16 May 2016

The Drive to Clean Up Digital Advertising

Advertising trade bodies on both sides of the Atlantic are on a drive to clean up some of the murky practices in the global digital advertising industry and engender more trust and accountability between media agents and their clients.

British trade body the ISBA, which represents around 450 agencies in the UK, is pushing for greater transparency and clearer contracts. It’s also proposing that the digital industry rethinks how contracts between clients and agencies are written to encourage greater transparency and accountability. Across the Atlantic the ANA is tackling similar concerns about the industry’s integrity. Addressing levels of so-called ‘ad fraud’ is one of the issues that they hope to tackle.

According to a shocking report from Distil Networks, published in Ad Age, ad fraud is costing the digital ads industry an estimated $18.5 billion each year.

This means that an estimated $1 in every $3 spent on digital advertising is lost to fraud. This includes fraudulent practices such as click fraud and fake registrations. Some of these need to be tackled across the wider industry – not all publishers are able to identify click fraud by bots, for example. But it’s unclear what motive publishers really have to do so. It’s in the best interest of clients to lead calls to reduce this kind of malpractice. So how do they avoid getting ripped off?

Some of the methods for fighting ad fraud are surprisingly low tech. Analytics malpractice is fairly easy to detect using low-tech approaches but, with many clients handing the data analysis off to their agency, they may not have the skills or capacity to really keep on top of this.

Other types of sharp practice in the digital ad industry can be tackled by improving the way contracts are drafted.

Clients should be encouraged to choose their own auditors, there needs to be a better framework for data ownership, and clients need to be aware who benefits from any rebates from media owners – at present these are not always being passed on to clients. This is why trade bodies are calling for greater industry-wide transparency about these types of practices, in a bid to shed light on unscrupulous practices.

Growing complexity

One thing that’s very clear is that the growing complexity of the media landscape is delivering increasing pressure on digital advertisers but also more opportunity to mislead their clients. This is particularly the case for international advertisers who are managing a media ecosystem across multiple markets and national borders.

An international media landscape of this complexity means there are simply more ways to skew the data, whether mischievously (on the part of an interested party) or just because of the difficulties of gathering accurate data. This can be due to technical difficulties caused by people using proxies or VPNs, which obfuscate data collection.

Offshore rebates have been identified as a particular area of concern for trade bodies looking to improve the industry’s integrity.

These are rebates given by publishers to those placing the ads (often on behalf of their client), but specifically where the payment is being made overseas rather than in the country where the ad is shown.

In markets where rebates are outlawed (including France and the US these can often be disguised as other payments or received offshore – clearly a form of corruption. But the network of parties involved in multi-national ad ecosystems makes it easy to hide sharp practices from clients, regulators and the taxman.

Some on the agency side blame client pressure and competitive forces for a lack of transparency in the industry.

With margins squeezed, ad agencies have to make a profit somewhere. The problem is the lack of transparency and disclosure is bringing the industry into disrepute and leading to a lack of client confidence. Digital advertising is going to become like professional cycling at the height of doping period, when everyone knew everyone else was doing it and there wasn’t any point riding clean. In ad terms, this leads to practices such as incremental commissions, price mark-ups and mysterious consulting fees being added to bills.

Many on the agency side remain hostile to efforts to force greater transparency on the industry, with resistance to the idea of greater sharing of information between agencies and their competitors. The ISBA has proposed more sharing of terms and more information about what rebates the agencies are receiving. In the States its equivalent body, the Association of National Advertisers, is also focusing on the issue of rebates – particularly those received and paid overseas.

These professional bodies remain relatively toothless, and the kind of investigative activities required to uncover all these hidden practices are likely beyond the remit of both parties. But the ANA is serious about its aim to clean up the offshore rebate issue and has hired a forensic corporate investigation company to look into the matter. It’s likely that it will be too difficult for clients to sue based on past wrongdoing by their agencies, but it feasible to see a few agencies discredited. In the competitive media landscape, clients will shop elsewhere if they suspect they have been deceived.

What’s likely is that the activities of bodies such as the ASA is going to result in more client suspicion and greater scrutiny of the results agencies are presenting.

Clients are probably going to want to see evidence of where their ads are being shown and to whom and they’ll be less willing to take their agency’s word for it.

It’s probably good news if the people paying for the digital advertising become increasingly involved in how their money is spent. But the point of using an agency is that the digital landscape is now increasingly complex, and many clients lack skills and resource to achieve the required level of involvement to police their external ad team. Greater education is probably the solution but this is likely to come about slowly. In the short term, clients are left suspicious of whether they can trust their ad agency to have their best interests at heart.


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