Advertisers invest $63 bn in programmatic buying, but industry concerns loom large

WARC, the international authority on advertising and media effectiveness, has released its latest monthly Global Ad Trends report, digesting up-to-date insights and evidenced thinking from the worldwide advertising industry. Threats to the digital advertising ecosystem are the focus of the latest report. 

WARC estimates that $63.4 billion was spent on programmatic advertising worldwide last year, but as little as $17.8 billion (28 per cent) may have actually made it to the ‘working media’ level. 

Programmatic’s role in ad trade is increasing rapidly: two in every five dollars (39 per cent) spent on advertising in the US last year – across all media and formats – were traded by machines. This rate has doubled over the last five years. 

With a continued and rapid rise in digital advertising, concerns have surfaced within the industry. Over half of the senior marketers surveyed by the CMO Council cited social media risks and reputation management as a major issue. One in three highlighted ad fraud, ad misplacement, and viewability as concerns, while a quarter cited media buying transparency and accountability. 

WARC provides the following evidence for each of their main concerns: 

Media transparency and accountability: ‘Tech Tax’ cost programmatic advertisers over $30 billion in 2017

The World Federation of Advertisers (WFA) believe some 55 per cent of investment goes towards what some have dubbed the ‘tech tax’ (the money spent on trading desks, demand side platforms, ad exchanges and data, targeting and verification services). WARC drew a consensus from media buyers, and while the rate of tech tax varied between markets, agencies and stacks, the outcome broadly aligned with the WFA estimates. 

The tech tax would equate to $34.9 billion. The true figure will be closer to $30 billion, as platforms where the tech is integrated (such as YouTube’s Trueview) cloud the calculation. 

After agency fees, of the $63.4 billion in estimated programmatic advertiser spend last year, only $17.8 billion made it to the ‘working media’ level when assuming a 30 per cent fraud rate. 

Reputation management: Brand perception changes with negative adjacency, and one in five consumers will take direct action

One in five (19.5 per cent) consumers state that they would take some form of direct action against a brand if its advertising appeared alongside objectionable content, either by boycotting the brand (10.5 per cent) or being vocal/ raising issue (9.0 per cent). 

43 per cent of senior marketers claim that they have already had reputation problems after ads had appeared next to objectionable content. Almost two in five (37 per cent) have pulled or intend to pull ads as a result. 

Ad misplacement: Programmatic video ads pose greatest risk to brands

Ad misplacement – the risk of a legitimate ad appearing on an undesirable site or next to objectionable content – varies significantly by market, format, and buy type. The average risk for desktop display ads across 11 key markets was 6.9 per cent. 

The issue is particularly prevalent in the Americas. One in ten (10.2 per cent) desktop impressions in Brazil were flagged on moderate to very high-risk inventory, followed by the US (9.4 per cent) and Canada (8.4 per cent). The risk was lowest in Singapore (3.4 per cent). 

Data for the second half of 2017 show that brand risk is routinely higher when the ad is bought programmatically. This is particularly true for video ads. 

Ad fraud: Most ads are not optimised against fraud and remain vulnerable. One in three clicks on programmatic ads is fraudulent

The Association of National Advertisers (ANA) estimates that around $6.5 billion was lost to ad fraud worldwide last year. Total losses could have been cut to $700 million if the entire industry had adhered to safety guidelines. 

Non-optimised ads remain vulnerable. Fraud rates for desktop display ads vary by key market: Italy (16.1 per cent), Germany (15.9 per cent), France (14.6 per cent), US (11.3 per cent), Japan (8.4 per cent), UK (8.3 per cent), Australia (7.7 per cent), Spain (3.0 per cent). 

Aside from fraudulent impressions, click fraud is also prevalent online. Data show that as many as three in four clicks on programmatically purchased 300 x 600 ‘half page’ ads (a unit Google describes as one the fastest growing sizes) are fraudulent. On average, one in three clicks on programmatic ads across all sizes and platforms is fraudulent. 

Viewability: Almost half of programmatic ads do not meet Media Rating Council standard. Only one in four viewable desktop adsis actually seen

Programmatically purchased ads routinely under-perform in terms of viewability when assessed against the Media Ratings Council standard. On average, almost half (46 per cent) of programmatic ads are not viewable. 

Even if the ad is viewable, it is unlikely to be seen. Data show that only one in four (23 per cent) of the desktop display ads defined as viewable by the Media Rating Council (MRC) standard are actually viewed, with only 4 per cent of measured ads seen for more than one second. 

Social media risks: Social media provides the least-safe environment, with 300m+ worthless accounts

10 per cent of Facebook’s 2 billion monthly users are duplicate accounts, according to company reports. The number of fake accounts is estimated to be between 2-3 per cent by Facebook, suggesting that as many as 265 million accounts could be worthless to advertisers. 

Separate research shows that, on average, 16.4 per cent of the followers on Instagram’s top 20 accounts are fraudulent and as many as 15 per cent (49 million) of Twitter’s users don’t have an offline identity. 

Summing up, James McDonald, Data Editor, WARC, said, “The boom in programmatic advertising over recent years has exposed major flaws in the ecosystem, including heightened brand risk, impression and click fraud, and poor viewability and dwell time. This has led advertisers – who collectively paid $30 billion to ‘middlemen’ in the online ad supply chain last year – to reassess the way they invest and keep pressure on the industry to clean up its act.” 

Global media analysis: A round-up of digital threats

  • 8% average fraud rate for non-optimised programmatic ads
  • 11% risk of negative adjacency with programmatic ads
  • 13% of Facebook accounts are worthless to advertisers
  • 20% of consumers that would take direct action against a brand due to negative adjacency
  • 23% of viewable desktop ads are actually seen
  • 32% average rate of click fraud for programmatic ads
  • 46% of programmatic ads do not meet Media Ratings Council standard
  • 55% rate of ‘tech tax’ within the programmatic chain
  • 76% click fraud rate for programmatic half page desktop ads

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