At the World's Biggest Ad Conference, Everyone Was Talking About "Trust" Too | Agency Daily: Advertising Week New York

The old line in the ad business was that nobody knew where 50% of the ad budget went to waste. Now the digital age is here, and WeChat official accounts tell us 90% of it went to the wrong place.

On the afternoon of September 29, New York time, a panel called "It's All About the Story" ended, and with it Advertising Week New York 2016.

This was the 13th Advertising Week New York. Over four days, 1,153 American advertising people came to the city — and that is only the count of those who spoke at the nine venues; the number who attended was far higher. Its sheer size is why Advertising Week New York is called the largest advertising conference in the United States, if not the world.

Speakers this year included AOL chairman and CEO Tim Armstrong, General Motors chairman and CEO Mary Barra, Hearst chief content officer Joanna Coles, Mashable CEO Pete Cashmore, W+K partner Colleen DeCourcy, Facebook COO Sheryl Sandberg and Google president of the Americas Margo Georgiadis.

Jeff Hinz, managing partner of MediaCom USA, part of WPP's GroupM, has come to Advertising Week New York 13 years running. This year, he told QDaily, every conversation "was about how to measure a client's return on its investment in digital media" — on stage and off it.

"Everyone is talking about 'trust,'" Melissa Lea, US director of operations at the market research firm R3, told QDaily.

Both remarks describe the same thing. Because nobody can reliably measure what digital marketing does, the work between buyers and sellers up and down the chain is getting harder, the gray zone in between keeps widening, and the crisis of trust is an open secret in the trade.

Next to the WeChat readership fraud exposed in China over the same few days, the timing may look like coincidence. Look closer, though, and behind both sits one problem that the advertising business everywhere — China and the United States included — needs to take seriously.

Trust is not the only thing troubling Madison Avenue. Plenty of people are also worrying about what an ad agency is supposed to do in the future, what kind of consolidation the industry faces, how programmatic buying and native advertising — the two agreed-upon trends — will develop from here, and what part media will play as they do…

But the biggest problem is the trust crisis that has broken out in American advertising

The crisis has already arrived, and nobody in the American industry denies it.

In June, the Association of National Advertisers (ANA) published a "transparency report." The study, which the ANA hired K2 Intelligence to carry out, interviewed 150 American advertising professionals, including 38 who had worked or were still working at agencies. It found the US industry riddled with "numerous non-transparent business practices, including media agencies taking rebates."

Three days before Advertising Week opened, The Wall Street Journal broke the Facebook video ad scandal: for two years Facebook had told advertisers and agencies that the average time users spent watching video ads was 60% to 80% higher than it really was.

At almost the same moment, Dentsu apologized in public for overcharging at least 111 clients for internet advertising. Toyota, one of Dentsu's biggest clients, had complained earlier that its internet ads were not delivering what it had been promised.

These events set the tone for this year's Advertising Week. The organizers scheduled a session called the Trust Forum and declared 2016 "The Year of Transparency."

As Melissa Lea put it, advertisers and agencies alike spent this year's Advertising Week "haunted by transparency."

Backroom dealing is not new; it existed in the era of traditional advertising too. But digital marketing has fewer settled rules and constraints than the old business did, which makes the dealing harder to spot. And the missing rulebook comes down largely to one thing: the effect of digital marketing is hard to measure, so deals and partnerships no longer rest on prices anyone can post openly.

The disagreement runs in at least two directions. When we talk about the effect of digital marketing, what is actually worth measuring? And who should do the measuring?

On the first question the industry has reached no consensus. The standard example: the more traditional camp holds that click-through rate matters most, while another holds that brand exposure matters more. Now picture advertisers, agencies, tech companies and media outlets each holding a different view, and consider how many ways that can be combined.

The second kind of uncertainty is about who holds the measuring stick.

At this year's Advertising Week, Google said that YouTube video ads are twice as good as TV ads at prompting people to run a Google search. Google, as a technology company, does have the data-analysis tools and the standing to say so. But seen from a media company's chair, grading your own homework raises fair questions about accuracy and fairness.

Facebook has the same problem. Days before Advertising Week opened, it announced deals with Nielsen, Oracle Data Cloud, Visual IQ and Neustar MarketShare to improve how ad performance is measured in a digital environment.

This is not only an American argument. In China's digital marketing business, whether performance figures, data and traffic are real is debated just as hotly. The WeChat official-account traffic fraud exposed on September 28 quickly became the most damaging story the advertising trade has had. The ugly, sad part is that the trade was not ignorant of fake traffic. Everyone knew. It had become a tacit arrangement nobody named.

In China, ad-tech companies have raced to publish "anti-fraud white papers," and the data teams inside agencies keep saying in public that they want real numbers. "In the internet era everyone is chasing what is real — and what does chasing what is real mean?" "We use huge amounts of raw data, which we call real data, and this real data does not come from you, the client, telling us what your target audience looks like. We use mobile internet and mobile devices to go out and find those real people for you in the market…" a GroupM executive said at a forum in early September.

The industry is trying to write rules, but the damage is done, and it has left the relationship between advertisers and agencies delicate and unspoken. McDonald's now wants agency revenue tied directly to marketing results (even though how to measure those results is still unsolved). General Electric has begun auditing its agencies to stamp out "agency practices that are not above board," such as taking rebates from media companies.

"Advertisers aren't usually alert to every change in the industry… but now they're suspicious, and suspicion brings hesitation," said Tony Pace, chairman of the Association of National Advertisers.

The whole industry is talking about consolidation — but who consolidates whom?

"There is a great deal of discussion, and a great deal of guessing, about what the agency of the future should look like, what it should do and when it will show up. I think it's clear that there will be consolidation: a lot of things will move under one roof and be run by the same team, and that includes services and data."

Chris Lederer of PwC's strategy arm said this in a session called "The 'Agency' of the Future."

The quotation marks around "Agency" were deliberate. The implication is that the ad agency of the future may look nothing like today's, and that the word itself will come to mean something new.

Some of the change is already visible.

"We looked at McDonald's key messages and realized we had the data and the intelligence, but we wanted to be sure our partners had the human insight," McDonald's CMO Deborah Wahl said. "We looked at the agency structures that exist today and realized we needed a new model."

That new model came up again and again during the week, and at its center is consolidation.

McDonald's announced in late August that it had signed a $1-billion-a-year advertising deal with Omnicom, which owns DDB. Omnicom will build a 200-person marketing team for the chain, drawing creative, media buying and interactive marketing from agencies inside the group. For the advertiser, pooling resources means less time spent coordinating and a lower bill. For agencies, it is a challenge to a tradition of fighting their own corner alone.

AT&T, one of America's largest telecom companies, is doing much the same, folding several advertising operations into a single group. "I want people in one place, where everyone can pick up on what everyone else is saying," AT&T chief brand officer Fiona Carter said at Advertising Week.

Besides pooling resources inside the holding groups, agencies are moving into technology and data — work that traditionally sat downstream from them. In the past they mostly bought data from third parties. This is what we discussed in our series "What Changed the Advertising Industry," and it explains why agencies are all busy with "R&D": as the chain fills up with more players, they need to win back a say in it.

The other route is to build partnerships with technology companies outside. The problem now is that they need to hurry.

Over the past few years Yahoo, Facebook and Google — all of them part media, part technology company — have been buying ad-tech firms to take hold of every link in the chain. Were it not for antitrust concerns, Facebook and Google, worth more than $100 billion apiece, could buy WPP, worth tens of billions, without much trouble.

You can also see these part-media, part-technology companies drifting toward creative work, which is vertical integration by another name. Facebook has set up a division called the Creative Group, whose main job for now is working with creative shops to improve the content of video ads. Its creative director, Andrew Keller, used to be CEO of the creative agency CP&B. Given the talent Facebook can attract and the money behind it, nobody should be shocked if it one day opens a creative agency of its own.

Yahoo, a media company, has done the same sort of thing — buying BrightRoll, a programmatic buying provider, for $640 million in 2014. Deals like that bring Yahoo extra revenue, and they also make sure Yahoo's own inventory gets better treatment when the buying is done by machine.

Consolidation is turning up in unexpected places too. Since the start of 2016 The New York Times has bought two ad agencies to build out its native advertising business. The paper is a small player in advertising terms, but the fact that a media company is changing roles at all ought to make Madison Avenue nervous.

The question facing agencies — traditionally the center of this industry — is that if they do not consolidate soon, the best resources will flow to technology companies and media outlets, and the agencies may end up being the ones consolidated.

Media matter, and pairing native advertising with programmatic buying is seen as the trend

Media play a bigger part in the advertising chain than you might think.

One clear sign: this year, when people at Advertising Week talked about "content," the word they reached for was "storytelling," not "creativity." The first belongs to media; the second belongs to agencies. The closing session was simply called "It's All About the Story," and the four-day conference drew Hearst, Bloomberg, The New York Times, Vox and Mashable.

"Advertising Week 2016 may be the year the disrupted became the disruptors," said Scott Wells, CEO of the American out-of-home advertising company Clear Channel. "A lot of traditional media — print, radio, outdoor, even television — media that were once shaken by the digital, social and mobile revolutions, are all producing new content to rebuild their businesses."

"Rebuild" may be too strong a word, given that traditional media are still shrinking and that attention has moved to digital and mobile for good. The disrupted becoming the disruptors makes more sense if you look at media as content producers. What got disrupted was the technology and the platforms; the real disruptors are the people who make the content — which is exactly what traditional media are good at.

Underneath all this, the shape of advertising is changing. Experience and wit matter more and more, and they depend on good ad content, which hard-sell advertising usually cannot deliver and which the makers of hard-sell advertising — the agencies — are not especially good at either.

"Like most millennials, Generation Z" — people born between 1995 and 2010 — "knows our sponsored content is really an ad dressed up as a video story, and they don't mind," said Brian Robbins, founder and CEO of the American video company Awesomeness TV, at Advertising Week.

Young people have the best bullshit detectors around, Vice founder Shane Smith once said. He meant that they know good content from bad, and that as long as the content itself is good, whether it is an ad hardly matters.

More and more media outlets are doing what agencies used to do and moving into creative work, making ad content for advertisers in their own register through "native advertising" — in the United States people are more likely to call it "sponsored content."

The underlying reason media keep moving upstream in advertising is that they know their readers, the potential customers, better than agencies do. That is a product of media content becoming more varied and more finely sliced: consumers are no longer sorted by demographics like age, sex and location, but by interests, tastes and values.

"A brand's audience now happens to be the same readers we talk to every day," Vice China CEO Zhou Yaohua once told QDaily.

Beyond creative work, media inventory is also getting more attractive — not the old page banner, but the ads placed inside a site's feed, which the industry calls the "native display ad." Worth noting: in the United States, "native advertising" covers both the sponsored content a publisher makes for an advertiser and the native display ad.

Business Insider's data unit forecasts that by 2021, native display ads, on websites and social media, will account for 75% of all display ad revenue. Today the share is 56%.

What this demands is that the ad itself — at least the headline, summary and image that show up in a feed — fit the tone of the site, so that it does not stick out and readers click on it.

Tod Sacerdoti, Yahoo's vice president of advertising products, thinks the shift in the native display market will be the next source of growth for programmatic buying — using data and algorithms to decide which platform an ad should run on, what price is fair, and which time slots are worth the most.

According to Digiday, the technology for buying native display ads programmatically is finished, and over the past few months publishers including Condé Nast and Time Inc. have been using it. Greg Williams, co-founder of the digital media buying firm MediaMath, said at Advertising Week that programmatic buying of native advertising will "at least double" in 2017.

Add it up and every problem in American advertising is one the rest of the world is living through, or soon will. The technology giants have rewritten the rules of the business, and the whole business is both in love with data and lost in it.

The old line in advertising was, "I know half my money is wasted; I just don't know which half." Now the digital age is here, and WeChat official accounts tell us 90% of it went to the wrong place.

Compared with not knowing where half the money went, knowing that 90% of it went astray might, at a stretch, count as progress — even if the way we found out was unseemly. But isn't it time the whole industry faced up to the question of its own honesty?

Cover image from Visual China