Amid the blizzard of press releases and conference tidbits concerning media, advertising, and adblocking, only some really matter.
Here are the ten key things that happened in Q4.
1. US Department of Justice examines possible agency shenanigans.
It transpired that the US Department of Justice had launched an investigation into rigged bids that unfairly favored advertising agencies’ in-house services over others, at clients’ expense. The Association of National Advertisers’ report into agency kickbacks, released in June, exposed agency practises that shortchanged clients, and several big brand CMOs launched audits of their agencies. But the DOJ investigation now raises the stakes for agency executives: previous investigations in 2002 resulted in prison sentences.
2. Media consolidation
AT&T agreed a deal to purchase Time Warner for $85.4 Billion. Meanwhile, Verizon’s acquisition of Yahoo! was troubled by the news that half a billion Yahoo! user accounts had been compromised by hackers.
3. Fake news, boycotts, and trustworthy media
The US election upset prompted a focus on “fake news”, and the advertising that supports it. One episode stood out amid the wider media turmoil: Kellogg’s, a large food brand, removed its advertising from Breitbart, a website associated with the “alt-right”. In a singularly bizarre countermove Breitbart called for a boycott of the brand while at the same time soliciting advertising from other brands. The episode confirmed yet again the utmost value of trustworthy media in a changing information economy.
Image: Breitbart advertisement.
4. Facebook revealed upside to its stance on adblocking
Facebook released earnings figures for Q3 (read earnings call transcript here) that showed that its decision to deploy ads that could not be tampered with by adblockers had increased its desktop ad revenue by 9% in the second half of Q3. Facebook is likely to make an additional three quarters of a billion dollars by showing tamper-proof advertising in 2017.
5. Google and Facebook dominated advertising revenue growth
Jason Kint, the influential CEO of publisher trade group Digital Content Next, parsed PwC revenue figures and concluded that although spending on digital advertising had increased by 19% year-over-year in the first half of 2016, this was entirely accounted for by Google and Facebook’s growing revenues. Established media had actually declined.
6. Further consolidation
Adtech & martech companies consolidated. Krux, a data warehouse, was acquired by SalesForce for $700 million. TubeMogul, a system that advertisers use to buy video ads, was acquired by Adobe for $540 million. Criteo also completed its acquisition of e-commerce advertising firm HookLogic for $250 million.
7. Facebook closes its ad server
Meanwhile, Facebook announced that it would close its ad server, Atlas, which was used by advertisers to understand who was seeing their advertising campaigns. Instead, Facebook will support other ad servers to apply Facebook’s 1st party understanding of its users to measure the efficacy of advertisers’ campaigns.
8. Amazon strengthens its advertising business
Amazon strengthened its advertising business by launching two new services for publishers: “Transparent Ad Marketplace” and “Shopping Insights Service”. The marketplace handles header bidding in the cloud and allows publishers to take bids from more parties for their visitors’ attention without slowing page load. The insights service lets publishers use some of Amazon’s own extensive 1st party user data to better understand who is visiting their own websites.
9. EU privacy reforms hint at global shift
Privacy reforms in the European Union continued to create more protections for users on the one hand, and existential challenges for the Lumascape on the other. Three developments are worth highlighting.
- First, the WFA’s CEO signalled that that the big brands are likely to apply the privacy standards due to be introduced in the EU’s General Data Protection Regulation across the globe.
- Second, the Article 29 Working Party of data protection regulators published guidance on the new data protection officers that businesses providing services in the EU are required to appoint: these officers must have tenure and report to the highest levels.
- Third, a draft text of the new ePrivacy Directive was leaked to Politico. A finalised proposal is only due from the European Commission next week, and will then be subject to a three-way negotiation between Commission officials, European Parliament representatives, and the Council of Member State Ministers. Nonetheless, the leaked draft indicates the Commission’s strong stance on consumer privacy: among its many reforms are measures that will essentially kill 3rd party cookies.
10. WhiteOps revealed a colossal new ad fraud
WhiteOps released details of a colossal ad fraud operation in late December: “Methbot” generates $3-$5 million every day by defrauding brands that spend on video ads. The fraud is two sided. Counterfeit websites mimic thousands of genuine premium sites and request ads from networks. In parallel, hundreds of servers operate automated web browser sessions (complete with with fake mouse movements and fake social network logins) to simulate the viewing of 200-300 million video ads every day. This release will give pause to any who assume that ad fraud is not a enormous problem.
Q4 2016 in one sentence…
Agencies faced scrutiny not only from wary CMOs but also from the DOJ, ad fraud graduated to a new level, new privacy standards threaten 3rd party tracking, Facebook revealed an immediate financial upside of its stance on adblocking, and Google and Facebook dominated advertising revenue growth.
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