Advertising on the Open Web: fix it or lose it

Media Leaders

The Open Web is getting smaller, despite what we were told. The smartest advertisers will work out how to use the best parts while making the ‘Walled Gardens’ more accountable. 

Once upon a time programmatic media trading was going to be the future of the advertising industry.

Precision audience targeting!

Mass personalisation at scale!

Right ad, right time, right audience!

Data will answer all of our prayers!

Effective, efficient, accountable!

So where are we now? It’s not an exaggeration to say that the promises of programmatic have not been delivered and sections of the market are both dysfunctional and hugely ineffective. Meanwhile the ad tech sector has become bloated and a source of untold wealth for some at the expense of advertisers.

We should, however, be careful to distinguish between advertising on the Open Web and advertising with Walled Gardens such as Facebook. The latter work through an owned and operated business model with integrated technology; the Open Web is a Heath Robinson-esque collection of ad tech providers.

The main similarity between the two is that advertisers cannot tell what’s going on, either because of unnecessary complexity (Open Web) or deliberate obscurity (Walled Gardens). The truth may be out there but it’s heavily disguised. Vanity metrics rule over true measures of business effectiveness.

The net result is that gazillions of ad dollars are being spent blindly. If programmatic lived up to its billing, advertisers could spend a lot less because of the supposed efficiencies, but in a market that gets paid per impression, that’s not what the supply-side wants and they are in the ascendancy. Volume equals handsome profit.

Nobody likes a lower budget, so advertisers bring in procurement to force illusory ‘savings’ through lower media prices for the same spend that directs money to the bottom-feeders,  perpetuates the downward spiral in quality and misuses media agencies.

The Open Web is suffering as ad dollars are increasingly flowing in one direction. According to Ebiquity, the big Walled Garden players will take 50% of all ad money in 2022. Amazon has just revealed its ad revenue for the first time and, as expected, the numbers are vast.

A vast fatberg of ads

Although there are nuances in the data, it is clear that the Walled Gardens are cleaning up. They are taking revenue from offline media and now diverting it from the Open Web, too.

The sharpest guys in the room, Arete Research, have predicted that Walled Gardens will proliferate at the expense of other media, including the Open Web, leading to a meltdown in ad tech and publishing. Who would bet otherwise?

For many advertisers, the opacity of the Walled Gardens is preferable to the opacity of the Open Web with fewer mouths to feed.

It feels like you’re being less wasteful, especially if you’ve read the ISBA/PwC study and Bob Hoffman’s somewhat crude blog that estimated that only 3% of online advertising makes it through the various filters of ad tech costs, ad exposure shortcomings (such as ad fraud) and attention.

The danger with these kinds of estimates is that they are reductive and do not represent the vast range of results that can be achieved by different advertisers employing different tactics, but the overall picture is correct. The market is dysfunctional and rewards the wrong people (i.e. everyone except the advertiser).

Simply put, if only 3% of ads are effective and I see hundreds every day, it implies that there is a vast fatberg of ads that don’t reach me that fall by the wayside. This is possibly the case but the true level of ineffective advertising is unknown and, as things stand, unknowable given the lack of transparency in the market.

In the Klondike-style dash for cash that the Open Web represented over the last 10 years many ad tech providers have launched products that purport to make advertising work harder, but in reality the main beneficiaries have been the ad tech players themselves, with many floating at eye-watering multiples and using the proceeds to acquire other companies to keep the plates spinning before they cash out handsomely.

This week’s announcement of Open Path by The Trade Desk that is offering tools to publishers which cut out some of the ad tech chain may possibly benefit advertisers but is perhaps more a way of reducing its reliance on the traditional DSP to Exchange route to market and on Google’s Open Bidding system. Either way, it remains to be seen how much benefit stays with The Trade Desk or reaches the advertiser.

Given that there has not been enough genuine human traffic to drive their required revenues (especially post-IPO), some have turned to artificial traffic and this has helped make ad fraud a major and growing problem. It is arguable that some ad tech companies add very little value and profit from fraud but their systems are closed to scrutiny so no-one can tell.

The imbalance in market share is a major source of the problems besetting the Open Web. The Walled Gardens have such a dominant share that everyone else is feeding off scraps and when your revenue target looks distant, you turn to other ways to make it. Maybe you do a deal with a big agency group and give them a big rebate, for example. Or you adulterate your web pages with ‘content discovery ‘ material that makes money at the expense of the audience’s experience and intelligence.

Programmatic market in flux

One key factor is Google. The toothpaste is fully out of the tube when it comes to Google’s dominance in search, online display and video. It has been allowed to expand and exclude competition and has cleverly made itself a quasi-monopoly, as various regulators have already concluded. It pretty much dictates the economics of the market, leaving everyone else in the Open Web flailing around.

Google’s decision to phase out third-party cookies to be replaced by its own solutions demonstrates that the entire industry is in its hands. And the removal of third-party cookies is going to favour Google and other players with good first-party data while harming the Open Web.

Meanwhile, TikTok and Snapchat have carved themselves out a strong niche in the younger market and Amazon will continue to take advantage of its market dominance in ecommerce by expanding its advertising products. These sectors have been walled-off and won’t be un-walled.

Only regulation can now address the hegemony of the big Walled Garden platforms and individual advertisers and associations can only make a marginal difference. Yes, consumer power is critical as we have seen in the drop-off in Meta’s fortunes recently, but Meta has the firepower to rebuild, even if it’s easy to be sceptical about the Metaverse (as I am).

The Open Web has prospered through surveillance technology such as cookies but privacy concerns are overtaking traditional tracking techniques.

So the programmatic market is in flux with the Walled Gardens going from strength to strength and the Open Web floundering; but does it matter, what does the future look like and what should advertisers and their agencies do?

Yes, it matters because advertisers need to have a wide range of choice in where to advertise and be able to access good environments to appear in with reliable measurement of delivery. The Walled Gardens will increasingly be opaque as their command of first-party data increases and much of their user-generated content is not where advertisers who value their brands should appear (even before ‘brand safety’ concerns).

As I wrote last month, not all supposedly ‘quality’ publishers deserve to be supported but there are pockets of excellence in the Open Web that could be lost as the market moves further towards Walled Gardens. It is no exaggeration to say that many publishers may not survive the next five years and many ad tech companies certainly won’t.

If advertisers want an alternative to the Walled Gardens they will need to improve the health of the Open Web. They can start by supporting industry initiatives to provide accountability and transparency, such as the current ANA study into the programmatic market (where Tom Triscari and I are assisting).

While the trade associations are acting to achieve collective action, individual advertisers can take control of their supply-chains and advertising delivery. All the tools already exist if advertisers choose to use them.

Links in the wasteful and ineffective supply-chain can be excluded and ad exposure can be improved quickly through a sharper focus on what to buy and at what price, recognising that low media costs are low for a reason.

Advertisers must take responsibility

The media agencies are not letting the grass grow under their feet. Omnicom and GroupM have both launched products that aim to simplify the trading process and provide greater transparency, and these moves should be supported by clients of those agency groups. Open Path from The Trade Desk also reduces the supply-chain.

Curated market places are helping improve the quality of ad exposure and cut the costs of transaction, but they are hard to scale. This shouldn’t be a problem if advertisers believe that the benefits of targeting and better placement deliver improved results, but they still want to spend as much as possible.

Advertisers should recognise that programmatic media trading can work well if the right people and systems are involved throughout the executional chain, but very few advertisers know how to do this. They delegate responsibility too readily and lose sight of the advertising process too early, without the protection of audit rights. This can be avoided, and the better media agencies are showing the way.

The future will undoubtedly be dictated by the big digital Walled Garden players and advertisers will need to work with them in ways that are much more demanding of the platforms and provide better independent measurement of true ROI, but for this they will need new skills both internally and from outside.

In the meantime they should learn how to get the best out of the Open Web and that means making it far less opaque and much more accountable by truncating the supply-chain, trading much more transparently and measuring more accurately. This is all possible today.

In summary, it is in advertisers’ best interests to support the Open Web while they still can. It will decline over time but the smartest advertisers will work out how to use the best parts that will endure while developing an approach to Walled Gardens that makes them more accountable.

Nick Manning is the co-founder of Manning Gottlieb OMD and was chief strategy officer at Ebiquity for over a decade. He now owns a mentoring business, Encyclomedia, offering strategic advice to companies in the media and advertising industry. He writes for Mediatel News each month.

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