I’ve been thinking a lot about what would be appropriate to write about in advance of tomorrow’s show, where Jeff Green, the arguable leader of the independent ad tech world, will be coming on to our podcast (watch here)
TIDs have been beaten to death, though I know a lot of you will want to talk about them. Extending the topic, people may want me to try to talk about TTD’s press releases and what they’re working on.
But I think you’re going to get lots of that. I think the thing that is worth doing right now is trying to contextualize the moment. And if we do, I think it will provide all of us with clarity.
Before I dig in – a disclaimer. This article is not meant to condemn or pass judgment on any of these practices. If I’m being honest, I personally have both benefitted from them and been massively damaged when the industry shifted to do away with them. So don’t think of this article as judgment from an ivory tower; rather, this is my attempt at a relatively objective commentary on celestial bodies.
The thesis : The past 15 years of ad tech have included a series of improvements and paradigm shifts towards quality (damnit, Erez, might’ve been right about this whole thing, but don’t tell him).
Quality Reckoning 1 - Domain Spoofing & Toolbars
Originally, the first big scandals were related to domain spoofing (this was prior to header bidding existing). In the original ad tech platforms, in order to deal with the fact that ad tags sometimes rendered into unfriendly/hard iframe environments (sorry, this is a relatively technical concept – the idea behind a hard iframe is that the code executing inside of the iframe can’t talk to anything outside of it. Think about your ad rendering inside of a box that isn’t allowed to know anything about what’s outside of it) those ad tags allowed you to hardcode a domain into the tag. Basically, you could type “&domain=” at the end of the tag and the ad exchanges would pass that domain into the bidstream to be purchased from buyers.
Can you guess what there was a ton of in this era? That’s right, domain spoofing and toolbar traffic. Exchanges were flooded with Facebook inventory, Yahoo inventory, you name it – whichever domains drove the highest CPMs (I’m sure there’s a Fou out there who will reply and say THIS IS STILL HAPPENING!) produced by people fabricating the domains using &domain=. This is because the market at the time basically just wanted to “buy domains” for certain brands – and the technology that existed could be exploited to meet those demands. There also wasn’t a lot of post-bid detection, and as long as the report said you served to “foxnews.com” the buyers were stoked. So, participants in the ecosystem realized they could make meaningful amounts of money by “misrepresenting” their inventory – or in the case of toolbars, just not disclosing that it wasn’t being sold by the publisher itself, rather by another technology provider.
There was a massive reckoning. AppNexus shut off dozens of ad networks and significant portions of their traffic. Many ad exchange volumes precipitously declined. Companies went out of business and the ecosystem transformed. This wasn’t done because the sellers wanted to – sure some publishers were mad, but other “sellers” were the ones reaping the benefits! The change was made because buyers demanded it. And, at the end of the day, as Brian explained with many graphs – what happened was a redistribution, not tremendous shrinkage. And this will be a refrain if we look closely –
Effect of tactics on Buyers : Uncertain what they’re buying, often buying something that isn’t what it says it is. Less effective optimization.
Effect of tactics on Publishers : for publishers being spoofed, money going to spoofers and not to them. For rest of publishers, money being routed away from their supply.
Reckoning #2 - MFA
The next reckoning in my wildly incomplete history, other than the introduction of header bidding which wasn’t really a reckoning, was MFA (MADE FOR ADVERTISING). The MFA business model consisted of driving traffic to websites with hyper-engaging content (all you elitists out there, slide shows are still entertaining. Instagram is basically a giant slide show and Snapchat is disappearing slideshows) with very high ad density.
These websites came into being because buyers, at the time, wanted viewable inventory on specific audiences. Those were the only two things they were looking for – and an intelligent MFA site could deliver each of them at scales unprecedented on other websites. In case any of you were wondering, the largest MFA operations I’ve seen were capable of driving between 500 million and 2 billion advertising impressions per day. Comscore top 10, easy.
However, based on data, some buyers decided that MFA wasn’t providing incremental sales. A number of players entered the space to clean up MFA, and low and behold, MFA was rooted out of the ecosystem. Once again, certain companies went out of business. Certain sellers are making a lot less money today because we rooted out MFA. Once again the predilections of buyers dictated the behavior of the market – both in the creation of MFA, and then in its destruction.
Effect of tactics on Buyers : a combination of bad press and less-than-stellar performance.
Effect of tactics on Publishers : spend routed away from non-MFA publishers due to volume bias.
Reckoning #3 - Bid Jamming and ID Bridging
Which brings us to the current moment. The buy side has gotten progressively smarter, albeit slowly, over the past 15 years. The current paradigm on the buy side is still buying user IDs – with the caveat that the sites aren’t classified as MFA (most buyers still haven’t fixed outcomes, which would be the right way to stop buying MFA). Within our current infrastructure, there are two ways to get this money that have absolutely nothing to do with your website or your traffic – 1. Send more of those IDs (ID-bridging), 2. Make your website seem bigger than it is, so that your surface area to the bidder helps you get around throttling and pacing.
What you’ll notice is that each of these phenomena have gotten progressively less egregious. The ecosystem is undeniably getting cleaner and cleaner. Domain spoofing was basically outright fraud, MFA was certainly not outright fraud (I will fight people on this one, I wrote an article about it), but it was deemed unsavory, and ID Bridging and request inflation to get around algorithms are decidedly not fraud at all (well, some id bridging is fraud lol) – they are, however, practices that make it harder for discerning buyers to do their job, so it’s not a surprise that buyers don’t like them.
Effect of tactics on Advertisers : Uncertain what they’re buying, often buying something that isn’t what it says it is. Less effective optimization.
Effect of tactics on Publishers : Volume bias – publishers not rewarded on the performance of their inventory, rather on the ability to build a stack that duplicates and id bridges as much as possible.
This Is The Publisher’s Moment
I think at this moment we are presented with an opportunity to slay the dragon at the heart of what has hurt publishing on the web. At its core, programmatic disconnected the user and the advertising experience. What I think many have failed to realize is that the true destructive component of this is not necessarily buying “your audience” cheaper elsewhere – the real destructive component of this is that buyers became convinced that just buying “the user” was enough.
This is because programmatic has been, admittedly, built like shit. It’s been hacked together by systems that weren’t built to do this, all under the suppression of a monopolist who had everything they needed to make it not work like shit. I believe the most pernicious knock on effect has been that inventory description has been left by the wayside – and buyers exclusively optimized to UserID x Domain for many, many years. All of the inefficient (and totally rational) tactics above are downstream of this highly unintelligent and mediocre buyer preference.
This meant that all inventory itself was a commodity. This is why MFA worked. This is why the only way to increase your CPMs seems to be to directly negotiate. This is why ID bridging works, this is why bid jamming works. It’s because the primary determinant of CPM in this ecosystem is the user ID and maybe domain. In that world, all banner slots are made equal – it’s the user who drives the value. How are we at all surprised that ad density is a mess? The only way to make more money is to place more ads! When you get one of the valuable users you need to squeeze as much value out of them as possible (Gamera measures this BTW, I promise around 20% of a publisher’s users make all of the money). Simultaneously, if all ad slots are the same, how do you get share of voice? You get your commodity ad slots in front of the bidder as many times as humanly possible.
Sincera and Jounce, to their credit, began the trend of changing thinking about this. Things like ad to content ratio being valuable and correlated to outcomes is actually a big fucking deal. The foundation is laid for buyers to start actually evaluating advertising opportunities and not just evaluating users – and Gamera (my company) exists to continue this precise trend by adding real time metrics and some other fancy stuff into the mix to complement systems like Sincera or Deepsee.
As a corollary to this, buyers also want to become more intentional in what they’re buying. In a world of duplication and ID bridging this gets harder and harder, because discerning which unique advertising opportunities are which, and then buying the ones you actually want while dealing with pacing, is inherently difficult in such a noisy environment with all kinds of throttling.
This “cleanup,” if it actually happens which I hope it does, I believe will have very similar effects to the MFA cleanup. Just as MFA publishers winning budgets meant that those budgets didn’t go to other publishers, technologies that are superior duplicators and bridgers take budgets away from technology platforms that aren’t superior duplicators and bridgers. And if you as a publisher aren’t working with those platforms, or are limiting the number of exchanges you’re working with because reasons, you’re probably getting less of the pie than you would be in efficient equilibrium.
I think it is important to internalize this. The budgets are finite. Right now, we have an environment where supply competes on the ability to ID bridge (normally this is the purview of the middle men) and the ability to duplicate (which overrides bidding algorithms), not on the quality of the advertising experiences and the outcomes they drive. The drive towards quality that Jounce and Sincera tried to initiate was partially foiled by the fact that even with the data, the decision systems were being overridden. You don’t need to be a psychic to see that buyers don’t like that, and they’re going to do whatever it takes to unravel those things. I actually don’t think the minutiae matters – rather in this moment, we have practices that actively make it more difficult for publishers with quality advertising experiences who aren’t good at duplicating and bridging to be discovered by buyers, and we have a number of buyers who are coming out and saying that they aren’t up for an ecosystem that works that way anymore.
This is, in my mind, an undeniable good. There will be casualties as there have been in every quality paradigm shift. But wow – this might be the one. This might be the one that restructures the ecosystem so that it actually starts to perform. This might be the moment that grows the digital advertising pie instead of finding a way to redistribute branding budgets amongst those who are the best at manipulating the systems involved. I’m not so naive as to think that there won’t still be people who figure out new tricks, and there are always tricks to figure out. But between the line the trade desk is taking and curation (SSPs are a fantastic place to seat logic that also undoes duplication and id bridging BTW), I’m feeling as optimistic as ever. At least that’s what I’m betting my business on, and I’m planning on bringing as many publishers as I can with me to the promised land. And even if you’re a cynic about the big players, I think the toothpaste is out of the tube for this – the ability to compete on quality amongst the buy side companies will be a forcing factor for the rest of the ecosystem.
The equilibrium for facebook is around $20 CPM. That’s how well their inventory performs – that’s how much they can charge buyers, pocketing all of it themselves. And it’s ads on UGC. Can you imagine if programmatic reached an equilibrium even 50% of the way there? It isn’t impossible. We just need to break out of the old ways of doing things. I will leave you with a fact that should haunt all of us at night – Facebook has about 5-15% of the traffic of a large ad exchange. And it commands 4x the banner budget of our entire industry. Maybe it’s time to hold the “experts” to account for the fact that the ads on our websites aren’t working.