Going Clear! The Digital Ad Industry's Supply Chain Revolution Just Happened

April 3, 2017 - There are about 121 billion cans of food and beverage shipped commercially in the United States each year. Do you know how many cases of botulism can be attributed to those canned comestibles?

Approximately one. Not one percent. One. Fewer than .00000000001% of all commercially canned food and drink are seriously harmful to human beings. The food industry's enviable safety record is due to decades of progress in the science, storage, shipping, self-regulation, and regulation of the U.S. food industry supply chain. 

Do you know how many seriously harmful advertising impressions float through cyberspace each year? Between 3% and 37% of impressions are fraudulently generated  by bots, according to the most recent study by the ad tech firm White Ops and the Association of National Advertisers. Add to those the valid ad impressions that appear on porn sites, or adjacent to pirated copyrighted entertainment, or near falsified content and other forms of "fake news," and - well, let's just say the incidence of bad advertising is at least a few hundred billion times greater than the incidence of bad canned food.

And therein lies the digital media, advertising, and marketing industries' challenge, and our goal. We must create a fully trustworthy supply chain. We must make harmful impressions as rare as harmful food. 

The big news of last week is that marketers, after a long decade of ostrich-like ignorance, are finally taking charge of their own digital destiny. JPMorgan Chase, an early adopter of "programmatic advertising," as simple  digital ad automation is confusingly called, looked at the 400,000 sites on which its advertisements run, and decided to do a human-eyes review to determine how many of those sites were safe for its brand. The giant bank eliminated about 395,000 of those sites from its media plan. And JPMorgan Chase discovered that its ad prices did not go up, and its ad effectiveness didn't decline.

"It's only been a few days, but we haven't seen any deteriorating in our performance metrics," the bank's Chief Marketing Officer, Kristin Lemkau, told The New York Times.

Consumer Safety First

The soft sound you hear is the song of sanity that at long last is bringing harmony to the dangerously discordant digital advertising supply chain. It's being billed as a big step forward for brand safety. But it's much more than that: It's an acknowledgement by the marketing and media industries that we are responsible for consumer safety, too.

JPMorgan Chase was following the program I outlined at the IAB Annual Leadership Meeting two months ago, when I told the thousand senior ad industry executives gathered in Ft. Lauderdale, FL that it was up to them as individuals and their companies to "repair the trust."

"This is not difficult," I said. "Simply ask your finance department to create a list of all your customer payables. Then commission a team to review the list to determine who your customers actually are, and what they do for a living. If they’re engaged in child porn or distributing pirated movies or generating neo-Nazi propaganda, or anything else you wouldn’t want your parents, spouses, neighbors, or children to know about, then stop doing business with them. And once you’ve reviewed and cleared your customers, do the same thing with your suppliers."

Rest assured that JPMorgan Chase is not alone in its effort to demand a clean digital advertising supply chain. Procter & Gamble has begun calling major media companies and advising them they must join the Trustworthy Accountability Group, the industry's supply-chain self-regulator, or they will be removed from consideration by the world's largest advertiser. The company is following through on a vow made by P&G Chief Brand Officer Marc Pritchard, also at the IAB Leadership Meeting, to force all its advertising vendors to comply with basic industry standards... or lose its business.

Compliance Calls Surge

Since Mr. Pritchard's speech, TAG - which was co-founded and is co-led by the IAB, ANA, and 4As - has reported a near-doubling of signups for its Registry, the basic "trust program" it offers. The Media Rating Council, the industry watchdog for authentic measurement practices, has reported a surge in inquiries from ad agencies about its viewability standard - a response to another of Procter's demands, that all its agencies follow only the MRC's  viewability standard for digital impressions. In response to a third P&G requirement announced at the IAB event, both Facebook and Google's YouTube have agreed to MRC audits of their measurement practices to assure they comply with industry norms.

"Partners, together, we're making progress and gathering momentum," Mr. Pritchard wrote me and ANA CEO Bob Liodice on Friday. "Let's keep it going!" 

Indeed, the digital publishing industry is. Google, embarrassed by a brand safety imbroglio in the U.K. that spread across the Atlantic, in which legitimate brands' advertisements were found on several dozen terrorism-related and other unsavory YouTube videos, implemented a series of changes to assure the quality of YouTube's inventory. Among the moves: removing flagged videos within two hours instead of 48 hours; adding new filters for advertisers to screen out hate speech, sexually suggestive material, profanity, and sensational or bizarre content; and partnering with accredited, third-party brand safety vendors to assure compliance with the procedures.

But there is much, much more left to be done. It's not just digital ad tech companies that are culpable - agencies, publishers, and the brands themselves bear responsibility. As I said at our January Leadership Meeting, "There is no one culprit in this ugly scenario. All of us in this room play a role: the marketers pressing for billions of additional impressions at unsustainably low prices; the agencies pressuring the publishers for more and more free 'added values'; the publishers so desperate for revenue that they run ads disguised as news and source 'audience extensions' on  unsavory sites; the tech companies whose algorithms drive consumers to deceitful  content; the journalists who complain but remain in their silos, unwilling to understand, let alone participate in correcting, their industry."

By putting its money on the line for standards compliance, Procter & Gamble launched a shot across the bow of entire marketing-media ecosystem. JPMorgan Chase doing a quality review of all its sites and eliminating 98% of its publishing partners  is an equally industry-shaking move. Together, these giant brands are saying the digital advertising supply chain isn't too complex for the average marketer to understand. They are saying that brand safety is a prerequisite for advertising that drives growth, and everybody needs to comply - or else. They are saying that industry associations and the work we do bringing companies together to agree on the standards and practices that should and must bind us matter.  

Leadership Priority

I have no doubt that P&G and JP Morgan Chase will be followed by a wave of big brands taking similar actions to secure the digital industry supply chain on behalf of brand and consumer safety. The Association of National Advertisers, declaring that "marketers must take their industry back," has made supply chain transparency one of the core objectives of its new ANA Masters Circle, an elite group of senior marketers tasked with making changes happen in the profession of marketing.

"It’s time for CMOs to demand a simpler, more-transparent, highly productive supply chain, one that aligns core metrics with goals for incremental business growth," the ANA says in its recently released 2017 CMO Leadership Agenda. "We can reach this objective if each CMO ensures their teams and agencies pursue the recommended actions for transparency, measurement, viewability, and ad fraud — while creating a highly productive, extraordinarily efficient, streamlined supply chain."

I'm pleased to say that IAB has been committed to the cause of supply chain trustworthiness

since I came to this job in 2007 and extolled the importance of "a supply chain that’s more transparent, less complex, and less costly" - so it's great to have the ANA as a partner in this vital endeavor.

Critics already are caviling that new demands for quality will definitively lead to higher advertising prices in digital media. Well, of course they will - for the same reason that food in supermarkets costs more than food that fell off trucks. There is no such thing as a free lunch - unless you want to risk botulism. 

Others fret that one of the glories of the Internet - the long tail of small specialty sites that generate so much valuable niche news, entertainment, opinion, and services - will be disenfranchised as marketers start limiting their programmatic buys to pre-qualified lists of publishers. To which I say: I have little doubt there are a hell of lot of long tail sites that made JPMorgan Chase's cut from 400,000 to 5,000. 

Besides, even the smallest hot dog pushcart has to follow the city's health code.

And finally, in no other industry on earth do retailers put goods on their shelves before checking that they're safe for human consumption. Wal-Mart doesn't do it, Kroger's doesn't do it, and we - the retailers of ideas, journalism, entertainment, and ads - shouldn't do it either. 

It's time for you - you brands, you agencies, you publishers, you tech companies - to build a real civilization in this murky swamp we've invented. It's time for you to follow the industry's health codes, comply with consensus standards, and stop the toxin of ad fraud, piracy, opaque metrics, and fake news. It's time for you to make our supply chain 99.9999999999% safe. 

Those Old Mental Models Got Me In Their Spell

March 17, 2017 - This week, the Interactive Advertising Bureau released the third iteration of our ground-breaking study, "The Economic Value of the Advertising-Supported Internet Ecosystem." The research, undertaken since 2009 by a team led by John Deighton, the Baker Foundation Professor of Business Administration at Harvard Business School and an authority on consumer behavior and marketing, found that digital advertising propelled $1.1 trillion into the U.S. economy in 2016— more than double the contribution it made in 2012, the last time Prof. Deighton explored the territory. The ad-supported internet ecosystem today accounts for 6 percent of the U.S. gross domestic product (GDP), representing a 20 percent compound annual growth rate from 2012 to 2016—five times the average American GDP growth during the same period. More than 10 million jobs, in every Congressional district in the country, owe their existence, directly or indirectly,  to Internet advertising.

But that phrase "directly or indirectly" seems to stick in some critics' craws. Fast Company magazine called the very concept of an ad-supported Internet a "fallacy." The study "counts in its top-line totals revenue and jobs from businesses that rely on the internet but don’t use an ad revenue model," reporter Mark Sullivan complained. The Wall Street Journal joined in the criticism. "The IAB is using a rather broad definition of what an internet business is, counting fully ad supported businesses such as BuzzFeed and Google as well as apps such as Uber," the newspaper grumbled. Jason Kint, CEO of Digital Content Next, objected: "A Harvard study literally categorizes the entire internet as 'ad-supported.' That's the most ridiculous overreach I've seen in a decade."

I think these journalists and trade group executives are hostage to an obsolete mental model - a paradigm that's unfortunately still widely held, and could be a significant obstacle for publishers, agencies, and brands alike.

Boxes and Slots

The concept of "mental models" was developed in the late 19th Century by the philosopher Charles Sanders Peirce, who was also responsible for developing the field of inquiry known as semiotics, the theory of signs. A mental model, Peirce said, is a form of human reasoning, a psychological representation of situations people could encounter or could imagine encountering. Peirce and his successors in the fields of psychology, philosophy, and cognition showed that these images of reality underlie our ability to anticipate and explain the world around us. 

Walter Lippmann's groundbreaking 1921 book Public Opinion - the foundational document for modern journalism, public relations, and advertising - employed the concept of mental models to explain how these disciplines helped people adjudicate between "the world outside and the pictures in our heads," ideally for the advance of liberal democratic societies and open economies. Thomas S. Kuhn, whose concept of paradigms and paradigm shifts in scientific communities transformed our understanding of the history of science, also owed more than a passing debt to Peirce. 

The word "advertising" calls up a mental model, and if you're over the age of 30, it's a fair bet that you share it with everyone in your demographic cohort. "Advertising" conjures forms of marketing communication that sit inside boxes on a page or screen, or time slots within motion picture narratives - ads and commercials, or, in the argot of media and marketing, spots and dots. 

But that's not what advertising is - not any more, and perhaps not really ever.

As long ago as the early 1980s, it was a commonplace that over a 20-year period, advertising spending had done a complete reversal, with some two-thirds of marketing investments having shifted from "above-the-line" media formats (that is, radio and TV spots, magazine and newspaper ads, and the like) to "below-the-line" disciplines, such as consumer promotions, trade promotions, public relations, and direct-response marketing. In other words, even then, advertising wasn't all - or even mostly - "advertising."

But was it ever? A tour through history shows that advertising used to be far more varied than prisoners of the mental model understand. In 1933, Procter & Gamble began directly producing, through its advertising agencies, the soap operas that framed its ads for Oxydol detergent. (One of Procter's agencies, D'Arcy Masius Benton & Bowles, still had a soap opera production facility in the basement of its midtown New York headquarters when I was covering the advertising business for The New York Times in the late 1980s.) Indeed, what we today call "branded content" infused early radio; the Young & Rubicam agency itself hired an unknown comic named Jack Benny and authored his famous on-air greeting, "Jell-o again!", on behalf its client General Foods. 

Another 21st Century digital construct - "native advertising" - was festooned across the first three seasons of "I Love Lucy" on CBS in the 1950s, with stars Desi Arnaz and Lucille Ball, in cartoon form, and live, in character as the Cuban bandleader and his lovably ditzy wife, touting the cigarettes of their sole sponsor, Philip Morris.

The phenomenon of content marketing wasn't limited to broadcasting. GQ magazine was launched in 1931 as Apparel Arts, a men's fashion catalogue and retail trade publication. To this day, fashion magazines happily and publicly skirt the boundary between editorial and advertising content, especially in print and digital photo spreads. It's a central component of their value proposition, to consumers and advertisers alike.

Arguably, the narrowing of advertising into the mental model "advertising" only really took hold in the late 1950s, with the industrialization of marketing communications that coincided with the growth of television. As head of NBC from 1949 to 1955, Sylvester "Pat" Weaver (a former president of Young & Rubicam) developed what became known as the "magazine model" of television advertising, by which multiple advertisers, rather than a single marketer,  sponsored a show. 

This innovation - which was boosted by the "quiz show scandals" of the era, which showcased to regulators and the public the uncomfortably direct power advertisers had over program content - dramatically increased advertising volume and advertiser visibility, even as it diminished their influence over content.  Network profits soared, and the multiple-advertiser model remains the standard for TV advertising to this day. (From the quiz show scandals also emerged the Media Rating Council, the ad industry's standard-bearer for media measurement.)

Industrial Advertising Paradigm

That industrial model of "advertising" transferred itself to the Internet. What is "programmatic advertising," after all, if not the mass-produced, mass-distributed spots and dots transferred from the era of mass media to the era of the Internet? But just as the real and diverse history of advertising belies the mental model that imprisons us, so too does the current reality of digital advertising defy that old mental model. 

It's not just that older concepts like soap operas and talent-voiced ads have found renewed life in the form of branded content and native advertising. Of more import, the lines that used to cleanly separate a product or a service from its advertising and from its retailing are themselves blurring.

I heard this firsthand last month at IAB@MWC, the annual thought leadership conference we convene at the Mobile World Congress in Barcelona, Spain. Leonid Sudakov spoke in great detail about his transition from the position of Chief Marketing Officer of Mars Petcare, overseeing advertising and communications for a portfolio of billion-dollar brands, to a new position as the company's Global President for Connected Solutions. He and the company had recognized that mobile applications and data could not only make their marketing communications more attributable and effective - they could inform, infuse, and even constitute new products and services. Some of those products and services Mars Petcare could give away to its consumers, to create or reinforce a relationship that would enable the sale of more pet food. But some of those new products and services could be sold independently, even becoming whole new lines of business. 

Among those new mobile innovations: Whistle, a "Fitbit for dogs" app it acquired last year that helps pet owners keep track of their pets' workouts. 

Is Whistle a service? A loyalty program? An ad? Content? A game? A marketplace? The answer: It's all of the above. 

I heard similarly from a raft of marketers, across a diversity of categories, who graced our stage in Barcelona. Lufthansa, Red Bull, and Procter & Gamble were among the brands that described the transformation of their marketing functions into innovation and R&D hubs.

Which brings me back to the complaint that the IAB/Harvard economic value study uses an "overly broad" definition of advertising, even including in its calculation of jobs growth and economic contribution companies like Uber, which "don’t use an ad revenue model." 

In Washington, D.C. yesterday, I had the pleasure of unveiling "The Economic Value of the Advertising-Supported Internet Ecosystem" with Prof. Deighton to a packed audience in an office at the U.S. Capitol. In the Q&A session afterward, I asked the Harvard Business School Professor about this critique. How could he justify including companies like Uber and Netflix in his analysis, I queried?

"We are incorporating and trying to encompass all forms of commercial and market  communication, even as they change into forms not previously known," Prof. Deighton said. An app, he offered, is simply a modern form of communication that calls attention to a product; the fact that it may also be part of the product itself is both material and irrelevant. "In times past, if you wanted a car service, you had to look in the Yellow Pages," he said. "The Uber app is a replacement for that, at the same time it is the underpinning of the company's service." 

"Make the Markets"

Or, as Prof. Deighton, who has built courses and an entire inquiry stream at Harvard on "Big Data in Marketing" based on his team's seven years of work with the IAB, says more formally in the study itself:

"One question the study seeks to explore is the extent of the ecosystem’s reliance on advertising to support it. Advertising can be read narrowly as payments by advertisers to publishers, following the precedent established in the pre-internet world. In that world ‘advertising’ did not cover advertising on so-called ‘owned’ media such as displays on the sides of a firm’s trucks and buildings, nor did it cover direct mail, catalog retailing, or telemarketing. However, in the digital economy, this distinction underplays one of the important economic consequences of the internet. The marketing effects of the internet ecosystem, particularly those of owned and earned media, are very substantial. Payments to publishers do not measure all that the internet does to make the markets that create the economy. 

"The internet, in sum, serves many commercial purposes besides advertising in the narrow sense of the word. Websites can serve as storefronts, point-of-purchase stimuli, as tools for conducting research online for offline purchase, and to transact online based on research offline. Websites can aggregate consumer reviews. Consumers can see products promoted and buy them in a single visit. They can download digital products and consume them online. They can share news about their purchases and opinions and review products and services on social media."

(Those who can take time away from tweeting should explore Prof. Deighton's complete description of the study's methodology.)

So, yes, welcome to the trillion-dollar Internet advertising ecosystem. If present growth trends continue, it will be worth $2 trillion to the U.S. within the next four years. Brands, agencies, publishers, and technology suppliers should embrace its diversity, for that is your opportunity to thrive. 

And that's how the mental model crumbles.