Would you give the keys to your kingdom to someone else? Or perhaps the keys to your house, or car, or tricycle? What if that someone else was a traveling snake-oil salesman in a long, dark trench coat? Common sense, right?
But that’s exactly what you’re doing when you give your digital advertising budget to someone else (media agency) to spend for you. And they give it to someone else (ad exchange) to bid for you. And they hand it to publishers, who hand it to someone else (monetization partner) to place for you. And they hand it to someone else (ad tech partner) to optimize for you. Following? No? No problem. Let me explain.
Conflicts of Interest, Misaligned Incentives Are Not Readily Apparent
Most big advertisers have historically given their TV advertising budgets to agencies to create TV ads and place them. But should they be doing the same with digital advertising budgets too? Of course those companies are not experts in digital marketing; they make soup or soda after all. But there are certain things in digital marketing that should be done “first party,” and not handed off to someone else, even if it requires some upfront learning. This is like learning how to ride a bike or how to look at analytics. Once you learn how to do it, you can continue doing it yourself and improving with experience. Digital marketing should be thought of in the same way.
Why is this important? From my 25+ years of experience in digital marketing, and specifically in ad fraud research for the last 8 years, there are many conflicts of interest and misaligned incentives that may not be readily apparent. All of these observations have led me to a “maybe trust, always verify” stance with any partner or vendor. Observe what they do, not what they say. And always make sure you have a way to observe their actions objectively and independently. Getting excel spreadsheets from the vendors themselves, which tell you everything is fine, is not going to be sufficient, especially if they have the motive and opportunity to trick you.
Marketers Give Digital Budgets to Media Agencies to Spend For Them
When marketers give their digital ad budgets to media agencies to spend for them, the top priority of the media agency is to spend it all, so they can make their revenue and profits. They are also afraid that if they can’t spend it all, they will be given less next year. This is what the best of the media agencies would do. Then there are “other” agencies that have been caught giving kickbacks to themselves through foreign subsidiaries. You can read more about this in the Association of National Advertisers’ Transparency Report from 2016 where they euphemistically said “Rebates and Other Non-Transparent Practices [Found] to be Pervasive in U.S. Media Ad-Buying Ecosystem.” These practices continue to this day; some are better hidden than others. The ISBA report from May 2020 found that half of every dollar spent by advertisers actually goes towards showing ads. The rest goes into the pockets of ad tech middlemen, a third of which “went missing.” In other words, the auditors from the study could not even trace where the money went.
The media agencies have the incentive to re-assure their clients that everything is fine, so they can feel comfortable continuing to spend money with them. So the agency sends excel spreadsheets that show how many ad impressions were purchased, the number of clicks, and the low prices procured. The agencies may even send fraud verification reports that appear to show low to no fraud. All of these are designed to convince the marketer “everything is fine, keep spending.” But is everything fine? How would you know if you don’t have an independent means of verifying for yourself?
Ad Exchanges and Publishers Love Big Traffic
The media agency then divvies up the ad budgets to big exchanges that commit to delivering a certain quantity of impressions by a certain time. These exchanges place the ads with their publishers first, but if they are running behind on delivering the quantity of ads they promised, they scramble to buy more from smaller exchanges. The smaller exchanges, in turn, try to get “inventory” from wherever they can find it. And they might end up buying from unscrupulous site owners that don’t have any problem with just creating ad impressions out of thin air using bot traffic. Why not? Bot traffic is the most reliable way to get traffic. It’s incredibly stressful waiting for real humans to come to your site; they may not come, or come in sufficient quantities — and then the publisher is stuck. They already committed to selling a certain number of ad impressions, but not enough humans showed up. They are practically forced to use bot traffic to make up the difference.
Some publishers don’t wait until they get into these dangerous situations. Some outright declare they buy all their traffic. “Sourcing traffic” is a euphemism for “yeah, we’re ripping you off with bot traffic; but because we don’t call it bots, you won’t suspect anything.” Since no one said “sourcing traffic” was bad and since few of the ad verification companies can detect anything wrong with the traffic, everyone does it. Of course large publishers with real human audiences don’t have to do much of it; but small, long-tail sites that don’t have many humans visiting their sites have to buy virtually all their traffic. Some publishers hand off the duty of sourcing traffic to someone else — a monetization partner. That partner gets a share of the ad revenue, so they are motivated to “do whatever” to make more money.
Publishers from MySpace to local newspapers allowed a monetization partner to set up a subdomain on their sites — e.g. trendingvideos.myspace.com — and monetize it for them. What could go wrong, right? The partner got a share of the ad revenue, so they started to cheat by driving fake traffic to the subdomain to generate more ads. As long as the checks kept coming, no one complained; most just looked the other way. This “monetization partner” scheme has been replayed over and over.
Most Ad Tech Is Not Wizardry, Just Smokey Mirrors
We’ve seen it all, from the monetization schemes above to less sophisticated cheating — for example, a content partner serving a big bank advertiser. They created custom content, designed to engage new consumers. In order to show their client how well the content performed, they bought traffic to artificially inflate the metrics. This made it appear that the content got a lot of new customers to engage. But of course, this was just the content partner tricking their own client into thinking everything was working well, so they would renew contracts and give them even more budget. Sadly, in this case, even the bank advertiser didn’t want to hear they were ripped off. They chose to look the other way.
And as I have written elsewhere, high click through rates may not necessarily mean high “engagement” by humans. Marketers think they got high click rates because their ads were so well targeted that humans just had to click – the magical wizardry of hypertargeting and behavioral targeting. What they failed to realize is that bots are very good at clicking too, and are specifically programmed to click ads to trick marketers into thinking they are performing well, so they allocate more budget to it. In fact, fake sites always have higher click rates and viewability; so marketers inadvertently send more budget to fraudsters when they optimize their campaigns.
Marketers, the next time you consider giving your budgets to someone else to spend for you, think again. You may be better off doing some or all of the digital marketing yourself. Otherwise you may be handing it off to someone else that doesn’t have your best interest as their top priority. Look, you’ve seen the movies. Slick promoters are just that – slick. They probably don’t dress in long, dark trench coats and they’ll invite you to their Cannes-yacht parties. See how slick DiCaprio looked in both The Wolf of Wall Street and Catch Me if You Can?