The Attention Value Dilemma: the need for a new internet
“Subprime Attention Crisis”, Tim Hwang’s book about the digital advertising industry, goes on sale on the 13th October. Tim argues that the industry runs the risk of collapsing, and this would cause huge problems for the broader economy.
It is an interesting thesis.
The way the ad tech industry has worked up until now has created multi-billion dollar companies like Google and Facebook. With such mind-blowing valuations, how could the industry in which they operate be at risk? For the average person in the street, it is hard to fathom what is going on behind the scenes in the industry. It is even more difficult to comprehend how it could all be vulnerable.
The digital advertising industry today is a mess. It is a murky ecosystem where fraud is accepted as part of doing business and supply chains are ambiguous at best. To make matters worse, two players, Google and Facebook, suck up the oxygen of the industry as well as most of the advertising budgets.
The current state of play leaves every stakeholder, be they a publisher, an advertiser or a consumer, feeling dissatisfied.
· Publishers cannot maximize revenue and do not want to share content with platforms like Facebook and Google.
· Advertisers still operate in the dark a lot of the time and have few metrics at their fingertips to gauge how effective their efforts have been.
· Consumers get bombarded with useless ads. Due to recent scandals, consumers are also more aware that they need to protect their personal data and, importantly, that their data has value.
It is far from a perfect system but how did we get here?
Advertising: Before and After the Internet
To understand why things have developed the way they have, it makes sense to look at the impact of the internet on advertising.
In the old days, publishers were often oligopolies, who always had the upper hand in negotiations. Newspaper and TV moguls controlled most of the widely used media (which was all analogue), and advertisers needed to pay up to access it.
Publishers provided the least amount of transparency they needed to get the advertisers to pay the price they wanted. The only transparency for advertisers was through readership or viewership surveys performed by independent companies (e.g. Nielsen) — these were samples and could only provide an approximation of the audience.
Distrust between publishers and advertisers was chronic. As John Wannamaker, a wealthy department store manager in New York City in the early 20th Century, remarked:
“Half of the money I spend on advertising is wasted; the trouble is I don’t know which half!”
The arrival of the internet shook things up, but only to an extent. The internet promised to introduce the transparency that advertisers wanted as digital media can be measured precisely. However, in the early days, the oligopoly publishers were reluctant to provide full transparency.
If transparency would highlight the half of ad spend that was wasted, publisher revenues could halve, if John Wanamaker’s quote were to be believed! As a result, publishers continued to misrepresent or overstate their audience (e.g. counting bot traffic, showing ads below the fold etc.)
Companies like Nielsen migrated their audience measurement services to the internet but full transparency was elusive, and the mistrust continued.
As the internet evolved, the internet advertising industry emerged. From close to 0% in the 1990s, today internet advertising is approximately 40% of total advertising (Zenith Media, 2018). The whole publishing industry has been transformed. The old publishing oligopolies have lost control, but new ones have emerged such as Google and Facebook.
The way internet advertising is transacted has also changed. Unlike print, in the digital world, it is possible to decide in real time what ad to serve via competitive bidding by advertisers. Led by media and tech companies such as Google, Yahoo and Microsoft, fully automated real-time digital advertising marketplaces have emerged over the last ten years. “Programmatic advertising” is the process of enabling digital advertising to occur in real time. There are many components in the programmatic advertising, but in simple terms, there is:
· a range of supply-side solutions which publishers use to offer their advertising slots into an exchange at the prices they want
· a range of demand-side solutions which advertisers use to enable them to buy advertising slots in an exchange at the prices they want
· a range of data service providers used by advertisers and publishers to define the audience provided and sought an exchange which matches the advertising transactions
· a range of analytics providers that verify whether both parties delivered on what they promised.
Today, programmatic advertising represents approximately 80% of US display advertising spend (The Digital Stats You Need For 2018, March 2018). The issue is programmatic advertising was never developed to solve the trust and transparency problems between publishers and advertisers. It was designed to gain efficiencies only. Currently, both sides of the market define the terms on which they want to participate, and transactions are taking place in scale, but the issue of trust and transparency remain.
The cost of the programmatic solution is very high. Intermediaries are capturing a significant percentage of the total transaction value (up to 75% in some cases), so both publishers and advertisers are losers (The AdTech Tax, Pippa Chambers). The lack of trust is embedded in the overall programmatic solution with duplication of the data and analytics function (which adds to the intermediary costs). The new publishing oligopolies (Google, Facebook, etc.) are also significant intermediaries that have market power. This set-up creates a conflict of interest that serves to preserve the inefficient market.
The user has been somewhat forgotten as user experience has suffered. Advertisers bombard users with digital ad-garbage that ends up being distracting noise. One ad costs only a fraction of a cent to show and the only way to increase effectiveness has been to increase the frequency of ads displayed. With minute revenues, publishers are forced to place an increasing number of ads on their content, which only makes the matters worse. As Peter Diamandis, Chairman/CEO, X-Prize Foundation, noted,
“Every second of every day, our senses bring in way too much data than we can possibly process in our brains.”
Despite all the technical advances of the internet and the evolution of programmatic real- time exchanges that attempts to address trust and transparency, the cost is significant as digital advertising is still very inefficient. A substantial part of the problem is related to the fundamental design of the internet.
The Internet’s Fundamental Flaw
The internet was designed to be an open platform to facilitate the free and transparent flow of information. The internet was not intended to be secure — many of the internet security features are retrofitted hacks on top of the original design (which is why cybersecurity is such a big industry today). The internet was also not designed to manage secure/trusted processes, so retrofitting hacks on top of the original internet design is also problematic.
Solutions that exist today are limited and contribute to making the already complicated digital advertising landscape more complex. They are also not a one-size-fits-all solution and are often dependent on one particular vertical or browser.
Instead of a solution dependent on a browser or a particular vertical, there is a need for a solution that can be used across the internet and provides comprehensive protection to the user.
As Facebook and Google are verticals, they can improve the situation within their own vertical, but their business model does not allow them to find a solution for the broader internet. Also, publishers will never feel 100% comfortable sharing data with large companies even if they made a considerable effort to improve the status quo.
Blockchain technology is secure and transparent by design which forms the foundation of a potential technical solution to the trust and transparency issue between publishers and advertisers.
If Blockchain indeed allows for Internet 3.0, “the internet of decentralized value,” where control is in the hands of publishers, advertisers, brands AND audiences in the ad tech context, then the current problem cannot be solved by the existing behemoths. Facebook and Google are verticalized environments and cannot solve this issue for the whole internet.
But blockchain is only part of the solution. To build an infrastructure which allows for such things as data targeting, mediation and attribution to work efficiently, something else is needed.
Human attention is a finite resource. Studies show that human beings can only process between 300–500 branded messages a day. In a world of abundant information and ads, it is user attention that is and will always be the hard currency of the internet.
Despite this, metrics used to measure attention have been based around quantity metrics, not the level of engagement. Focusing on how many times an ad or a piece of content has been served has resulted in users getting bombarded with irrelevant advertisements every time they use the internet.
The Attention Value Dilemma
We live in an attention-economy. However, it is unclear how our attention is valued. The ineffectiveness of digital advertising is due primarily to metrics used to measure the impact of ads on users.
The digital advertising industry measures quality with quantity metrics such as Cost Per Click (Clicks) and Cost Per Mille (Impressions). In this way, the quality of digital advertising is measured by how many times an ad is shown to a user (quantity). Whether the consumer saw the ad (display viewability less than 50%) on the page is an entirely different matter (comScore Advertising Benchmarks). The focus on quantity has opened up an opportunity for a fraudulent activity where bots, stacked/hidden ad placements and inflated view counts are stealing ad budgets. 56% of ad traffic comes from bots, meaning that an advertiser has to prepare for wasting more than half of their advertising budget even before they get to reach the users (The Bot Baseline: Fraud in Digital Advertising, 2018). John Wannamaker was right all those years ago!
Attention is the next evolution of advertising metrics. As Mark Yackanich, CEO of Genesis Media, pointed out: “A metric is meaningful when it provides you insight that allows you to take some action.”
Volume of impressions is a valuable indicator but quality of volume in terms of engagement with the ad is the more meaningful metric for advertisers and, in turn, publishers. It is the measurement of attention combined with the transparent qualities of blockchain that will form the basis of the new internet.
Companies that focus on measuring technology are few and far between. One interesting company is Adcoin (www.adcoin.com), a Delaware company, that has been focused on converting attention into digital currency since 2015. It aligns publishers, consumers and advertisers around a single positive experience. Consumers get digital content and rewards from publishers. Advertisers get direct attention and engagement from consumers and publishers get transactional revenue from advertisers.
Tim Huang’s book will no doubt draw attention to the problematic industry that is digital advertising. Thanks to blockchain and attention technology developed by companies like Adcoin, there is an opportunity to build something that’s a lot better than the current state of play.