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Tag Archives: P&G

Lawsuits Expose the Seemly Underbelly of Programmatic Digital

25 Sep

fraudsterAt the rate things are progressing in digital media and programmatic trading, the tenuous relationships between advertisers, agencies, ad tech providers, exchanges and publishers are about to come unglued.

While many in the ad industry have had their doubts about programmatic digital, this sector has grown unabated for the last several years. According to eMarketer in 2014 advertisers invested 28.3% of their ad budget in digital media. Their projection is that this will grow to 44.9% in 2020, likely topping $100 billion in total spend. eMarketer estimates that 80% of U.S. digital display activity in 2017 will be transacted programmatically. 

Interestingly, since 2014 the industry has become much more attuned to the risks encountered by advertisers when it comes to optimizing (or should we say safeguarding) their digital media investment. Yet in spite of the findings regarding unsavory practices emanating from the ANA’s seminal 2016 study on “Media Transparency” advertisers continue to pour an increasing share of their advertising spend into this media channel.

However, not all advertisers are continuing to embrace digital media quite as readily as they once did. A handful of progressives, namely Procter & Gamble, have begun to rethink the share of wallet being allocated to digital media and programmatic trading. Marc Pritchard, P&G’s Chief Marketing Officer, has been very outspoken in summing up his company’s position quite succinctly; “The reality is that in 2017 the bloom came off the rose for digital media. We had substantial waste in a fraudulent media supply chain. As little as 25% of the money spent in digital media actually made it to consumers.”

Given Mr. Pritchard’s comments it has been quite intriguing to monitor the legal developments in two high profile lawsuits that have recently been filed.

In the first case, Uber is suing Fetch Media, its digital agency suggesting that it had “squandered” tens of millions of dollars to “purchase non-existent, non-viewable and/ or fraudulent advertising” on its behalf. Uber has further alleged that the agency “nurtured an environment of obfuscation and fraud for its own personal benefit” and that of its parent company, Dentsu Aegis Network. To be fair, Fetch Media has denied what it says are “unsubstantiated” claims by Uber which it claims is designed to draw attention away from their “failure to pay suppliers.”  Allegations include that the agency acted as agent for Uber in some markets and executed principal-based buys in others and that they earned and retained undisclosed rebates tied to Uber’s media spend.

The second case involves RhythmOne, a technology enabled media company and its partner dataxu, a programmatic buy-side platform/ applications provider. RhythmOne originally filed suit regarding $1.9 million worth of unpaid invoices. Dataxu filed a counterclaim alleging that RhythmOne “used a fake auction to consistently overcharge” them and suggested that RhythmOne also “procured inventory from other exchanges, and then marked it up,” both violations of their partnership agreement. As an aside, for the $1.9 million in payments that dataxu admittedly and intentionally withheld from RhythmOne, going back to January, 2017, it is likely that dataxu’s clients had been billed and remitted payment to them. Which raises questions as to how and when their clients will be made whole.

Of note, both of these lawsuits delve into a range of topical issues that pose risks to most programmatic digital advertisers:

  • Agencies executing principal-based buys, rather than acting as agent for the advertiser.
  • The retention of undisclosed rebates tied to an agency’s use of advertiser funds.
  • Non-transparent fees and mark-ups being tacked on to the actual cost of media inventory by multiple middlemen (i.e. agencies, DSPs, exchanges).

These are issues that advertisers should familiarize themselves with and address through the development of a comprehensive client/ agency contract. In addition, advertisers must vigilantly monitor supplier compliance with the terms of those agreements to insure full transparency and, importantly, accountability when it comes to the stewardship of their digital media investment.

As these two cases highlight it is dam difficult for an advertiser to accurately assess the value of digital inventory that is being proffered on their behalf by their agency and adtech partners. Beyond establishing what percentage of an advertiser’s digital dollar actually goes toward media inventory, these separate, but related legal actions demonstrate that it is not just a lack of transparency that advertisers must worry about, but a lack of ethics. When it comes to programmatic digital media the American artist, John Knoll, may have said it best;

“Any tool can be used for good or bad. It’s really the ethics of the artist using it.”

There are steps that advertisers can take to both safeguard and optimize their digital media investment. If you are interested in learning more, contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Auction Price Models: Buyer Be Aware

06 Sep

transparencyInteresting article in MediaPost dealing with the vagaries of programmatic digital media auction methodologies.

Rogue players, operating with little or no transparency, without the agency buyers even knowing what auction methodology is being utilized to establish inventory pricing/ select winning bids… Is it any wonder why advertisers such as P&G, Unilever, L’Oreal and others are rethinking their digital media investments? Read More

Economic Growth Projections Raise Concerns for Ad Industry

25 Aug

economyAdvertising agencies are finding that organic growth will be a difficult objective to achieve in the near-term.

One contributing factor comes in the form of marketing spending constraints on the part of advertisers. Why? Organizations are feeling pressure to control costs in the wake of lack luster market conditions that are limiting growth and reducing margins.

The key economic indicator driving advertiser concern is “slow growth” which is impacting many sectors of the economy:

  • GDP growth of 1.2% during the 1st quarter and 2.6% in the 2nd quarter (short of the sustained 3%+ growth rate promised by the White House).
  • U.S. retail sales, excluding auto and gasoline, rose 0.5% in July ’17.
  • Fast-Casual restaurant sales fell more than 3% in the first quarter of 2017.
  • U.S. automotive sales have fallen for seven straight months (Jan. – Jul.).
  • Homebuilder confidence sank, posting HMI’s lowest reading in over 6 mos.

Two CPG giants have announced dramatic moves, which reflect the nature of this challenge. Unilever signaled its intent to reduce the number of agencies on its roster by 50%, while cutting the quantity of ads produced by 30%. Procter & Gamble Co. indicated that it would trim $2 billion in marketing spend over five years as part of an enterprise wide expense reduction initiative.

It is worth noting that there are motivations beyond “cost reduction” driving these decisions by advertisers. Consider fast-food giant McDonald’s, which earlier this year trimmed the number of agencies that it works with from 60 to fewer than a dozen. Their goals included streamlining marketing and improving the consistency of their output… in addition to reducing expenses.

Unfortunately, the impact of slower spending by advertisers is being felt on Wall Street. According to an August, 24 article in the NY Times, WPP which had earlier cut its revenue forecast saw its share price decline by 10.9% in London, with Omnicom Group and Interpublic Group falling 7% and 6.3% respectively in the U.S. and media stocks are generally lower as a sector.

Interestingly, advertisers have made a conscious decision not to fuel marketing spend to counter slowing sales, but to cut spending to protect margins, which is particularly concerning to the ad agency community.

With increased competition from non-traditional players (i.e. management consulting and technology firms) and the continued fall-out from an industry transparency crisis, the lack of confidence on the part of marketers regarding advertising’s ability to drive profitable revenue growth is certainly a worry.

Whether or not this slowdown in organic growth on the part of ad agencies portends a slump, remains to be seen, but at the very least the macro-economic uncertainty will serve to increase industry volatility. Perhaps the industry can find some solace in the words of Yogi Berra the hall of fame catcher and manager of the New York Yankees: “Slump? I ain’t in no slump… I just ain’t hitting.”

 

 

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