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The advertising industry s trust problem
Oct 1st 2016 | NEW YORK | From the print edition
ADVERTISING WEEK, an annual stretch of industry meetings that began on
September 26th in New York, is usually defined by schmoozing and
self-congratulation. This year s event has been marred by suspicion. In the
week leading up to it, Dentsu, a big agency, admitted overbilling by its
digital-ad division in Japan; and Facebook, a tech giant, said it had inflated
the average time people spent watching video ads.
Such revelations have reinforced existing concerns among advertisers that they
are having the wool pulled over their eyes when it comes to online
advertisements. At an Advertising Week panel on trust on September 28th, Bob
Liodice, the chief executive of the Association of National Advertisers (ANA),
spoke of broad doubts among his members.
It was not meant to be like this. Half of an advertiser s budget is wasted,
says the industry s favourite truism, but no one knows which half. Digital ads
were supposed to help. Cookies and other tags would direct the right
advertisements to the right people, based on their activity online. Digital
tools would track which ads inspire consumers to buy products. Indeed, on
September 21st Facebook announced new methods to do just that.
But as advertisers have gained greater control in some respects, they have lost
it in others. One fear is practical: that they are paying for online ads that
consumers don t see, either because they are shown to robots, or tucked in
obscure slots. Two underlying concerns are harder to address.
The first is that Facebook and Google have simply become too dominant. Last
year the pair accounted for more than 75% of online-ad growth in America,
according to Mary Meeker of Kleiner Perkins Caufield & Byers, a venture-capital
firm. Google and Facebook have added a lot of value to our marketplace, says
Mr Liodice. They also raise concerns. Marketers are particularly worried by a
lack of transparency. Facebook s inflated numbers did not lead to overbilling,
but may have prompted companies to advertise more on it. Google and Facebook
have started to allow third parties to verify some data, but many metrics
remain proprietary.
The second concern is that ad agencies are not acting in their clients
interests. In Japan, clients are sort of at the mercy of the ad agency, says
Jason Karlin, who studies the industry at the University of Tokyo. In America
an investigation backed by the ANA found that agencies were buying ad space and
reselling it to clients at markups of up to 90%. Some agencies were also
collecting undisclosed rebates from media firms for buying ad space. The
agencies trade group, the 4As, blasted the report as one-sided .
There are glimmers of change. The ANA has devised a model contract to protect
its members interests. The recent outcry may prompt Facebook and Google to be
more open. Facebook says it will let third parties measure how long a viewer
sees a display ad, though the company has yet to set a date. Some are even
prepared to vote with their feet: one agency executive has two multinational
clients that have already cut their spending on Facebook.
Yet marketers will not abandon Facebook or Google; they are too big. Nor will
firms give up on agencies. In Japan Dentsu s grip on media and advertising is
too tight; everywhere, marketers depend on agencies to navigate advertising s
complexity. So mistrust will persist. You re either a cynic, says Brian
Wieser of Pivotal Research Group, which analyses the industry, or you re not
paying attention.