Big Publishers to Online Advertisers: Trust Us (and No One Else)

Trade Group Says Do More Business With a Small Number of Premium Publications

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Big online publishers have a message for marketers: Stop putting so much faith in technology and realize that we're the only ones you can trust.

This argument runs counter to one of the core principles of online advertising. For several years now, the advertising industry has been increasingly enamored of programmatic auctions. Instead of finding a specific destination, advertisers would plug a few of their key goals into an automated auction system -- show my ads to young women; find me people who are interested in buying a car -- and software automatically places the ads in front of the desired audience anywhere on the Internet.

Automated auctions were a boon for smaller publishers, which rarely attracted attention from major advertisers and often lacked the resources to negotiate bespoke ad deals with national brands. It also turned out to be great for people looking to commit fraud. The dizzying complexity of programmatic auctions allowed fraudsters to hide among the middlemen and siphon money out of the system. This was done, in large part, by creating websites whose traffic was mostly robotic. According to a study conducted by the anti-fraud company White Ops, 11% of viewers of display ads in 2014 were robots. For video ads, it was 23%. The company says this type of fraud will cost advertisers $6.3 billion this year.

Earlier this week, White Ops released a second report examining the web traffic of 32 top online publishers. The study, commissioned by Digital Content Next, a publishing trade group, looked at more than 16 billion of these sites' "ad impressions" -- the number of times an ad is viewed -- on desktop browsers over a period of 53 days this summer. White Ops found that levels of nonhuman traffic were orders of magnitude lower than its study of the broader Web. For display ads, 2.8% of viewers were nonhuman; for video, it was 2.5%.

The latest White Ops report isn't a comprehensive look at the publishers' activity. It didn't include mobile devices, and it didn't look at content syndicated on other websites, which White Ops says generally shows higher levels of suspicious traffic. The company said it chose not to examine these types of traffic for practical reasons.

Digital Content Next jumped on the results to argue that advertisers looking to avoid paying to advertise to bots should simply do more business with a small number of premium publications. "Most of the ad fraud can be reduced by knowing where your ads are going to run," said Jason Kint, the organization's chief executive. "It seems like common sense."

There are signs that this argument is taking hold. During Advertising Week, which is going on right now in New York, executives for media and advertising companies have said they are seeing increased interest in so-called private exchanges. These are ways to use the same automated auction technology in much more restricted settings. CBS, NBC, Conde Nast, and Hearst have established such exchanges in the past two years, allowing advertisers to place ads on various online outlets that they own.

For advertisers, private exchanges offer what seems like a safer alternative to open auctions that can make it nearly impossible to keep track of where advertisements end up. But they also pay more for the privilege. David Morris, chief revenue officer at CBS Interactive, said his company's rates on its private exchange are four times what it charges in open markets. When CBS launched the private market at the beginning of last year, advertisers balked at the price, and CBS found few takers. It is now growing faster than CBS's activity on open exchanges. "We've seen a shift in mentality" among advertisers, said Mr. Morris. "They're looking for inventory that is in a clean, well-lit environment, high visibility, near zero nonhuman traffic, no fraud."

Encouraging advertisers to restrict their number of partners serves big publishers well, of course. At bottom, it's just an argument to stop giving so much money to smaller sites that sell more cheaply on open exchanges. Ian Schafer, chief executive of advertising agency Deep Focus, is skeptical of what he described as a scare tactic to gain an advantage over new competition. "It's more likely that you're going to find more technological solutions to fraud than you're going back to the way things were before," he said.

Even if private exchanges never overtake open ones, the online advertising industry has begun to retrench after a period of delirious optimism about the potential of technology to solve its problems. "Those positives are now outweighed by the negatives that we've allowed to creep in and grow," said Mike Zaneis, president and chief executive of the Trustworthy Accountability Group, an anti-fraud project of the IAB. Programmatic exchanges were initially seen as ways to make the balky system of buying ads more efficiency. "You would never architect it this way."

-- Bloomberg News

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