The UK’s online advertising sector is worth over £13bn with digital ad spend accounting for the majority (57 per cent) of all UK advertising. It is the world’s third largest digital ad market and Europe’s biggest with 19,000 people working in the sector.
Not only are online ads a big source of national revenue, they’re a key part of the ad industry. So the muted response to the Information Commissioner’s Office’s (ICO) scathing report which questions the legality of real time bidding (RTB) has been troubling, especially as this is worth £2.45bn (a sixth of the UK online ad spend).
Two weeks ago ICO said the sharing of internet users’ detailed profiles, throughout the online ad ecosystem, paid “little or no consideration” to privacy, defied GDPR requirements and ignored the rules governing the transfer of data offshoring.
You’d expect to see detailed analysis and media coverage with ad execs facing “robust questioning” from the likes of John Humphreys. With the exception of The Times, Financial Times and the tech media’s dissection of the news, response has been sluggish.
No doubt the fact ad tech uses an unhealthy amount of acronyms has helped the industry swerve focus, so here’s our explanation:
Programmatic advertising which uses software to buy advertising and conduct price negotiation using algorithms
If you’re a brand you task your agency or your internal trading desk with buying ads.
They use a Demand Side Platform (DSP) to buy the ads. A DSP offers inventory (ad space) from multiple providers where the ad placements and bid sizes are set.
The DSP links with Ad Exchange(s) marketplaces where publishers meet advertisers. These allow advertisers to buy from a wider range of sites, rather going directly to publishers. Publishers place their advertising inventory on the ad exchange often using Supply Side Platforms (SSPs). These allow publishers to place their ad space on a variety of ad exchanges to increase competition for their ad space and thus drive up prices
Advertisers and agencies use Data Management Platforms (DMP) which manage campaign data such as cookie IDs and generate audience segments, which are then used to target users specifically with online ads. Theoretically these help optimise campaigns and creative.
The largest volume of ad buys use Real Time Bidding (RTB) where online ads are bought in auctions lasting a fraction of a second hosted on Ad Exchanges or SSPs. The ICO considers RTB to be a problem because consumers haven’t given informed consent to their data being used (and probably have no idea about exactly what info they’ve shared or how they’ve shared it).
Reputational Russian Roulette
Another major challenge is brand safety. Because the ads served following a RTB bid use audience segments, they could be shown whereever these people are online. Some people have unsavoury interests and thus there’s a risk your family friendly brand could appear on an extremist website. Blacklisting sites aims to stop this, yet this will involve constant monitoring.
Vanishing acts and nefarious intent
Lack of transparency is a problem. Publishers end up with between 40 per cent and 62 per cent of each advertiser pound spent (Plum Consulting) and advertisers have very little idea of where their money has gone. Endemic advertising fraud exists, especially with RTB-placed ad campaigns due to the fragmented, cross-border, black box driven nature of much digital advertising. The recent Cheq report said that a third of online ads are affected by fraud, costing $23bn globally.
Ad fraud can come from bots (computers pretending to be people), click farms (where people/machines click on ads), domain spoofing (where publishers’ sites are mimicked and ads bought on them) and cookie stuffing (where extra cookies are received on people’s browsers without their knowledge.)
Staggeringly, considering the budgets involved and the clear involvement of criminals in some parts of the advertising ecosystem, clients have no ability to audit how their money has been spent. Much of the industry is still grappling with transparency.
Securing the eyeballs
RTB on the whole is where the lowest value and cheapest advertising inventory is sold: this is the lowest priority for publishers and advertisers are moving away from this model.
The next step up is Private Marketplace (PMP)/Private Exchange where publishers control who buys their ad space and only sell to pre-approved advertisers and agencies. This allows publishers to protect revenue. The New York Times stopped providing ads on open exchanges for European readers after GDPR came into force. It now sells direct to advertisers wanting to target its Euro readers, and saw its ad revenue rise. Buyers can go direct to the publisher to secure inventory before it’s offered to others.
There’s a flight to quality and the signs are advertisers are moving away from the mass pepper spray of ads at low-cost as programmatic guarantees are sought. This means a direct deal agreed with the publisher where they reserve the inventory for this brand/agency. Thus the placement and quality is guaranteed so advertisers have more control. The price will be more expensive as it’s a premium product.
The ICO has given ad tech companies six months to comply with the regulation. It said that it has done this to protect publishers. Right now there’s complacency from the ad tech sector. This will change when the first exemplar cases are brought as the potential fines of €20 million or four per cent of annual global turnover are eye-wateringly large.
Mark Bembridge is CEO of contextual ad platform Smartology.