Month: December 2017

Elon Musk teased details for a pickup truck that would challenge Ford Motor Co. and others in one of their most lucrative segments—though, true to form, the Tesla Inc. chief was vague about his intentions.
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Elon Musk teased details for a pickup truck that would challenge Ford Motor Co. and others in one of their most lucrative segments—though, true to form, the Tesla Inc. chief was vague about his intentions.
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Uber is selling its U.S. subprime auto-leasing business to startup-car marketplace Fair.com, ending a bid to attract drivers who lack regular access to vehicles.
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Uber is selling its U.S. subprime auto-leasing business to startup-car marketplace Fair.com, ending a bid to attract drivers who lack regular access to vehicles.
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Radoslaw Dobrolecki, US business development director at RTB House, discusses how artificial intelligence can help predict customer behavior at scale.
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This year, Facebook faced a backlash over enabling fake news and racist ads, got hauled in front of Congress for spreading Russian propaganda and found itself under the attack from European regulators. And that’s not to say anything of advertisers and publishers standing up to the tech giant over its measurement screw-ups and dominance of their content distribution. Here are five things we learned from Facebook’s annus horribilis:

Tech has too much faith in tech
A deeply seated belief running through Silicon Valley is the idea that tech will make the world a better place. Facebook may help people stay in touch with loved ones, spread democratic movements and help the marginalized find community, but the now-unavoidable truth is, humans can use tech for ill just as much as they can for good, as Facebook’s past year made abundantly clear. This belief caught Facebook flat-footed when it realized how much its platform was being abused.

Facebook’s strength is also a liability
Facebook’s stated goal has been to connect the world. But the scale that made Facebook an advertising powerhouse also works against it. Russian propagandists, racists and fake-news peddlers wouldn’t use it if it weren’t reaching nearly 1.4 billion daily active users to begin with. With that kind of scale, policing all the garbage that runs through the platform is unwieldy (or at least runs counter to profits). Facebook’s decision to reward sharing on the platform inadvertently fed the spread of fake news as well. Its size also makes it a bigger target for criticism. Live by the sword, die by the sword.

Fake news underscores Facebook’s role as a news source
The fake-news problem made us aware that more people are getting their news from Facebook and other social media platforms. Sixty-seven percent of Americans get at least some of their news from social media, up from 62 percent a year earlier, according to Pew Research Center. Facebook is the biggest pathway to news, with 45 percent saying they get news there, followed by 18 percent saying they get news on YouTube and 11 percent on Twitter. And people’s confidence about their ability to spot fake news is misplaced. The more they use Facebook, the more they’re likely to get fooled by fake news on the social network, according to BuzzFeed.

Facebook’s PR efforts haven’t been matched by the results
Facebook has been on a PR offensive this year, allowing users to flag fake news and hiring fact-checkers from organizations including ABC News and The Associated Press to verify suspected false stories. But whatever goodwill that won it with journalists was short-lived. A year in, some of those fact-checkers complain that Facebook exploits them for its own PR and that a lack of transparency on Facebook’s part hinders their work, the Guardian found. Meanwhile, fake news is still being shared on the platform.

Fake news isn’t just political propaganda
A lot of the attention on Facebook was understandably focused on Russian-sourced ads that attempted to influence the U.S. election and cause havoc all around the globe, but there were plenty of other efforts to exploit Facebook’s size to spread falsehoods. As The New York Times reported, anti-abortion site LifeNews.com, with 1 million followers on Facebook, has been one of the more prolific spreaders of fake news and misinformation. Facebook’s definition of fake news and its approach of going after the profit motive don’t necessarily work in the case of sites like this that don’t conform to other fake-news sites and are not motivated by profits but ideology, the Times reported.

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Amazon, Walmart and Kroger are no longer just mass retailers. They’re becoming media owners, too, offering their brand suppliers point of sale advertising opportunities. An increasing number of companies like Procter & Gamble and GSK are adapting their merchandising and marketing in response.

George Manas, president of Omnicom-owned Resolution Media, manages more than $3.4 billion in ad spending and focuses on integrating search, social, programmatic and commerce into media planning and buying with other Omnicom shops like PHD and Hearts & Science. We talked with Manas about the rise of this so-called retail media, why paid search is king and still rules and why he’s bullish on digital subscription services. Below are excerpts of our conversation, edited for length and clarity.

What’s the most interesting change in retail media you’ve seen this year?
All the major digital players like Facebook, Google, Pinterest, Snapchat and Instagram have developed ad offerings that start to bridge the gap between retail and media, in the form of shoppable ads or swipe-up-to-purchase type of ads, for instance. On the opposite side, the likes of Amazon and Walmart are acting like media owners. Amazon is really making inroads into advertising, renovating its search and programmatic products. So more and more, media is being wired for retail, and at the same time, more and more retail is wired for media. It’s an interesting convergence on both sides.

What is Amazon’s role in the rise of retail media?
Amazon, in particular, is in a privileged position because it has many content and commerce properties, and Amazon has shoppers’ login identity that is the key facet for it to become an advertising platform. Facebook has built an ad empire off of its identity graph with over billions of user logins. Amazon is starting to leverage the same model. Amazon is building its own identify graph through Amazon Prime to truly understand the consumer behavior, be it a shopping experience or a video-viewing experience. Now, with the Whole Foods acquisition, Amazon is able to bring offline consumer behavior into its identity graph.

When brand suppliers use retailers’ point-of-purchase ad opportunities, where does the media budget come from?
Historically, much [ad spend on mass retailers] came from a brand’s shopper team, retail team, cooperative advertising team or whatever team that was responsible for leading the brand’s retail partnerships. We continue to see the growth of ad investments in shopper marketing in general, which includes cooperative advertising. But now, we are starting to see the convergence of a brand’s traditional marketing investment and retail ad investment. Ad dollars are moving across the two with more fluidity. The traditional marketing model is deflated, and the marketplace is forcing brands to have a new kind of conversation that is more inclusive of brand marketing and retail marketing together.

Which ad formats drive the best results?
Paid search remains critical to win in retail media. On Amazon alone, for example, paid search drives the highest return on investment across the board for the vast majority of our clients. Winning in search and content is the foundation of marketing on Amazon and Walmart. Once brands gain the visibility organically, they need to use targeted paid search to win the lowest-hanging fruit, where consumers have the highest purchase intent that is relevant to the brand within those retail platforms.

But search marketing on the likes of Amazon, Walmart and Kroger isn’t just buying keywords.
Totally. In retail, search becomes more complex because clients need a search strategy that blurs the line between traditional keyword search, their back-end inventory strategy, logistics considerations and nuanced price-point considerations. Brands just can’t decouple their search strategy with their product strategy and inventory strategy. Clients now realize that they not only need a Google search strategy, but also an Amazon search strategy and a Walmart search strategy.

What does retail media’s future look like?
The Amazon effect is truly real, and we will continue to see retail media being algorithmically driven. On the flip side, the retail space needs more human touch, which is enabled by augmented reality and artificial intelligence. Those tech advancements open a whole new world of brand marketing, product marketing and creative experience on the retail shelf. Meanwhile, more brands will turn to subscription-based solutions. Dollar Shave Club is a prime example of what is possible in digital subscriptions. Some high-end beauty and grocery companies are also embracing this model.

Who will win in the convergence of retail and media: platforms like Google, Facebook and Snapchat, or mass retailers like Amazon, Walmart and Kroger? 
I’m tempted to look to China for some possible indication, but even there, in such an advanced online retail market, WeChat and Alibaba are neck and neck. I think we are going to be without a clear winner for some time.

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Snapchat had a tough but busy year. After a disappointing earnings call in November, ad buyers continue to reserve Snapchat campaigns for the “experimental” portions of their budgets, a slim 10 to 20 percent.

“While there are still a lot of strides that they have to work on as it relates to the performance marketing and direct-response side,” said Sherwin Su, social activation director at Essence Global, “their product development establishes a good foundation and signals they are continuing to add value for their core users, content creators, premium publishers and advertisers.”

Here’s a rundown of all the developments in Snapchat’s advertising in 2017:

Leaning into self-serve 
Ad buyers agree that Snapchat’s best move of the year was introducing the Snapchat Ads Manager. In May, Snapchat began allowing ad buyers to run two of the platform’s ad units, Snap Ads and sponsored filters, via a self-serve auction. The platform’s third ad unit, sponsored lenses, must still be bought through the Snapchat sales team.

Although Snapchat lost ad revenue due to this new application programming interface as reported in the company’s third-quarter earnings, ad buyers applaud the tool for making it easier and faster to roll out campaigns.

“The rollout and consistent development of their self-serve buying API reduced the cost of entry, which has led us to see a slight decline in total spend on the platform for some of our clients,” said Brittany Richter, vp and head of social at Dentsu Aegis’ iProspect, “but it has also led to an increase in performance and trust on the platform, as well as in the number of brands investing and planning to continue to invest in the platform.”

In the summer, Snapchat launched its marketing mix modeling platform, partnering with third parties like Neustar MarketShare and Nielsen to measure marketers’ return on investment, a necessary move in the current transparency climate.

Aiming to be the finest in AR
Snapchat wants to be the platform brands turn to for AR. In 2017, there’s no doubt it has made more developments in this area than major competitors Facebook and Instagram. Marketers have begun to discover AR’s capabilities and are spending millions to experiment with them.

In the last year, Snapchat has made a number of AR launches, including branded 3D World Lenses, where users can place 3-D avatars into snaps. Bud Light was the first to test this, according to Snapchat, making a character that appeared in a commercial running at the time (a vendor selling the beer) virtual.

AR Trial Ads debuted in November, allowing brands to showcase their products virtually in the real world. BMW, for instance, presented a 3-D model of the new BMW X2 in the camera’s field of vision. This gives viewers a way to see the car within their environment.

In December, Snapchat launched Lens Studio, which lets developers design their own AR lenses. The average Lens user spends three minutes daily trying out new lenses, and on average, Lens campaigns saw 19 ad lift awareness points and 9 percent in sales lift.

Contrasting storytelling and instant impact
In the summer, Snapchat began to determine the impact Snap Ads have on users. Compared with sponsored lenses and filters, which lead to more engagement, Snap Ads are meant to serve as a jumping-off place and provide “instant impact,” according to Snapchat. In July, Snapchat launched three new types of Snap Ads to emphasize this: cinemagraphs, GIFs and still images, which are ads that appear for a few seconds.

In the last few months, Snapchat has increased the number of ways brands can tell stories in filters and lenses, introducing Promoted Stories, which give brands the ability to share up to 10 photos or videos as part of one Story, in November. HBO was one of the first to use the format, using six photos on Black Friday of the TV series or movies people could watch instead of shopping.

On Dec. 20, Snapchat began letting brands sponsor their own animated filters with graphics that move across a screen that users can snap and share. Dunkin’ Donuts is the first brand to use these filters, promoting its dark roast coffee on the winter solstice. In the coming months, advertisers will be able to use these branded animated filters to target based on age, gender, interests and even time of day.

Breaking into gaming
In 2017, Snapchat made progress with gamified Snap Ads, where users swipe up into a branded game experience, and gamified sponsored lenses. According to Snapchat, 2017 saw a significant increase in brands launching game-style ads. Brands like Gatorade, McDonald’s, Mars, Hershey’s, Grubhub, Moët and Hollister worked with Snapchat to run branded games — ranging from trivia to choose-your-own-adventure games — in an effort to drive more engagement on the platform. Gamified ads average over a minute of engagement time when users swipe up, according to Snapchat.

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By Gabriel Weintraub (associate professor at Stanford GSB and chief economist at AppNexus)

The information technology revolution has created a tremendous amount of change in how markets function today. Online marketplaces are complex platforms that can be “designed” and “engineered” through the different levers that a platform controls. In this process, there are at least three features that these marketplaces need to execute effectively in order to become successful, as discussed in Alvin Roth’s book “Who Gets What – and Why” and Peter Coles HBS case “Market Design in Online Businesses.” These three features are at an inflection point in real-time display advertising marketplaces, and I believe we have a unique opportunity to get them right for the industry. Let us go over them one by one:

1. Creating “thickness” and enabling transactions

This means the ability to bring many buyers and sellers on board and then facilitate matches and transactions among them. For example, e-commerce platforms provide “global” reach for otherwise local sellers, while sophisticated search algorithms help buyers find what they are looking for from a multitude of offerings.

The real-time display inflection

We would like to have a thick marketplace and header bid auctions are a case in point. Header bidding enhances the openness of the market, which increases thickness by bringing additional demand sources to participate in transactions that would otherwise be closed to them. To deliver on this promise, however, we need to carefully think about auction logic. First, SSPs and exchanges should avoid using straight second-price auctions for header bidding. Sending second highest bids to the ad server typically results in heavily discounted bids that cannot compete head-to-head with competing highest bids from SSPs and ad exchanges (such as AdX), and fails to increase thickness. Additionally, sending the highest bids without shading them could massively increase clearing prices, which would harm buyers. For these reasons, it is important to come up with creative auction designs that compete fairly with other SSPs and exchanges, effectively increase thickness, while at the same time ensuring good outcomes for buyers and enhancing publishers’ monetization.

2. Managing trust and alleviating asymmetric information

A few decades ago, there were serious concerns due to trust issues on whether e-commerce sites could be successful: who would conduct a transaction in a single occasion with a stranger? Today, we not only transact confidently on these sites but we also use platforms that allow sharing cars and apartments. We trust these platforms because of sophisticated reputation and review systems, payment security, and other mechanisms in place that alleviate asymmetric information.

The real-time display inflection

Historically, this is a dimension in which display advertising has been lagging. In fact, some platforms and sellers have traditionally exploited asymmetric information and buyers’ naivety via non-transparent fees and non-transparent auction logic. However, as the market has matured, buyers and the ecosystem as a whole are increasingly demanding transparency. Buyers, rightly so, would like to know the quality of the inventory they are buying, what fees they are paying throughout the supply chain, and the auction logic of the exchange. Platforms and sellers should provide all of this information in a clear way. Failing to do so will result in a significant competitive disadvantage moving forward.

3. Effective monetization

On one hand, the platform and sellers need to make enough revenue from transactions. On the other hand, buyers need to extract enough surplus from them so that they have the desire to participate. Note that our two points raised above are critical drivers of monetization. With a thick market, sellers enhance their ability to monetize because of increased competition, and buyers have more options to choose from. In addition, both sides of the market can improve their decision-making with better information, for example, regarding the quality of agents at the other side of the market. On top of this, agents can optimize to enhance monetization even further.

The real-time display inflection

Similarly, if the two points raised above are well-executed, both buyers and sellers should benefit. On one hand, with the additional thickness and competition created by header bid auctions, sellers should obtain better prices for their inventory. This will be especially true if sellers are smart when defining auction logic, specifically with respect to pricing rules and hard floors. On the other hand, with better information, buyers can and should become more sophisticated and make better decisions. In particular, given transparent fees and auction logic, bidders can optimize both their path to supply, that is to allocate their spend in the most cost-effective way, as well as their bids.

Overall, I believe we are well positioned to create a better marketplace. If we successfully implement header bidding, increase transparency, and enable supply path optimization, we can increase the size of the pie in the real-time display advertising industry. All sides in the ecosystem—buyers, sellers, and platforms—can benefit.

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Blood-testing firm Theranos has secured a $100 million loan from Fortress Investment Group, averting a possible bankruptcy for now.
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