The Three Biggest Ad Headaches

What does this industry need to fix? I’ll delve into three specific problems here… for starters.

Media Costs Too Low

This might not seem like a problem. For many marketers, it’s a godsend. But it’s a huge snafu. Media costs are depressed, making publishers’ margins too low. The cost of building and maintaining their sites and of serving ads are too close to the amount of money they bring in.

Media sales commissions are hardly lucrative. Really great salespeople won’t stick around in an industry where they can’t make money, because great salespeople are driven by a desire for wealth.

From an operations standpoint, the only way to effectively implement and manage an online advertising campaign across a large number of publishers (from the marketer/agency perspective) is to use a third-party ad server (3PAS) to manage, traffic, and report on campaign activity (see my column on 3PAS). Two years ago, using a 3PAS was a no-brainer for anyone who understood the value proposition.

At that time, media costs averaged around $15-20 CPM. The 3PAS costs were around $1-3 CPM. This was 5 to 10 percent of the media buy. Today, media costs hover around $2 CPM, and 3PAS costs around $0.75 — 20-40 percent of the cost of the buy.

For marketers and agencies that understand the value proposition of a 3PAS, value still significantly outweighs cost. Without a 3PAS, it’s difficult or impossible to calculate return on investment (ROI) and a campaign’s true value. Unfortunately, some advertisers won’t OK the additional cost to agencies managing their online campaigns. The advertiser loses the ability to properly evaluate campaigns, as site-side servers don’t offer post-event tracking (post-impression and post-click analysis). The additional labor involved in trafficking and reporting without a 3PAS cancels out the savings.

Ad-Server Discrepancies Still Too High

A few years ago if you asked what the biggest industry problem was, there’s a good chance the response contained the word “discrepancy.” Nothing’s changed.

Example: Advertiser buys 1 million impressions from publisher. The advertiser traffics the ads using a 3PAS to the publisher. The campaign runs. When it’s over, the publisher’s report shows it served 1 million impressions. The 3PAS shows a lower number. In some cases, a significantly lower number.

The industry average discrepancy rate is 20 to 30 percent, depending on who you ask. A few people tell me they regularly experience 40 percent discrepancies. That’s a big difference. The problem gets nastier. Since the advertiser has an available lower number, it often tries to get the publisher to accept the 3PAS number and lower the bill accordingly. This causes the publisher to request a discrepancy investigation, which costs both the site-side server and the 3PAS time and money.

Why discrepancies? By definition, there should be discrepancies. Really. The publisher serves the ad tag that calls for the ad. At that moment, the publisher counts the impression. The call goes to the 3PAS, which serves the ad and counts the impression at that moment. While the call is being sent the user could close her browser or click away, interrupting the process before the 3PAS counts the impression. By nature, there should be some discrepancy. Worse, some scenarios have 3PAS with a higher number of impressions than the publisher, counterintuitive as that seems.

One cause is from publishers who filter IP addresses of employees. This is prevalent at large networks that systematically filter out employees at their own IP or domain. As these networks have a large internal population visiting their properties, this alone can cause a significant discrepancy.

Possibly the most common cause of this type of discrepancy between site-side server and 3PAS is caching (a Web page is stored locally for quick future retrieval). If the publisher counts page views rather than ad calls (as IAB counting methodology guidelines require), the publisher may not be aware of a page request if the content is cached. As 3PAS generally “busts cache” effectively, the advertiser may have higher numbers than the publisher. Its number would be more accurate. Since the advertiser got a deal from the publisher in this case, it generally doesn’t complain about this discrepancy. Effectively, the publisher gives the advertiser free impressions.

What’s an acceptable discrepancy? Only you can answer that. Most experts say 10 to 15 percent is OK. If you’re getting a lower discrepancy, you should be happy. When evaluating ad servers, ask the following questions:

• What’s the average discrepancy between site-side servers and your product? If it’s over 15 percent, ask why.
• What’s your discrepancy resolution policy? This sets expectations for resolution timelines and what form resolution may take.
• What’s server response time (the time it takes the server to choose an ad and count the impression while sending the response back to the user)? The lower the response time (sometimes called matching speed), the lower the discrepancy. These should be measured in milliseconds. Due to the nature of Internet traffic, charting can show even a few milliseconds can cause significant changes in discrepancy rates.
• How do you bust cache? The technology should use at least two methods.
• Do you follow IAB counting methodology guidelines? This answer should be yes, and make use of the IAB robots and spiders list.

Technical Implications of IE 6 and Third-Party Cookies

Internet Explorer (IE) 6 has a default method for handling third-party cookies. IE 6 only allows cookies to be set by the domain visited, unless a third party has a P3P-compliant compact privacy statement.

This is relatively simple to set up. The third party confirms it’s not collecting personally identifiable user information. On paper, this sounds good. If you’re on Yahoo, for example, only Yahoo can set cookies on your PC unless the cookie is “safe,” meaning it won’t steal any personal information.

But Microsoft did this alone, and it doesn’t reflect the way the Internet works. It’s easy for ad servers. Most 3PAS and site-side servers (to my knowledge) are in compliance. Many publishers are owned by networks of sites that make use of consolidated cookies across all properties. In that case, if any of the servers that set cookies have different domain names, do collect personally identifiable information, or neglected to set up compact privacy statements properly, IE 6 blocks its cookies. This can cause problems: from the inconvenience of not having forms prepopulated or settings remembered to frequency caps not functioning on pop-ups (which really annoys users).

As you surf with IE 6, a red eye in the bottom of your browser’s window provides a privacy report when clicked. It’s illuminating to surf high-profile sites and learn they’re not P3P compliant.

There are plenty of other problems. These three are significant and often misunderstood. Let’s solve them and move forward!