“The Sell Sider” is a column written for the sell side of the digital media community.
Today’s column is written by Alessandro De Zanche, an independent audience strategy consultant.
As media brands try to figure out their long-term monetization strategies, which may include paywalls, micropayments or alliances, many still heavily rely on display advertising, mainly programmatic.
In many cases, however, publishers’ digital advertising revenues are declining in lockstep with user attention toward display.
This highlights how unbalanced the programmatic space has become. Publishers – a critical element of the programmatic ecosystem – are being strangled by the way the ecosystem has evolved and is managed.
In today’s programmatic space, advertisers are fed up with a general lack of transparency. Ad tech and media agencies are the middlemen without any relationship with users and their data, yet many eat a big part of the value generated by publishers through high fees (transparent and not), rebates charged along the chain and data leakage, which severely damages media brands and their audiences. At the same time, users are turning their backs on display advertising and engaging less.
All of this begs the question: Is including programmatic display advertising as a core revenue opportunity still a wise strategy for media brands?
Data leakage: the silent bleeding
Going back to my last point, in the past couple of years, I’ve heard less and less talk about data leakage. I see data leakage as the silent bleeding of publishers’ first-party data, which causes huge financial and reputational damages to publishers when middlemen mirror their audiences and sell them at a fraction of the price, leading to misuse and bad user experiences.
I believe the topic isn’t discussed as often because other big issues, such as bots, domain spoofing, viewability and privacy breaches, are easier to detect. There is often no easy fix for data leakage because it is engrained in the way programmatic display advertising works.
There are no figures for the magnitude of data leakage occurring in programmatic, but considering the level of fraud in other aspects of programmatic, the impact is undoubtedly significant.
But now GDPR creates new opportunities for publishers to regain control of their data and relationships with their audiences, though the value of that data is directly proportional to the level of ownership and exclusivity.
If GDPR is an opportunity to reinvent media brands’ audience, data and monetization strategies, why do publishers keep focusing on choices that eat away huge chunks of their revenues either directly or via data leakage?
Changing the rules of engagement
To improve the user experience, we need to change the rules of engagement with users. We must shift users from hunted prey to partners with a true value exchange. The principle of free content in exchange for personal data is, in theory, logical, fair and reasonable, but too much abuse of that data and terrible business practices are forcing the industry toward a radical change, and there is no way back.
What if publishers started radically reducing ad slots, leaving just one or two ad spaces for branding and sponsorships, while moving the focus of commercial interaction to different locations within the user experience?
I don’t mean eliminating advertising and marketing touch points, but repositioning them and reimagining them through different eyes and interaction channels that would protect the user experience and, in the background, first-party data exclusivity.
What if media brands removed most advertising from the content and consolidated user attention for marketing and advertising messages elsewhere, such as in dedicated sections or environments where the publisher acts as a quality connector between advertiser and consumer? What if users were given an incentive for interacting with brands that belonged to verticals for which they have indicated personal interest? What if users willingly provided data and information that allowed for the personalization of rewards they may receive through interacting with brands?
A virtuous cycle
With the user receiving rewards and value from interaction and engagement with brands of interest, a virtuous cycle of exponential data collection and knowledge building – which would be truly deterministic – could be created.
It would eliminate the current cat-and-mouse approach and perception of the user being hunted, which create issues with data quality and accuracy.
That would also represent true direct-response advertising that is permission-based and proactively engaged with, as opposed to today’s force-feeding advertising system.
Publishers could divert the costs from nontransparent and undifferentiating third-party data to investments in value for the user in the possible form of discounts, offers or vouchers. Done in collaboration with brands and in exchange for closely protected data, this would contribute to engagement and success, which would increase advertisers’ demand as a consequence.
Publishers could potentially charge a “cost per interaction.” An offer delivered to a dedicated page, section, widget or inbox, for example, could be much higher than programmatic CPMs.
This approach would also provide other benefits. For example, it could reduce publishers’ dependency on programmatic display revenue sources, which deliver rewards that are a fraction of what they should be, while minimizing media brands’ pivotal role.
It would also improve the user experience, increase trust and make it easier to discuss alternative business models with users. Data leakage would be significantly reduced, making first-party data more valuable. And the CPMs of the limited ad slots would rise because supply would decline, or they could even be monetized on a sponsorship basis.
Stronger, not different, data strategies
Those strategic shifts would not affect publishers’ core data strategies but would rather strengthen them by protecting users, data and revenue.
It would mean adding a complementary way to collect data and deliver the marketing or advertising message on different, but much safer, channels that are free of data leakage.
It would represent a deep change for media brands, which would move toward owning their destiny and data, rather than handing control and monetization to third parties.
It would require financial and human resources. Some might say that not all publishers can afford those. I’d object and argue the survival of the fittest is a better outcome than a slow global decline for everyone.
Business and financial pressures are extremely powerful, but media brands must evolve and fight the status quo. They must reject any attempts from other players in the industry to keep publishers artificially alive long enough to be their source for “ad slots harvesting.”
Many will argue the theoretical benefits of programmatic display, but the fact remains that users are rejecting display advertising and publishers are struggling.
We cannot bend reality to fit agendas. If certain practices slip past GDPR or there are calls for more privacy protections outside the EU, it will be users or the status quo’s financial unsustainability for media brands that force us to change. We’d better be ready.
Follow Alessandro De Zanche (@fastbreakdgtl) and AdExchanger (@adexchanger) on Twitter.
