The Metaverse? Let’s fix the Internet first
In the first of a two-part article, Nick Manning assesses what’s wrong with a digital landscape dominated by Google and Facebook and why the advertising industry is hamstrung to fix it
You are by now thoroughly steeped in the arcane world of the Metaverse, Web 3.0, non-fungible tokens, cryptocurrencies and the revolution in marketing being brought about by Virtual Reality and Augmented Reality, aren’t you?
If not, you need to shape up. One US commentator suggested that CMOs will already be panicking after Facebook’s name-change to Meta, and, if you don’t have an answer yet for how your brand will take advantage of the Metaverse, you’re ‘NGMI’ (Not Gonna Make It, kids!)
Even one media auditor is jumping on the bandwagon.
This is of course, hyperbole on steroids and the latest evidence of how the marketing industry veers like Dominic Cummings’ shopping trolley towards the latest ‘sexy’ thing.
Supposedly, if you don’t have a point-of-view on the Metaverse, you don’t have a point-of-view.
Let’s leave aside the fact that, just because the Metaverse will be a reality one day, it doesn’t mean that brands should want to force their way into it. People already feel bombarded by advertising and most products are bought by normal people who think Oculus Rift is a character from Harry Potter.
Let’s also charitably assume that the Facebook rebrand as Meta is not just a smokescreen for its failure to control its platform and Frances Haugen’s whistleblowing. It wouldn’t be surprising if Facebook wanted to invent something better than it has got now.
Let’s also ignore for a while that most people like to be with other people in real life, especially post-Covid, and may prefer the kind of shared experiences that don’t require a VR headset. After all, wearables didn’t quite catch on, did they?
While future-gazing attracts understandable attention, the truth is that advertisers are wrestling with challenges posed by today’s digital channels, let alone the still-diaphanous opportunities of the next five years.
Let’s call it ‘Actual Reality’.
Now, if you’re thinking that this is going to be a piece about how good ‘traditional’ channels are, look away now. There is no longer any meaningful distinction between ‘digital’ and ‘traditional’ media; after all, BVOD is as digital as it comes.
People don’t distinguish between channels and nor should advertisers, but there is a world of difference between good and bad media for advertising, and the internet is where many of the true problems lie.
Some digital channels deliver high-quality content in a well-managed environment, sometimes regulated, sometimes voluntarily designed to provide a good user experience.
However, many of the main players in the online advertising market do not fit this description.
Far too much advertising money is being spent with media platforms that are unfiltered, unaccountable, unreliable, arguably complicit in public harm and provide a poor advertising environment.
Many rely on user-generated content that reminds us why we treasure talented professional content creators above Uncle Bob’s fishing photos or opinions on vaccines based on his YouTube ‘research’.
A lot of today’s online advertising looks like a mash-up between a newspaper’s classified column, a Tokyo nightscape and a Moroccan bazaar. The ‘content verification’ material at the bottom of most webpages looks like a deliberate attempt to annoy people for the sake of pennies in the pound.
No wonder overall levels of advertising effectiveness are falling and public trust and favourability in advertising has declined, presumably in line with the growth of ‘last click’ measurement.
However, the biggest issue of all for advertisers is the inversion of the traditional pyramid where advertisers and the media lived in a state of symbiosis, with a mutual stake in the success of advertising.
The advertisers called the shots and the supply-chain served their needs for a modest cut.
Neither of these two conditions applies today.
Now, the big advertising revenue is being made by the large digital platforms who are not responsible for the content they publish, nor accountable for its audience delivery, nor for its performance. It’s just a firehose of impressions, with some peaches but mostly lemons, for which the advertiser pays without the traditional guardrails of industry research or reliable data from the media vendor.
Meanwhile, vast profits are being made by the adtech intermediaries who simply provide the plumbing but have no responsibility for the quality of the ‘water’ flowing through them. They get paid handsomely anyway and can even determine the cost of advertising at will by masking arbitrage.
And while the super-profits from digital that were being made by the media agency networks may have been at least partially curtailed by the move towards transparency, that game is hardly over.
The advertising market is about as dysfunctional as any market can be, where the people who should benefit the most have been relegated to bystanders, and where advertising budgets often disappear into a black hole.
None of this is new, but the industry doesn’t seem interested in talking about it.
Maybe the status quo suits many people and they don’t want to rock the boat, or maybe there is a sense of helplessness. Either way, a lot of blind eyes are being turned.
Let’s consider some of the evidence:
- The advertising revenues of Meta and Alphabet continue to rise stratospherically, despite all of the recent negative coverage surrounding ‘surveillance capitalism’ the dangers of algorithmically-amplifed extremism and sensationalism and the resultant threat to democracy, all fuelled by advertising.
- The market capitalisations of the big adtech companies have reached ludicrous levels; the most recent analysis by the Quo Vadis newsletter shows that a portfolio of listed adtech players have increased their market cap by over 900% since early 2018, ten times the NASDAQ’s growth during that time. Expect more IPOs in the Gold Rush.
- A recent report from cybersecurity firm Barracuda claimed that two thirds of all internet traffic comes from bots, with ‘bad bots’ accounting for 40%. Yet ad fraud detection systems do not seem to reflect this and advertisers are paying for impressions that cannot be real.
- In the Open Web it is well-established that nearly half of an advertiser’s budget goes to the supply-chain and not the publisher, and the other half is depleted by poor viewability, invalid traffic, including fraud, and other exposure problems.
- The ISBA/PwC study showed that the average campaign was appearing on 40,524 websites. It is hard to believe this is the precision ‘personalisation at scale’ that we were promised. Half of the budget goes on paying for this.
- The complex supply-chain does not apply to the Walled Gardens but the lack of visibility, not to mention unreliable reporting, makes the measurement of appearance, audience delivery and performance imprecise at best.
- The absence of cross-media measurement tools makes campaign planning a hit-or-miss affair. The individual platform owners seem reluctant to risk the lucrative status quo by co-operating in multi-platform industry research.
The reality of today’s internet-led media universe is that Social Media is controlled by Meta (and its associated properties) and the Open Web by Google and this is not healthy for society and certainly not beneficial for advertisers.
Yes, alternatives are available for brands but they lack scale and can struggle to compete in a market where Facebook and Google call the shots.
Google’s control of the market is amply proven by its decision to phase out third-party cookies, a move that requires everyone else to rewrite their business plans, leading to a scramble for incompatible identifiers.
Fortunately, there are new signals that long-overdue change is coming, but those signals are coming from outside the advertising industry:
- Bloomberg and The Wall Street Journal are tracking the recently released and unredacted court papers from the potential anti-trust litigation against Google’s quasi-monopolistic market-share in the US online advertising market, including alleged collusion between Google and Facebook to reduce the threat of header bidding. The potential US action mirrors enquiries in the UK, EU and Australia.
- The Economist has covered the murkiness of the online advertising market.
According to the US court documents, the dominance of Google in the Open Web stifles competition, discourages innovation and keeps advertising costs higher than they should be. Google has 75% of the US market and yet charges the highest take-rates, a classic example of a distorted market.
It is an extraordinary irony that Google commands such a large share of the market and yet the ISBA/PwC study in 2020 identified nearly 300 different supply-chains across only 15 advertisers and 12 publishers.
This market is excessively concentrated and yet over-complicated at the same time; a rare feat, but it allows Google to claim that there is plenty of competition.
- Then there is the subject of privacy. The recent findings by the EU that the IAB Europe’s consent pop-up system infringes GDPR is the latest in a long line of stories that expose the fragility of true privacy in today’s online advertising industry.
- In a series of revelations Facebook is finally being held to account for both its failure to moderate extreme content and its monetisation of it through algorithmic amplification. Google has escaped similar scrutiny but its tools enable the commercialisation of such content in the Open Web.
- And finally there is more action over the role the Social Media platforms play in the enablement of real-life crime. They not only fail to prevent it, they profit from it and are not held accountable. This video is nine minutes well-spent if you want to see a thorough take-down of the platforms over this issue.
And last, but by no means least, some industry observers are putting the jigsaw together across all of these dimensions and calling for government action, even if such a respected commentator as John Naughton believes even legislation may be too late and take too long.
The business pages are abuzz with such stories, yet there is a roaring silence from the advertising industry over these egregious market factors.
The stranglehold that the big platforms have achieved means that the advertising holding companies and publishers are in thrall to them, and dare not comment publicly.
It is left to the trade associations and some enlightened advertisers to try at least to stem the tide through the Conscious Advertising Network and the Global Alliance for Responsible Media, but making these initiatives work in real life is hard sledding.
In fairness, it’s a real dilemma for media agencies and publishers. The properties and tools that the big platforms have developed over time make life easier for them and save costs. Without them, the West would be even wilder.
Many publishers have become reluctantly reliant on the traffic generated by Facebook and Google’s search ranking algorithms that encourage short-term traffic generation but sacrifice revenues.
For the media agencies it’s a more benign picture. They can operate more efficiently while extracting margin from the complexity of the market.
And it must be said that many advertisers do benefit from the large platforms, especially performance-led players and SMEs, but without knowing much about how and why.
But for most advertisers internet-based advertising is a constant challenge where the input costs and effort are rarely aligned with positive outputs or it’s just difficult to tell if they are. They just have to keep going and constantly feed the machine.
On a positive note, the advertising eco-system is itself in transition as ‘new economy’ advertisers replace the old guard as the big spenders in the market.
This new breed, many direct-to-consumer or hybrids, will hopefully look for more from the advertising market. They will seek digital-style capabilities from the ‘traditional’ sector and better brand-building capabilities from the digital end of the market.
We can hope that these new players will address some of the present dysfunctionality of the media market by bringing fresh thinking in media strategy and execution.
However, the pyramid won’t be re-inverted in favour of all advertisers in the near future, and so individual advertisers will need to provide their own solutions to the dysfunctionality of the market. There are actions they can and should take to address the difficulties covered in this column.
In Part Two next week, I will provide recommended solutions for some of the pitfalls outlined in Part One, designed around the real-world challenges of today’s advertising market and designed to provide some soothing balm to problems that, taken together, can appear too big to address, even before the Metaverse arrives.
Nick Manning is the co-founder of Manning Gottlieb OMD and was CSO 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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