Prepare for the agency bloodbath as digital advertising matures

As Google and Apple introduce their individual ad blocking measures, Simon Larcey considers how agencies have the most to lose during ad tech's Armageddon.

Armageddon is coming – I assure you. The way advertising is bought and delivered is about to change.

In the last six months, both Google and Apple have introduced measures across their browsers to block advertising. Leading programmatic vendors have moved towards a first-price auction model as opposed to the second-price system.

For an industry that embraces change, the key media buying organisations do not like this one little bit.

The industry talks about transparency, but there is still a long way to go. The ads.txt system, which agencies demand the major media owners use in the name of transparency and fraud reduction, is a move in the right direction. But it is in its early days and yet to be a proven solution, as invalid traffic is becoming more and more sophisticated.

It appears the ad tech vendors are taking things into their own hands. When someone like Google – whose core revenue is from advertising – blocks ads, it says something.

I’ve heard references about the ad tech bloodbath – well ladies and gentlemen, I introduce the agency bloodbath. Unless we practice what we preach, it is going to happen.

Based on the current decisions by Google, Apple and programmatic vendors, we need to work within these new parameters and ensure we understand what they mean and how we can still deliver the goods.

First-price auctions provide better yield for publishers and give the advertisers true perspective on value. If advertiser X is prepared to pay Y – then let them.

The biggest losers in this transaction are likely to be the agencies, as they have to pay what was actually bid as opposed to one cent above the second price.

Would a second-price auction work in any other industry? Can you imagine bidding on a house, where the house owner accepts the winning bid, and then the agent says, “Actually, we’re taking the second price +1.”

Really, how would that go down? The real estate agent would actually do themselves out of commission and the homeowner would get less.

So why is this pissing off media agencies? This should work in an agency’s favour.

Google’s new filters on Chrome get rid of annoying ad formats. Banners that cover content, video ads that start playing, the type of nonsense ad formats being bought in droves over the recent years. The type of ads that less-than-premium publishers use.

Google is dedicated to providing first-class advertising solutions. By introducing this new initiative, it will reduce bad actors and help improve performance. In addition to this, they are helping publishers ensure their advertising won’t be turned off by launching the Better Ad Experience Program.

This is a great initiative, which publishers can use to evaluate whether their inventory and advertising will be filtered. If it is, Google give recommendations on how to resolve and time to make the suggested changes. They are not just cutting you out.

However, if you do not make the changes, you will find all your advertising eventually being filtered out.

Google’s aim is to improve the consumer experience and only deliver non-invasive ads to real humans. In addition to improving the consumer experience, eliminating the annoying ad formats will help to reduce ad fraud and improve performance. Overall, this will make agencies look good and deliver better-performing campaigns for their clients.

Apple’s changes on Safari are a little more sophisticated and hard hitting. Their solution is to outright block third-party cookies. This substantially reduces the ability to cross-website track, which is the basis for current digital advertising targeting.

When this was announced last year, no less than six trade organisations in the US joined forces and sent an open letter to Cupertino, complaining about the changes and the negative effect it would have on the industry. Apple said the changes are meant to improve trust with users, explaining that “users feel that trust is broken when they are being tracked and privacy-sensitive data about their web activity is acquired for purposes that they never agreed to”.

This change by Apple will motivate new, innovative solutions and create alternative ways of tracking users and delivering advertising. Cookies were designed around desktop computers. More people now view the web on mobile devices and it is imperative that a better, less invasive way of targeting be introduced.

Big changes are happening. With first-price auctions, advertisers now pay what they believe to be a fair price. Google has introduced a system to improve the quality and effectiveness of digital advertising, and Apple has improved the experience and privacy concerns of their customers by introducing third-party cookie blocking.

These are all positive changes in the digital advertising space.

It seems to me an unexpected power shift is happening in the media industry. The companies that once made the decisions now have to adapt to suit the technology vendors that are setting the rules for the next generation of digital advertising.

Simon Larcey is an adtech specialist. 


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