'A' is for ad money oddly gone missing: Probe finds middlemen siphon off half of online advertising spend

A study of the UK online advertising market, conducted by global accounting firm PwC, has found that publishers get just half of what advertisers spend, with the other half siphoned off by ad-supply chain intermediaries. Worse still, about 15 per cent of the total spent, or a third of the fees, cannot be accounted for. The …

[Anonymous Coward]

No surprise, but what to do about it?

> PwC's finding that publishers received just 51 per cent on the dollar, or British pound in this case, underscores long standing complaints about the inability of news publishers to sustain themselves through online ad revenue.

No surprise, but what to do about it?

Well, there's nothing to stop on-line papers from booking their own adverts, just as they did for print. And then their sites might be rid of that "one neat trick" fake ad shit and the whole site might just become a more pleasant place and attract more readers?

[Doctor Syntax]

Re: No surprise, but what to do about it?

Agreed. And your handle seems strangely appropriate.

[c1ue]

Re: No surprise, but what to do about it?

Yes and no. More appropriate would be 3+3=3 - representing the part lost to fraud...

[vtcodger]

Re: No surprise, but what to do about it?

On top of which, it would be difficult to block ads served directly by the content provider. One might argue that it would be difficult for content providers to police the content of ads for malware and such. True enough. But since no one seems to police ad content anyway, would the situation actually be any worse?

[Anonymous Coward]

Re: difficult for content providers to police the content of ads

Not if they ensure that any ads were straightforward static images linked to point to a specified page on the site of the company/whatever placing the ad :-)

[Kevin McMurtrie]

Re: No surprise, but what to do about it?

I block ads because they eventually delegate to hackers and rabid marketing departments. Direct ads are usually fine.

[I ain't Spartacus]

Re: No surprise, but what to do about it?

The problem with the publishers serving the ads, is that they don’t have the creepy user data collection that the advertisers want for ad targeting. Not that I see much evidence that this is effective from Google and Facebook. But the advertisers still appear to believe that it is.

So I’m sure what they’ll try to do is to drive down Google and Facebook's profits a bit. And maybe try to force them to deal with the click fraud that they facilitate and profit from. So that should mean a bit more cash for publishers eventually. But I don’t see major change happening until the next big buzzword comes along to replace big data in advertisers' dreams of perfect targeting.

[jrd]

Marketing execs ripped off by agents, intermediaries and fraudsters. Arguably as close to a victimless crime as you'll find.

I struggle to find any sympathy for companies that find a large share of their advertising spend is worthless, or to think of any way in which my life would be improved by their advertising being more cost-effective. I guess I'd see it differently if I worked in Marketing though.

[Paul Herber]

If you are not enthused by the opportunity to create a market for nasally-fitted fire then you are not the sort of person we want!

Here, have some leaves.

[Chris G]

Victimless crime?

No, the victims here are all of us who are being advertised to, tracked across the internet and paying for it on every purchase we make.

Marketing execs are not being ripped off they are just on a narrower margin than they could be but the bottom line is the product manufacturer is charged more, who then passes the cost on to the consumer. How much lower would the cost of living be if Google, Faecebook and all the marketers were transported to hell overnight?

[jrd]

Re: Victimless crime?

"but the bottom line is the product manufacturer is charged more, who then passes the cost on to the consumer."

You seem to be claiming that reduced return on spend in advertising leads to higher prices.

So, by inference, if the cost-effectiveness of advertising improved, manufacturers would spend less on advertising and reduce their prices?

I don't think so. I think they would increase their advertising budgets and raise their profit margins.

[Snake]

Re: Victimless crime?

In my own experience, I have yet to see an executive (not in the public relations or advertising departments) be thrilled with the prospect of spending money on ads. It's a cost of business, without any guarantee on returns, and they all hate it, seeing it only as a necessary evil (one they wish they could just avoid from the outset).

[Chris G]

Re: Victimless crime?

I am claiming that all advertising has to be paid for, if ad agencies, publishers or anyone else in the system are incurring costs or losses, they are passed back to the manufacturer who is trying to sell their goods, someone has to pay for that and that someone is the consumer.

All executives may dislike spending on advertising but they still do and it is them that drive the need for ad placement strategies and the resultant tracking and privacy issues.

[Greybearded old scrote]

Useful summary of the reason

https://idlewords.com/talks/website_obesity.htm#fatads

The whole page is worth a (long) read, but I've linked directly to the advertising section.

As 2+2=5 said perhaps now that the true cost of outsourcing your ad sales is spelled out, those middle men will be losing their market.

Or more likely, not.

[Version 1.0]

Re: Useful summary of the reason

Good read, it explains the way I've seen things for years - I was going to say that advertising is like cocaine but these days it's nowhere near as much fun. However the dealers and the middlemen make the money, the folks growing it get bugger all if they are lucky and the end-user is just a pocket being picked.

When advertising was first seen it was all about trying to publicize the benefits and advantages of your products. These days it's all about grabbing money, the quality and functionality of the products is irrelevant. If you think my comparison of cocaine to advertising is bad then look at the money that all the advertising companies like Google and Facebook make every day - it's all legal (and tax free) ... a mafia wet dream.

[Doctor Syntax]

Re: Useful summary of the reason

"Or more likely, not."

Of course not. Otherwise marketing execs would have to start buying their own lunches.

[martinusher]

Re: Useful summary of the reason

I've found that everywhere I've worked for years has been dominated by sales and marketing (sales being the ground troops for marketing's generals). Product development got less and less emphasis with it being dominated by people who were good at marketing product, typically themlseves. The result has been a bit of a perfect storm all the elements come together in a sort of maelstorm of hubris, the most visible manifestation for the workforce being a ruthless drive to cut costs to feed this monster and a tendency to outsource (itself driven by glib salesmen who promise much but don't necessarily deliver).

Advertising, marketing and finance provide essential support functions for the business of business. Unfortuantely they seem to have lost sight of the 'support' bit as they've promoted themself first to be the core function and then the only function of business.

[batfink]

Well this is a step forward

There's a well-known adage in the marketing game: everyone agrees that half of the money spent in advertising is wasted, but nobody knows which half.

Well, now we know which half...

[Neil Barnes]

Re: Well this is a step forward

Both halves?

[DCFusor]

Re: Well this is a step forward

Reminds me of an ex I'll call Zeno.

Half of what's yours is mine.

Half of what's left is mine.

Repeat.

[Anonymous Coward]

Re: Well this is a step forward

It was actually attributed to Lord Lever.

His other good one was his description of ocean yacht racing: "Like tearing up £20 notes under a cold shower" - which could be another description of spend on advertising.

[Pascal Monett]

"the online ad industry urgently needs to work together"

No they don't. They can continue ripping each other off as long as they like.

Besides, all it takes is an honest intermediary to do the job right, and the whole thing will crumble.

The problem is, they're all thieves. They can choke on their fees.

[vtcodger]

Re: "the online ad industry urgently needs to work together"

My God man. We have economies worldwide being devastated by a global pandemic, and you suggest interjecting honest conduct into the economic mix? Have you thought through the consequences? Civilization would surely collapse.

[Paul Kinsler]

Re: Have you thought through the consequences?

I recall (to a degree) a ye olde times SF story involving a government agent travelling around the US to ensure that businesses spent money on advertising and shiny product add-ons, ostensibly to ensure that the many extra jobs created kept the economy on track. The twist was that they were in fact a Soviet agent, since the USSR knew they had no hope of keeping up if the USA *actually* started becoming more efficient.

[a_yank_lurker]

Wanamaker was an optimist

So if half of the total ad spend is wasted and half of the good ad spend is siphoned off then only a quarter of the add spend is actually doing any good.

It seems that many sites have failed to understand they might need to more aggressively seek ads themselves rather than relying on an ad agency to be generous. It used to be that most newspapers ran mostly local ads for the bulk of their advertising. I do not see this being done much these days.

[Chris G]

Re: Wanamaker was an optimist

I usefd to negotiate my own deals and provide the artwork and copy with my two local papers.

It's surprising how far you could push them from an initial offer.

[Doctor Syntax]

Re: Wanamaker was an optimist

Very much so as half his money probably wasn't just wasted, it was actively putting off prospective customers.

However, he was before his time. Nowadays there are ad-blockers. The people he was trying to sell to could have told him which half. He needn't have wasted his money and needn't have spent it counter-productively unless, of course, those rip-off intermediaries charged him extra for trying to get past the ad-blockers.

And remember, the advertising industry only sells one thing. It's not soap or cars or whatever the advertiser's product might be. It's advertising and the people hey sell it to are advertisers.

[ecofeco]

Re: Wanamaker was an optimist

Have you lost your mind? In house departments with actual employees that actually do the work are SO last century, man!

/s

[Mike 137]

"middlemen siphon off half of online advertising spend"

and they get it whether the advertising converts to sales or not.

I have a strong suspicion that "personalised" ads that aren't relevant to the page content against which they appear are likely to have a very low conversion rate. Relevance to the page content is much likelier to convert (basic human psychology). But of course content-relevant ads are harder for the middle men to place, and are a lot less amenable to high speed auctioning.

[a_yank_lurker]

Re: "middlemen siphon off half of online advertising spend"

To me targeted ads are a scam. They are allegedly based on information about my interests as expressed by searches, purchases, etc. But the information used has one glaring weakness, no context as to reason for the search, purchase, etc. That makes 'targeted ads' nothing more than are a roll of the dice. A more sensible ad campaign would take into account the nature of the site and the likely readership and target that general demographic. While the conversion rate might not be great it will be about as effective as radio or TV advertising.

Another issue overlooked is a good bit of advertising is not so much about a specific product but more about 'brand' awareness. The store, product, etc. exists and if one has need for x you have some idea who might provide it.

[Giles C]

Re: "middlemen siphon off half of online advertising spend"

The problem is with “targeted” ads is half the stuff once bought you don’t need again for years.

If I was to buy a garden rake, it will last me 20 years (provided it is reasonable quality), therefore I don’t need another one. But no, I will be stalked around the web with loads of adverts to buy more rakes, if they looked and said you have bought a rake do you want a hoe, then they might stand a chance of making a new sale but the algorithms can’t process that sort of logic...

If I bought a pack of bog roll then yes I will need another pack relatively soon.... but I would just nip out to the shop and get one now the great bog roll panic of 2020 seems to be over....

[Anonymous Coward]

Re: "middlemen siphon off half of online advertising spend"

"now the great bog roll panic of 2020 seems to be over...."

Glad to hear it's over for you; our local store converted the TP (bog roll to you) aisle to bottled water so it wouldn't be empty. There's been no TP there for over a month.

[a_yank_lurker]

Re: "middlemen siphon off half of online advertising spend"

Taking your example of a hoe and context, you might have a set of perfectly fine gardening tools and just needed a new rake. Or you might need some more tools but obviously not a rake. Or it was a gift. It is hard to tell without the context behind the specific purchase.

[Duncan Macdonald]

Ads pissing people off

So many ads just annoy people to the point where they either (a) refuse to buy the product or (b) stop using the website or (c) use a good ad blocker that actual "good" advertising money (ie the ads are served to customers with an interest in the product) is probably under 1%.

Remember mute buttons are what TV ads were designed for!!

(In the UK, the National Grid needed to know the timings of the TV ads so that the generation was available when people left the TV to put the kettle on.)

[Throatwarbler Mangrove]

That's a shame ...

Not.

[Will Godfrey]

Where's the problem?

A basically dishonest system is being robbed by basically dishonest people. Looks like a perfect match from here.

[Claverhouse]

Souls to be Saved

Adtech providers, he said, never seem to be happy to their prosperity. "They’ve had a perpetual dissatisfaction with making $XYZ money for doing nothing but connect a pipe to a faucet," he said.

.

To quote a noted Victorian painting by Holman Hunt, "The Awakening Conscience".

Even marketeers can get to Heaven.

[PaulVD]

A special offer to advertisers

If I read the article's terminology right, I am on the demand side of the online advertising business.

So I have a deal for the advertisers: I will stop demanding ads if you will stop supplying them. Everybody happy now?