March 30, 2015

Part 2: Will Advertising Corruption Scandal Explode?

On March 5, Jon Mandel, former CEO of Mediacom (owned by WPP) told an audience at the Association of National Advertisers Media Leadership Conference about widespread U.S. agency kickbacks.

He presented a document which purported to show how some of the kickbacks work...
"...a media agency agreeing with an unnamed media vendor to an industry-standard 2% commission, but as much as 9% in volume-based incentives." (Ad Age)
Since then, reports of kickbacks have appeared in The Wall Street Journal, and several other venues including a front page story in Ad Age, that reported...
" 'It's really ugly and crooked,' said one ad-tech executive who described receiving such requests."
" 'It's the reason I left,' said a former U.S. media-agency executive."
Ad Age reports,
"U.S.-based marketers are being kept out of the loop about billions of dollars that agencies make back from deals on clients' behalf, according to industry executives, whether in the form of opaque markups, kickbacks or undisclosed rebates."
Mandel said,  
"Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?"
According to The Wall Street Journal...
"Marketers say they’re increasingly worried agencies are allocating ad dollars in ways that best suit their own businesses, as opposed to those of their clients."
Brian Wieser, Senior Research Analyst at Pivotal Research Group says...
"...most of the activity involving undisclosed activities is likely concentrated in digital." 
But kickbacks are only the tip of the iceberg of fraud and corruption in the digital ad business.

As we have said on several occasions, ad agencies have become the web's lapdog -- irresponsibly exaggerating the effectiveness of social media marketing; ignoring the abominable results of display advertising; and glossing over the fraud and corruption that has contaminated the web. Why? Follow the money.

Online advertising is a gold mine for agencies. WPP, the world's largest agency holding company, gets 30% of its revenue, over $5 billion, from digital. It is aiming for 45% over the next few years.

Perhaps the most astounding part of this incipient scandal is that the victims seem determined to hush it up.

While Ad Age reports that "hundreds of millions" of dollars are being siphoned from advertisers, a few days after Mandel's talk, the Association of National Advertisers issued this pathetic statement,
"...we regret any impression that agencies in general are engaged in questionable activities and apologize to those who were offended."
Gag me with a volume-based incentive. Mandel never claimed these practices were universal.

Apparently the victims are afraid that a thorough investigation will expose them for the clueless buffoons they are. After all, if their corporations lose a few hundred million here and there, big deal. Just as long as they don't lose their jobs.

The big question is whether this will erupt into a full-fledged scandal or just fade away behind a curtain of double-talk and indecipherable accounting? The answer lies in discovering whose interest would be served by exposing the corruption of the current system:
-The agencies? Hell no.
-The online media industry? Hell no.
-The marketing doofuses who have been asleep at the wheel? Hell no.
None of the principles have much of an incentive to make trouble. The only hope lies with the press.

If the mainstream press gets on it, and governmental agencies take notice, something useful might happen. Otherwise, corruption as usual.

By the end of this decade online advertising will be as big as TV advertising. The advertising and marketing industries are too deeply invested to make much of a fuss about its unsavory, criminal underbelly.

Will the advertising corruption scandal explode? Count me as officially skeptical.

March 26, 2015

Will Advertising Corruption Scandal Explode? (Part 1)

Two years ago we wrote, "Not only are online advertisers getting screwed by crooks, some of them are also getting screwed by their agencies."

This is suddenly a hot topic.

For over two years, the Crack Investigative Team here at The Ad Contrarian Worldwide Headquarters has been reporting on corruption and fraud in advertising -- particularly in the online ad industry.

In June of 2013, we said,  
"This is the biggest advertising story of the decade, and it's being buried."
(A bibliography of some TAC writing on this story appears below today's post.)

Billions of advertisers' dollars have been stolen, wasted, and misappropriated while everyone who should have been acting responsibly turned a blind eye. There was just too much money at stake.

Meanwhile, pathetically naive and impressionable marketers continue to throw good money after bad down the online advertising toilet.
- They don't know what they're buying
- They don't know who they're buying it from
- They don't know what they're getting
- They don't know how much they're paying
If the victims weren't so fucking dumb, it would be sad. But, honestly, I can't help but be amused.

There are several types of fraud being perpetrated on online advertisers, here are a few of the major ones:
1. Phony traffic - Bot-nets generate billions of phony visits to websites daily, which advertisers pay for.
2. Phony clicks - Likewise
3. Phony websites - Sometimes called "spoofing," phony websites pretend they're real websites and sell imaginary ad space to knuckleheads
4. Invisible ads - Euphemistically called "unviewable," these are ads that "technically" appear but are invisible.
5. Agency kickbacks - Suddenly, the most topical corruption issue. 
The wonderful thing about all these scams is that everybody thinks it's the other guy who's the idiot. Everyone assures their clients and their management that it's the other guy being screwed and "we have processes in place to protect ourselves."

Yeah, right.

Meanwhile the crooks and sleazebags are laughing all the way to the bank.

In the past ten days, the trade press has finally come out of its inexplicable torpor and has started to report on the some of the issues, particularly the agency kickback issue. Will this explode into a full-fledged scandal?

Some thoughts on that will appear here on Monday.

Some pieces on this subject -
Online Advertisers Getting Hosed 4/29/13
Time To Clean Out The Stables 5/2/13
Online Ad Criminals 9/16/13
Alarming Online Sleaze Factor 10/16/13
The Scam What Am 11/14/13
Epic Screwing Of Online Advertisers 2/27/14
NYTimes: 57% Of Online Video Ads Unviewable 5/6/14
Ad Industry Is The Web's Lapdog 5/19/14
Woeful Weenies Of Traditional Media 6/2/14
Amazing Tale Of Online Fraud 10/15/14
Digital Clown Act In Big Trouble 10/30/14
What Every CEO Needs To Know 12/8/14
Agencies Cheating Clients, Says Former Mediacom CEO. No Shit,Says Me. 3/9/15
The Difference Between Waste And Fraud 1/14/15

March 23, 2015

What The Brand Babblers Don't Understand

Imagine for a second that you're the brand manager for BigSave supermarkets.

Your job is to build the BigSave brand so that customers prefer you to SaveMore, and HugeSave.

You know how wonderful BigSave is. You want to spread the word. You want consumers to see inside your brand. You want them to know how responsive you are, and how pleasant you are to engage with, and how willing you are to work with them and help them.

Building the brand is absolutely essential to your career and central to your life. Once you leave the house in the morning, it is the most important thing you do.

Now let's talk about the average consumer. The average consumer couldn't give a flying shit about BigSave.

If BigSave exploded tomorrow, the average consumer wouldn't bother picking up the donuts.

The average consumer has other things on her mind. Like why she gained 2 pounds last week, and why her father is looking pale, and why the fucking computer keeps losing its WiFi signal, and why Timmy's teacher wants to see her next week, and what's that bump she noticed on her arm?

The point is this: our brands are very important to us marketers and very unimportant to most consumers. Please read that again.

Are there some brands each of us are attached to? Sure. Are there brands we buy regularly? Sure. Is our attachment to a handful of brands strong and nonsensical? Sure. The problem is we buy stuff in hundreds of categories and are strongly attached to only a few brands.

The idea that our attachment represents "love" or any of the other woolly nonsense perpetrated by brand hustlers is folly.

The clearest demonstration of the weakness of the cult of brands is the dismal performance of social media marketing. We were promised that social media would be the magic carpet on which our legions of brand advocates would go to spread the word about the marvelousness of our brands, and would free us from the terrible, wasteful expense of advertising. It has done nothing of the sort.

In fact, it is often the exact opposite. Social media is usually where people go to scream about the mistreatment we get at the hands of companies. And where companies go to beg forgiveness.

A recent study reported that among a brand’s fans, only .07% — that’s 7 in ten thousand — ever engage with the brand’s Facebook posts. On Twitter the number is even lower — 3 in ten thousand. And these are not average consumers. These are the brands so-called "fans." (This is a correction from the original post which had the number at .7%)

A study I quoted here recently by Havas claims that “in Europe and the US, people would not care if 92% of brands disappeared.”

Having a successful brand is very important to a marketer. But the idea that it is anything like that to a consumer is folly. Brand babble is just the faulty conflation of marketers' needs and consumers' interests.

Modern marketing is operating under the delusion that consumers want to interact with brands, and have relationships with brands, and brand experiences, and engage with them, and co-create with them.

Sorry, amigo. Not in this lifetime.