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Only 28% out of $63.4bn invested in programmatic advertising makes it out

WARC’s latest Global Ad Trends reports show that out of $63.4bn invested in programmatic advertising, only $17.8bn made it to the “working media”

WARC’s latest monthly Global Ad Trends report estimates that $63.4bn was spent on programmatic advertising worldwide last year, but as little as $17.8bn (28%) may have actually made it to the ‘working media’ level.

Programmatic’s role in ad trade is increasing rapidly: two in every five dollars (39%) spent on advertising in the US last year – across all media and formats.

With a continued and rapid rise in digital advertising, concerns have surfaced within the industry. Social media risks and reputation management was cited as a major issue. One in three senior marketers highlighted ad fraud, ad misplacement, and viewability as concerns, while a quarter cited media buying transparency and accountability.

WARC provides the following evidence for each of their main concerns:

Media transparency and accountability: ‘Tech Tax’ cost programmatic advertisers over $30bn in 2017

The World Federation of Advertisers believe some 55% of investment goes towards what some have dubbed the ‘tech tax’ (the money spent on trading desks, demand side platforms, ad exchanges and data, targeting and verification services). WARC drew a consensus from media buyers, and while the rate of tech tax varied between markets, agencies and stacks, the outcome broadly aligned with the WFA estimates.

The tech tax would equate to $34.9bn. The true figure will be closer to $30bn, as platforms where the tech is integrated (such as YouTube’s Trueview) cloud the calculation.

After agency fees, of the $63.4bn in estimated programmatic advertiser spend last year, only $17.8bn made it to the ‘working media’ level when assuming a 30% fraud rate.

Reputation management: Brand perception changes with negative adjacency and one in five consumers will take direct action

One in five (19.5%) consumers state that they would take some form of direct action against a brand if its advertising appeared alongside objectionable content, either by boycotting the brand (10.5%) or being vocal/raising issue (9.0%).

43% of senior marketers claim that they have already had reputation problems after ads had appeared next to objectionable content. Almost two in five (37%) have pulled or intend to pull ads as a result.

Ad misplacement: Programmatic video ads pose the greatest risk to brands

Ad misplacement – the risk of a legitimate ad appearing on an undesirable site or next to objectionable content – varies significantly by market, format, and buy type. The average risk for desktop display ads across 11 key markets was 6.9%.

Ad fraud: Most ads are not optimised against fraud and remain vulnerable. One in three clicks on programmatic ads is fraudulent

The Association of National Advertisers (ANA) estimates that around $6.5bn was lost to ad fraud worldwide last year. Total losses could have been cut to $700m if the entire industry had adhered to safety guidelines.

Non-optimised ads remain vulnerable. Fraud rates for desktop display ads vary by key market: Italy (16.1%), Germany (15.9%), France (14.6%), US (11.3%), Japan (8.4%), UK (8.3%), Australia (7.7%), Spain (3.0%).

Aside from fraudulent impressions, click fraud is also prevalent online. Data show that as many as three in four clicks on programmatically purchased 300 x 600 ‘half page’ ads (a unit Google describes as one the fastest growing sizes) are fraudulent. On average, one in three clicks on programmatic ads across all sizes and platforms is fraudulent.

Viewability: Almost half of programmatic ads do not meet Media Rating Council standard. Only one in four viewable desktop ads is actually seen

Programmatically purchased ads routinely under-perform in terms of viewability when assessed against the Media Ratings Council standard. On average, almost half (46%) of programmatic ads are not viewable.

Even if the ad is viewable, it is unlikely to be seen. Data show that only one in four (23%) of the desktop display ads defined as viewable by the Media Rating Council (MRC) standard are actually viewed, with only 4% of measured ads seen for more than one second.

Social media risks: Social media provides the least-safe environment, with 300m+ worthless accounts

10% of Facebook’s 2bn monthly users are duplicate accounts, according to company reports. The number of fake accounts is estimated to be between 2-3% by Facebook, suggesting that as many as 265m accounts could be worthless to advertisers.

Separate research shows that, on average, 16.4% of the followers on Instagram’s top 20 accounts are fraudulent and as many as 15% (49m) of Twitter’s users don’t have an offline identity.

“The boom in programmatic advertising over recent years has exposed major flaws in the ecosystem, including heightened brand risk, impression and click fraud, and poor viewability and dwell time. This has led advertisers – who collectively paid $30bn to ‘middlemen’ in the online ad supply chain last year  to reassess the way they invest and keep pressure on the industry to clean up its act,” said James McDonald, Data Editor, WARC.

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