. So you’re not getting what you expected (ads shown to humans) and you paid for.

On top of this, some of those sites might trick brand safety, viewability and fraud detection technologies so they all appear legitimate, even though they are 100% fraud. You’re probably paying for brand safety, viewability, and fraud detection services, but clearly those services are not delivering what they promised and your ads are showing up on crappy sites, marked as viewable when they are not, and shown to bots, but marked as “valid.” Should you still be paying for these services, and buying ads relying on their measurements?

The above is still not the worst of it because each of the following cases of outright fraud have been documented over the years. Outcome Health cooked their ad impressions and the books. They plead guilty and paid $70 million in fines to settle a federal criminal investigation for inflating their advertising reach (ad impressions on screens in doctors’ offices) and falsely inflating their revenue. Uber is in the midst of suing 100 mobile ad exchanges for falsifying reports that showed where Uber’s ads ran, and for fabricating documents that claimed ads were placed even though no ads were ever shown.

And finally, something that happens regularly, media agencies keeping unspent digital ad dollars and booking those as their own profits. Here’s how it happens. A brand advertiser instructs the media agency to buy $10 million worth of digital ads. But by the end of the campaign, only $6 million was actually spent. The agency doesn’t want to give the money back and sometimes the brand manager doesn’t want the money back. Through the use of creative media accounting software, CPM prices are adjusted to make it appear the entire $10 million was spent. No one is the wiser.

If CFOs were not aware of some or all of the above, they should look into it. Ask more questions, especially if your CMO and the marketers under them are spending heavily in digital advertising, and buying through the programmatic ad tech ecosystem. If you don’t investigate this, it will be on you for “buying a vacuum that doesn’t suck.”

And finally, something that happens regularly, media agencies keeping unspent digital ad dollars and booking those as their own profits. Here’s how it happens. A brand advertiser instructs the media agency to buy $10 million worth of digital ads. But by the end of the campaign, only $6 million was actually spent. The agency doesn’t want to give the money back and sometimes the brand manager doesn’t want the money back. Through the use of creative media accounting software, CPM prices are adjusted to make it appear the entire $10 million was spent. No one is the wiser.

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