March 27, 2017

Online Advertising Is Corrupt At Its Core

Let's forget for a minute about the growing Google scandal.

Let's forget the kickback scandal unearthed by the ANA.

Instead, let's go back to first principles and focus on the nature of online advertising, and why - at its core - it has become a corrupt and dangerous thing.

It all started with a big fantasy. The fantasy was this -- people would want to interact with online advertising.

We were told that online advertising would be far more effective than traditional advertising because it would be interactive. This fantasy lived for a few years until reliable data arrived and it became clear that consumers had virtually no interest in interacting with online advertising. In fact, click rates (the only possible way to interact with online advertising) were so low, platforms like Facebook refused to divulge them.

There are two ways online publishers make money - traffic and clicks. In light of the indifference consumers were demonstrating toward display advertising, publishers needed to find a way to generate traffic and/or clicks to attract advertisers and make money.

A crisis was averted when they hit on a solution: Disguise advertising as something else.

When you see a TV commercial, a billboard or a magazine ad, there is no question what it is. It is an attempt to sell you something. These ads may be annoying, stupid, or tiresome but there is no doubt about the nature of what they are or what their motives are. They are ads and they want to sell you something.

Online advertising is different. It has become devious, non-transparent, and unscrupulous. It is intentionally confusing and its motives are often unclear. It does everything possible to hide its real intent.

Yahoo is in the top 5 websites in the U.S. by visitor count. Here is a a screen grab from this morning's (as I write this) front page news feed.

Let's ignore for a second the unspeakable crap that Yahoo considers front page news. One of the leading stories on this front page is not a news story at all. It is an ad disguised as a news story (it's the Stephen Hawking "story.")

Yahoo also deceives us about the security of our personal information. According to Yahoo...

“...we have a deep understanding of the threats facing our users and continuously strive to stay ahead of these threats to keep our users and our platforms secure...”

But according to The New York Times, in 2014 Yahoo's chief of security recommended some changes that would make their platform a lot more secure by employing "end-to-end" encryption.

This initiative was thwarted by the person who runs their email and messaging services because " would have hurt Yahoo’s ability to index and search message data..." That means simply this -- they wouldn't be able to read our email and target us with advertising accordingly.

The result? Last year Yahoo announced that half a billion accounts had been hacked.

Google earns its money by misdirection. When you search for "Gloves" as I did here, you get an ad disguised as a search result.

Unless you happen to notice the word "sponsored" in the upper right corner, and happen to know that by "sponsored" Google actually means "this is an ad" you would believe you're getting a search result.

Google has made a minimal effort to identify ads (as is required by regulation) including a little yellow "ad" badge on most paid ads. However, the overall look and feel of the ads is so similar to search results that half the people can't distinguish between a paid ad and a legitimate search result. There is only one possible explanation for this - Google is intentionally blurring the lines.

This is not the only way Google strives to deceive. According to The Wall Street Journal, the Federal Trade Commission has reported "... Google Inc. manipulated search results to favor its own services over rivals’, even when they weren’t most relevant for users...the FTC’s bureau of competition found evidence that Google boosted its own services for shopping, travel and local businesses by altering its ranking criteria and “scraping” content from other sites. It also deliberately demoted rivals."

The Wall Street Journal also recently reported that "ads for products sold by Google and its sister companies appeared in the most prominent spot in 91% of 25,000 recent searches related to such items."
The Journal says, "The results show how Google uses its dominant search engine to boost other parts of its business and give it an edge over competitors....After the Journal shared the analysis with Google on Dec. 15, many of the ads disappeared... Google declined to comment on the disparity." I bet they did.

Facebook uses the names of its users to create phony testimonial ads which falsely imply that your friends and family are endorsing the brands in question. This practice amounts to hijacking user identities and disguising them as product endorsements. The ad below appeared in my Facebook feed today.

I have contacted both Nathan Krinsky and Susan Tillem, the people referenced in the ad, and have confirmed that neither of them knew they were being used in this way.

When Mr. Krinsky was questioned about this his response was, "how did they get my name?" He said he had no awareness of their using his name, he did not give permission nor did he "like" the advertiser.

Actually, he did give permission but didn't know it. The permission for them to engage in this deceptive practice is buried deep in the agreement he signed when he opened a Facebook account.

There is only one explanation for this -- Facebook is intentionally exploiting a legal loophole to deceive us into thinking our friends are endorsing products which they are not endorsing.

Many of the ads in my current Facebook feed are identified as "suggested posts." I wonder what language it is in which "suggested post" means "ad?" As usual, they are doing their best to confuse what is an ad and what is not.

Social Media is a gross abuser of reasonable advertising standards. The most dangerous outcome of this has been the perversion of the news industry.

First is fake news. The ability of fake news to make money for its creators is enabled by adtech (the automated buying and selling of advertising space.)  In very simple terms, a fake news story runs on a social media platform, attracts traffic and clicks, which signals programmatic (automated) systems to buy advertising on the site. Below is an egregious example of a "successful" fake news story.

A second corruption of journalism is the ascendancy of clickbait. Since online publishers only make money from clicks and traffic, the use of clickbait tactics to attract traffic has become more economically rewarding than good journalism.

In the current model, good journalism can actually have a negative economic effect. The valuable people you attract through good journalism are tracked and re-targeted to at a lower cost site. Or your story is hijacked, aggregated and republished somewhere else. You'll never believe what happens next!

Third is the development and acceptance of "native advertising" as a legitimate form of journalistic activity. Despite its euphemistically lovely name, native advertising is nothing but advertising disguised as news.

Legitimate news organizations, desperate to make money at all costs, have been seduced into  producing and running thinly disguised advertising pieces masquerading as news. The rot has gotten so deep that some once-reputable news organizations have actually set up studios for the creation of this crap, and are going so far as to oversee its wide dissemination on social media channels on behalf of its clients.

It's hard to overestimate the damage that online advertising has had on the credibility of our news media. The fact that we have a populace that no longer knows what to believe from a media industry they once trusted, is not an accident.

Advertising and marketing people are generally good, hard-working people with worthwhile motives. We want to help our clients and we don't want to damage people or society. But we have been sleepwalking on a slippery slope of deviousness and deceit that has been advanced by a tech culture which has embraced - let's not kid ourselves - an ethos of malleable ethics.

There is decay, corruption and deceit now sitting at the heart of online advertising.

March 23, 2017

Adidas And Television

Adidas made some headlines this week when their new-ish ceo announced that they were no longer going to use television advertising and were going to put all their advertising money online.

The purpose of this move, according to the ceo, was to quadruple online sales in the next 3 years.

A few thoughts:
  • First, this doesn't sound like a change in ad strategy as much as a change in business strategy. 
"All of our engagement with the consumer is through digital media and we believe in the next three years we can take our online business from approximately 1 billion (euro) to 4 billion (euro) and create a much more direct engagement with consumers." 
From this language, it sounds like Adidas is switching from a typical retail sales strategy to an online direct response strategy.
  • The only problem is, from numbers I've been able to dig up, only 6% of their sales are online. Adidas annual sales are about $17b, about $1b of which is the result of e-commerce. The risk-reward element seems completely out-of-whack to me. Do you really want to spend 100% of your advertising money to support 6% of your sales?
  • This change in strategy could cause serious erosion of distribution at retail. I doubt that retailers will be happy about Adidas spending all its money to support its own online store sales and no money to support theirs.
  • Over several decades, Adidas has spent hundreds of millions - if not billions - on TV and other traditional ad media. In so doing it has established a successful and well-known brand. Milking the brand of its value by converting it to direct response may provide some short-term sales lift, but is likely to do damage long-term.
  • By the way, what TV advertising? I watch almost nothing but sports on TV and in the recent past I can't remember the last time I saw an Adidas spot. This means one of three things: either the whole "no more TV" stuff is horseshit, or their media buying is lousy, or their creative is so weak I can't even remember it. 
  • Or maybe he is not envisioning a refocus to direct response and believes he can boost all sales with a purely online advertising effort. Let's do some math.
    In the past year, Adidas grew by 16%. Projecting that growth over the next 3 years they would be at about $25.5 billion in sales. Quadrupling their online sales without growing their retail business would leave them with about $20 billion in sales. So even if they achieved their magnificent online growth, they still have to grow their retail business by about 10% annually to get to that $25.5 number. I'm curious to see how well they can do at achieving 10% annual growth in offline sales with 100% online advertising. This should be fun.

March 20, 2017

The Future Is The Place To Be

When I'm shooting my mouth off at some conference the question I get most frequently is this, "What's the future of advertising?"

I have no fucking idea what's going to happen 10 minutes from now, how the hell am I supposed to know what's going to happen "in the future," whenever the hell that is? For all I know, someday someone might click on a banner ad. Who knows?

But conference goers and press reporters can't help asking that question. They've been trained to do this by marketing yappers.

You see, marketing gurus are usually so confused by all the horseshit generated by their industry that they can't even figure out what's happening now. So they've learned to hide in the future.

The great thing about talking about the future is that you don't have to know anything. You just make shit up and nobody can refute it.

And when the future comes, who's going to remember the baloney you predicted 10 years ago? Meanwhile you make a lot of money and get a lot of press with impressive sounding horseshit.

This strategy also works great for CMOs...
BOSS: Why is business so shitty?
CMO: Well, we're preparing for the future...
Sadly, when the future shows up 18 months later and business is still shitty the CMO gets thrown out on his ass and is replaced by some other nitwit who thinks he knows what the future looks like.

The present, on the other hand, is a dangerous place. It's a place with actual facts. There's accountability. When you say something about the present there's a way to check on it. So if you're a buffoon with a Powerpoint and a bag full of clich├ęs stay away from the present. Nothing to see here. Head for the future - it's your happy place.

One of my personal policies when I do talks is to never talk about the future. The present is bad enough. The only time I do so is to ridicule predictions made by marketing geniuses. Always good for a few laughs.

I try only to speak about what's currently happening. Not horseshit about stuff that may or may not happen in 10 years. A good deal of what I talk about is how different the present is from the once certain predictions of marketing futurists.

I go to a lot of conferences (hey, it's a living) and I have to listen to a lot of speakers. It's pretty easy to know pretty quickly who the bullshit artists are. They're the ones who are telling us what the future is going to be like and warning us that we'd better be ready for it or we'll be left behind. And being ready for it usually includes buying into some baloney they're selling. 

The futurists know nothing that you don't know. Well, I'm wrong. They know one thing - they know how to turn bullshit into a speaking fee.

And they always have an escape valve. When you point out that a prediction of theirs was 100% dead-ass wrong, they give you this -- "just wait, you'll see."

In other words, they kick the can farther into the future. It's a no-lose proposition.

So I have some predictions to make about the future...
  • Social media will replace advertising
  • The 30-second spot is dead
  • Google glasses will be everywhere
  • TV will die
  • QR codes will change advertising
  • Interactive TV will be huge
Just wait, you'll see.