Video Killed the Radio Television Star

Every month, Industry Index gathers MadTech leaders to discuss trends, hot topics, and new technology in the industry. This month we asked what the future holds for OTT, Convergent TV and Audience Targeting for Video.

Can you relate to this statistic?

65% of traditional television subscribers watch a streaming service every day. What’s more: 17% of all paid-TV subscribers want to cancel their traditional subscriptions… AKA 17% are ‘Cord Cutters’. Ed Laczynski, CEO and Co-Founder of Zype kicked off Industry Index’s recent Roundtable with these data gems – and that was just the first 30 seconds.  

Moderator Jonathon Shaevitz posed an interesting idea: Has the industry entered the OTT and Convergent TV era without the correct terminology? And, without a clear lexicon, do we have a dilemma as the ecosystem plays catch up while running at a full sprint?  

“OTT is the world we are living in,” stated Myles O’Connell, SVP of Global Content at Complex Network. “Anything that’s not pipes-to-the-home is technically OTT – content being served digitally.”

Enabling a World that Demands Instant Gratification
Content, Original Series, Consumer Behavior

Bottom line: consumers are hungry for video. Chief Strategy Officer of VideoAmp, Jay Prasad explained, “Quality content has never been in more demand.”

Since the first television was introduced to the market there has been a constant stream of content being produced. That stream (read: raging river) continues today. What has changed is how content is generated, and the ways it’s being consumed. OTT bypasses traditional publishing methods, connecting content creators directly to consumers. Endless programing is easily accessible – every hour of every day.

Video-hungry audiences continue to look for the easiest paths of content consumption. This has moved traditional, linear advertising to embrace the digital revolution (it always comes back to the money.) Prasad explained, “Netflix’ budget for original content this year is $6B, versus NBCUniversal’s $2B.” However, O’Connell interjected that, yes, the amount of money Netflix is spending is massive, but “geared towards a global audience.” NBCUniversal is on a national basis.

Though the original Netflix model looked a bit different (who doesn’t remember returning scratched DVDs in those little paper sleeves), they shifted some time ago to feeding the content-starved beast (who doesn’t remember waiting a whole WEEK for the next episode?).  Not only has OTT and Convergent TV removed delivery friction, it has changed how content gets from creator to audience. ‘Original Series’ are encouraged and absolutely welcomed by the consumers. The push for original content now allows platforms to scale by keeping audiences’ attentions. Melissa Rosenthal, EVP of Cheddar, addressed this: “You really have to get creative and strategic with how you are pulling together all of these videos to engage users by grabbing and keeping their attention.”

As OTT and Convergent TV platforms are rapidly scaling, pressure is being put on large, traditional networks. Digital brands are creating streaming networks that are, “narrative-driven, understanding you cannot just string videos together and think it’s a network,” Rosenthal explained.

Bye, Bye Bundles
Digital vs. Linear, Skinny Bundles

“There is a last ditch effort to grab all the linear dollars,” Adam Helfgott, CEO of MadHive, offered. Collectively, the Roundtable agreed that we are seeing linear and digital networks starting to merge, and the buying process isn’t going to be viewed as separate.

The ecosystem has accepted the challenge to produce better content. More money continues to enter digitally and linearly. Like Biggie said… more money, more problems. Think of it like this — you’re Comcast, laying all the pipes to move the content from publisher to consumer. Here come Netflix/Amazon/Hulu, making more money than you – through your pipes. Of course you want to charge the digital networks more. Prasad explained that the OTT and Convergent TV platforms are, “…getting rich off large network sweat, so the traditional networks want to level the playing field a bit.”

But how?

The days of large cable bundles are nearly past. “There are 190 channels in a bundle,” O’Connell explained, “and most people who subscribe to cable only watch 17 channels. The breakup of the bundle is going to happen, it’s just a question of when.” First, there were ‘Cord-Cutters.’ Now, there is a younger generation: ‘Cord Nevers’. This group will most likely never pay for a large-bundle cable subscription. 

O’Connell continues, “I think the bundle itself is getting a lot smaller, that’s why I think a lot of digital publishers are looking to get into video… because where does the advertising go? Where do the subscription fees go? It goes somewhere… it’s a business and there is just as much demand for high quality content.” Around the Roundtable, a flurry of conversation ensued around the idea that digital publishers are talking about bundling their content on a streaming interface.

BUT! There is still a need for a bundle when it comes to live TV. Prasad explained, “The main value of linear, and a huge part of the skinny bundles, is if you don’t watch something live (like sports or news) you most likely aren’t going to watch it later on-demand… linear is going to keep their focus on programming that is live, and everything else – there is going to be a push for on-demand.”

But O’Connell asked what happens when consumers, “…have their broadband package, and their $40 skinny bundle, and Netflix or Hulu, or whatever it is? Then you are looking at having a big bundle again.”

Blurred Lines
Traditional, Subscription, and Hybrid Models & the Fragmented Audiences Who Love Them

So, there’s the traditional model, which could waste away (or at least slim way down). But, that doesn’t even scratch the surface. The industry has entered an uncharted frontier – digital. Digital as far as the eye can see…

The digital world has the subscription model (winner: Netflix). Plenty of room in the middle of the pack, though. Laczynski explained that, “Vertical networks are making enough money on subscribers, but they are not making enough money on ads.”

But wait, there’s more! Linear + digital = hybrid model, which Hulu and the skinny services (like Sling TV) call home. Prasad stated, “The hybrid approach will continue to grow. It reduces the ad loads a little bit by making sure the targeting is good and the user experience is high.”

What’s more: The blurred lines of digital programming models, and the transition away from cable bundles, has fragmented audiences, O’Connell believes. This fragmentation is a new lens for advertisers. “Brands are starting to realize they are paying for content, one way or another,” Laczynski explains, “so they might as well embed themselves in the content. To do that you have to allow yourself to be exposed to 10, 20, 30, 40 different distribution platforms.”

Target Practice
Ad Buy Bullseyes?

Although the consumer space may seem shattered, advertisers are beginning to understand how to capitalize on audience targeting capabilities offered by OTT and Convergent TV. Prasad explained that, “Even though ratings may be down on a linear buy, viewership is up across all these different experiences, so we are going to sell access to our audiences not just as a primetime slate — and that’s working.”

But, the OTT and Convergent TV industry must grasp that change may be implemented slowly and with some hesitation. Helfgott offered, “It’s going to take a long time to change the business model.  People are used to doing things one way, [this] is a shift in the way the industry thinks.”

But to Rosenthal, it seems foolish to not jump in head-first and embrace the power of audience targeting. “We are living in a world where you know exactly who you are targeting, and addressable TV as a whole is going to be shifting. It just doesn’t make sense to not target, it just seems like you are kind of throwing darts.” There has always been a need to understand targeting, however, targeting unto itself isn’t a new idea. What is new is the hunger from consumers to have a constant stream of quality content.

“What is changing is consumption,” O’Connell explained, “there are so many ways to consume content, there’s still tons and tons of power in advertising so there are a lot of opportunities.” Ads want to be housed within quality content, to and – to top it all off – audiences are able to consume content across multiple screens.

A Whole New World
Cross Screen Strategy & the Need for a New Currency

How many screens do you consume content on? One… two… three or more? Shaevitz posed this question to both Roundtable participants and attendees. The majority identified with three or more screens. Cross-screen targeting, it’s no longer a ‘should’ but a ‘must.’ Prasad explained, “There are more opportunities that different platforms offer, and advertisers are seeing the possibilities of how they can target their clientele and what different platforms can do for brand awareness.”

Old habits die hard – the industry at large is used to doing things one way, even though times are changing… or have changed. Will GRP win the game, since that’s what everyone is familiar with? Likely not, but OTT/Convergent TV is missing one thing: A cross-platform currency. “There is now a new denominator of what advertisers are basing ad buys off of, and that’s targeting,” Prasad stated. “Even when you move into cross-screen, there is an introduction of measurement, and that is not going to be a GRP.”

Increasing advertising opportunities are setting the bar higher for brands. OTT and Convergent TV have opened up a world of audience targeting possibilities. Have we entered into a new era where ads will no longer feel like a waste of time; just background noise? If so, and we think yes, there needs to be trust on all fronts, from brands to publishers and vice versa. Trust will propel inventory, even while the industry continues to get its sea legs.

Prasad explained after growing pains presented in Q4, “We couldn’t fill all the OTT demand for our advertisers and probably left several billion dollars on the table just because there wasn’t enough inventory, which was painful… Running through programmatic pipes is a process of cross-screen video.”

Why You Got To Be Shady?
Fraud

“Digital has shot itself in the foot in the last couple of years by having an ecosystem with a lot of low quality or fraudulent advertising practices. Therefore, advertisers are moving towards safety, and safety has worked for 50+ years… television,” Prasad stated.

There is a larger issue, which goes beyond the fraud epidemic. Helfgott explained, “Because linear and the big networks are viewed as ‘safe’ the big networks are realizing that they could be selling ad buys for more money… capitalizing on the ‘safety’ aspect.”

Naturally, OTT/Convergent TV wants to keep the ad revenue in their sectors. However, and beyond the money, the issue of fraud raises questions of responsibility in moderating the shade that’s being thrown around. There is a call for platforms to start taking more responsibility.

Rosenthal made this point very clear: “As the industry increasingly relies on social distribution, the platforms have to do a better job at weeding out the crap.”

How’s The View Up There?
Facebook, Google, and… Netflix

It’s interesting that platforms aren’t putting a stop to fraud, and at the same time, the OTT and Convergent TV sectors are living in Facebook’s, Google’s, and Netflix’s shadows. It feels as if these three powerhouses – and we’re going out on a limb here – make their own rules.

The water is murky, and Facebook is bulldozing with all its powerhouse glory. Helfgott thinks that, “Facebook gets a ton of credit where it’s not really due because they become the last click from distribution point of view.” This means that brands’ ad impressions are getting lost through Facebook as a distribution platform. This is important for agencies to see.

Now, Facebook is entering the OTT space… a murmur ran through the Roundtable room.

Let’s not forget that we’re in the glory days of Netflix, too. There’s no doubt that they’ve set the pace for running a subscription-based model, but will they finally turn a profit?

The Road Ahead

OTT, Convergent TV and Audience Targeting has already changed the video consumption industry.

‘Cord Cutters’ are moving toward a firm embrace of the streaming world, and ‘Cord Nevers’ will never know the smell of a fresh TV Guide wafting from the mailbox.

Does it seem like we are too far down the rabbit hole, and there’s no turning back now? You’re right!  But there is still a long journey ahead. There are many questions yet unasked; many variables to be sorted out. Laczynski explained, “Things are happening pretty fast and we are in the middle of it… there’s this whole world that is opening up, and it will continue to change over the next decade as behaviors change.”

There’s one thing we know: Without OTT/Convergent TV, a whole weekend wouldn’t be dedicated to an entire series, or two… There wouldn’t be a need to click <YES> To the ‘Are You Still Watching?’ prompt… We couldn’t ‘Netflix and Chill’! We also know that without Audience Targeting, those 30 second spots would still feel like a waste of time rather than a moving experience, with brands speaking to us on a deeply personal level. How would they know their creative is exactly-what-we-needed?

Don’t Touch that Dial

How does OTT, Convergent TV, and Audience Targeting for Video impact your streaming behaviors? We want to hear from you. Binging on Season 5 of “House of Cards” can wait.

Let’s Talk About Chatbots

AUTHOR NOTE

We sent our summer intern, Rebecca Shaevitz, to her first MadTech event. She returned with fresh insight on the role Chatbots are beginning to play in the ecosystem… Well worth a five minute read.
– The Industry Index Team

Knowing almost nothing about Chatbots prior to attending “Chatbots: More Than Hype” presented by ROKO Labs, I figured I’d walk away with an understanding of what Chatbots do and how they are relevant in the MadTech space. To be honest, the ins and outs of chatbots are still a bit unclear to me – the Chatbot ecosystem spans many different platforms, user demographics, and designs.

Despite my confusion, I did pick up a few key takeaways:

  1. Chatbots can be implemented into almost any platform. Why is this important?
  • Companies do not have to create an entirely new technology to take advantage of their benefits. A platform that may be struggling with user navigation or the specific operations of a user interface can implement a Chatbot. If done correctly Chatbots can work… almost like magic.
  • Chatbots can be continually updated to stay relevant to users’ needs and interests.
  1. Chatbots can be powerful tools for platforms to engage users, smooth-over confusing steps in technologies, or simply entertain. However, design and function must be highly intentional to ensure intended purposes are achieved.
  • Failures are largely due to language processing issues, outdated designs, inappropriate tone, and poor visual cues.
  • Chatbots without clear intentions (or those which are poorly implemented) may do more harm than good, alienating or confusing users.
  1. User involvement should be viewed as an important aspect in the creation and design process.
  • Users can indicate which Chatbots/Chatbot features will be most useful during the selection and testing processes.
  • Users may spread the word about new Chatbots, providing a first line of promotion for these new technologies.

I’m still unsure of a good deal of the Chatbot ecosystem. Maybe that’s because Chatbots are constantly evolving; maybe it’s because their potential is only just being discovered. I do know that the next time I interact with a Chatbot I’ll have a better understanding of how to assess its efficacy, as well as a greater appreciation for its development and complexity.

3,500 MarTech Companies and Counting…

At Industry Index we’re obsessed with organizing, categorizing, and segmenting the Industry. We’re tracking 5,000+ tech companies across MarTech/Adtech, as we like to call it — MadTech. Our tracking is expansive — e-commerce related companies, social media, chatbots, augmented reality, salestech, marketing automation… the list goes on.    

Meanwhile, there is a lot of great research occurring all around us. One data point that caught our eye was published on Chiefmartec. They recently announced that they now track over 3,500 MarTech companies, up from 2,000 in 2015 and 1,000 in 2014.  

Sure, you can quibble with the exact number, but the pace of growth is undeniably astounding: It doubled from 2014 to 2015, and then grew 87% again between 2015 and 2016. Simultaneously, tremendous consolidation continues. It seems like every week there’s another deal.

Why the tidal wave of growth?

1)It’s the money.
All signs point to the explosion of investment capital, sheer number of startups, and expansion of the MarTech ecosystem. Pick your favorite statistic:

  • MarTech spending is expected to reach 10% of overall budgets for Fortune 500 companies by 2024 (up from 1% in 2014)
  • MarTech spending reached $12B in 2014
  • MarTech spending will reach $120B by 2024

2)There are additional compelling reasons for the proliferation:   

  • It is easier than ever for brands to try and test tech.  
  • Most new tech have APIs that allow faster deployment and integration
  • The SaaS model reduces tech acquisition costs – lower risk to try
  • The proliferation of tech drives more targeted “point” solutions; tech deployments can be for single campaigns or trials
  • Previously siloed data and systems can now be integrated and leveraged with relative ease
  • Most importantly, customers are expecting more and better engagements with companies – Personalized, fast, authentic… IMMEDIATE!

Marketers ultimately need to remember the real reason they’re investing in MarTech: To better understand current and potential customers with the purpose of driving sales. Companies need to make sure that their marketing stack—regardless of the vendors that they work with—provides deep customer intelligence and paints a holistic picture of the customer.

 

What does this mean for MarTech buyers?

  • First and foremost, the phone will keep ringing, emails will be chirping, LinkedIn messages will fill your inbox.  
  • The market is difficult to understand and sort out. Understanding the differentiation of companies within a category can be agonizing. You need to start with a different perspective:
    • It is incumbent on buyers to start by developing a general understanding of the type(s) of tech that are interesting.
    • You need to focus more attention on developing your own requirements.
    • Finally, consult the data. More and more companies are utilizing research to produce content, and much of this research is extremely useful.  However, you need to be a smart consumer of data/content. There is a BIG difference between research studies, true thought leadership, and long, glorified sales pitches.

What does this mean for MarTech vendors?  

For starters, doesn’t it feel like there is more competition? That’s because THERE IS MORE COMPETITION.

As Industry Index began planning for its website relaunch for this summer, we began with a basic question:  Where are the boundaries of MadTech and how do we organize our data?  

This lead us to explore vast numbers of companies, and where they sit in the ecosystem.  It was immediately apparent that not only were there many more companies, but the boundaries had expanded. And, while many of the new entrants are narrowly targeting a single problem, most companies are now, unlike five years ago, selling solutions that inherently include data, products, and integrations with other technology types as basic table stakes.  

So what does it all mean…

  1. Despite all the M&A activity, the marketplace is growing more crowded.
  2. The lines between tech categories are getting very murky.
  3. More MadTech products are being sold directly to brands – sometimes because the agencies are reluctant to test, but more often because data integration requires direct relationships with brands.
  4. Marketers are increasingly trying/buying tech, but companies’ product lifecycles are shortening.
  5. Most MadTech vendors continue to dance in the dark, not knowing the basics: the whos, whats, and whys of their prospect lists. Vendors are too willing to attempt to stretch their product capabilities in exchange for a few more dollars of revenue.

5 Minute MadTech – Sales Automation and Marketing Automation: Part 3

Where have you been? Thanks to the internet,  you can catch up on Part 1 and Part 2 here.

What allows Sales Automation (SA) and Marketing Automation (MA) to be on an upward trajectory? Tech, baby. As we move into the automated future, the friction of MA/SA implementation should be first to go. The star of the show, ladies and gentle-bots: Artificial Intelligence.  

Waves of Innovation

Gartner has represented the constant growth of SA through different “waves”:

  • “Wave 1: Client-server and desktop based sales systems”
  • “Wave 2: Web 2.0 and API-based sales systems”
  • “Wave 3: Algorithmic SA with predictive analytics and AI”

Waves 1 and 2 were gnarly, but we’re on the front end of the big kahuna – #3. Tech is simplifying the sales process by automating – and thereby accelerating – communication between sales and marketing departments. Knowledge Tree states, “Automated analytics about the performance of content can be automatically shuttled back to marketing so they can see which content performs and which doesn’t. The result is that teams can invest in assists that win and eliminate low-performers.”

Box checked for automation – but what about AI? CRMs are the biggest intersection of sales and marketing departments. According to Medium, “AI applications in CRM is just a tip of the iceberg. As AI technology strengthens, CRM which is ripe for disruption is going to be the biggest beneficiary moving from being a system of records to a really helpful tool helping organizations become more efficient and productive.”

As long as the machines don’t rise up against us, the future is looking much smoother.

MA, FTW

The Huffington Post quoted a Gleanster study which, “…reports that 90% of respondents report regular and periodic use of Marketing Automation for large-volume email campaigns.” The article continues to explain that MA, “has revolutionized the way organizations are managing their time and targets.” Now the best possible prospects are given time to convert, saving time, energy, and money.

Data integrations and predictive analysis will be the main focus for MA growth, via AI integration.

The Huffington Post continues, “The most valuable use of AI in marketing is to enable personalized conversations with customers, knowing their goals, ambitions and profiles. This type of personalized communication eliminates spam, which often plagues marketing today.” Digital natives know when they’re being spammed, unwillingly part of  chain emails, etc., and the lack of personalization is an instant red flag. In spite of this, in recent years many have concluded that mass emailing works… but does it? This answer isn’t so black and white.

Personalized one-on-one conversations can now move beyond simple list segmentations. “…Visitors can expect to have a unique conversation with the brand, based on their specific needs. Dynamic ad copy, one-to-one emails, customized website and mobile experience, AI will make hyper-personalization possible at scale.

AI may allow MA to practice safe marketing. Rather than communicating with promiscuity, the personalized approach that AI has introduced will reach mass audiences creating interactions that are aligned with actual individuals, rather than more vague segments.

Wrapping It Up…

AI has expanded well-beyond sitting on your kitchen counter (ordering your paper towels and surreptitiously shilling for Burger King.) It’s being implemented across MadTech, and SA/MA are no exception. If only we could get it to open the pod bay doors.

5 Minute MadTech — Sales Automation and Marketing Automation: Part 2

Now that we’ve washed SA/MA’s laundry, let’s start putting it away.

The goal: Achieving harmony and interoperability between SA and MA to drive (and optimize) customer acquisition. In our 5 Minute MadTech series on Account Based Marketing, we explained the importance of lead generation quality over quantity, i.e., that it’s better to fish with a spear than a net. SA and MA leverage this idea by removing labor-intensive tedium from the process. It’s a complex ecosystem, though. Which is more important for your goals? How do you achieve the right balance?

The critical factors: Complexity and Transactional Volume.

Sales Automaton vs. Marketing Automation explains which tech should take the lead  based on these two factors. Here’s our breakdown of that explanation:

  1. Low Complexity, Low Transactional Volume
    If your business has a short sales cycle with a low sales volume, SA may not be the most important tool to consider. Simply put, “The effort of tracking every opportunity is more work that it may be worth.”  Higher importance: MA
  2. Low Complexity, High Transactional Volume
    “Marketing Automation is critical for the non-complex sale, where the speed and volume of transactions are the core of the business.” MA assists in identifying and nurturing prospects until the final sale can be executed, with lower costs per customer acquisition. Higher importance: MA
  3. High Complexity, Low Volume of Transactions
    It’s extremely important to implement SA. “There are multiple stages and meetings to a new client acquisition, and you want to be managing the information around each.” Higher importance: SA
  4. High Complexity, High Volume of Transactions
    “In this environment you need [MA] to attract and nurture a high volume of prospects through the initial buying process.” This allows the sales team to manage the pipeline with SA to depict who’s extremely close to the purchase decision point. SA & MA get equal weighting

According to The Huffington Post the digital marketplace “…has set a fast pace to lead conversion, and businesses have no time to lose on customers that may not convert at all. Sifting through leads consumes time and energy that can be utilized more effectively.”  How are MA and SA evolving their tech to achieve even more value from automation?

In our next 5 Minute MadTech, we’ll dig into recent MA/SA tech innovations in measurement and analytics, and uncover how artificial intelligence may be the next big thing in the category. Are the robots getting their own, smarter robot overlords?

Content Roundup: Wind Beneath Twitter’s Wings? — There Will be blood Data — Amazonian AdTech

Here’s some of our fav MadTech news from the last two weeks — Who’s down with OTT? Time to break up Big Data? Social media soars? Marketing automation, and more…  Plus, this coming week, we’ll go deep on our blog about Amazon’s next move in digital media space..

Anything juicy we missed? Tell us on Twitter, Facebook… or button it up on LinkedIn.

 

The World’s Most Valuable Resource Is No Longer Oil. It’s Data. The Economist,  May 6, 2017
The attention economy demands a new approach to antitrust rules as Google, Facebook, et. al., become
the new Standard Oil…
#finance #bigData #monopoly

YouTube Is Adding 40 Original Programs With Celebrities and Creators Adweek,  May 5, 2017
YouTube is going after traditional television ad dollars with exclusive new programs, and the brands who cut them off weeks ago are coming back…
#video #ott #youtube

Twitter Makes The Case For Live at Its Inaugural NewFronts AdExchanger, May 2, 2017m
Twitter added 9 million new users in Q1 after several quarters of disappointing earnings. Is it getting its wings back, thanks to livestreaming?
#social #emerging #twitter

Amazon Confirms Advertising Will Become A ‘Meaningful’ Part Of Its Business The Drum, Apr. 28, 2017
Bezos and co. prodded other parts of adTech with the launch of its cloud-based header bidding product in December…
#finance #amazon

5X More Marketing Automation Vendors Added Than Removed MarTech Conference  Apr. 26, 2017
If you bet on consolidation over the past six years, it’s time to pay your bookie…
#marketingAutomation #crowded

 

UPCOMING INDUSTRY EVENTS

May 15 – 17  /  TechCrunch Disrupt, New York, NY

May 19 – 22 / International Conference on Virtual Reality, Hong Kong

May 24  / Roundtable: OTT & Audience Targeting for Video, New York, NY

May 31 – June 2  / Digiday Programmatic Marketing Summit, Scottsdale, AZ

 

Your Second Helping: Influencer Marketing Fraud with Gil Eyal

CEO & Founder of HYPR, Gil Eyal talked with Industry Index about how the Influencer Marketing sector will label, prevent even simplify fraud as the industry continues to grow.

II: How much do you think fraud is impacting Influencer Marketing? With continued growth, will fraud continue to grow?

GE: Just like any other form of digital marketing, influencer marketing is extremely susceptible to fraud. In fact, the whole industry is structured in a way that encourages influencers to inflate their numbers – both follower and engagement numbers by paying for bots to follow them or engage with their post. Some might argue that, like in sports, the fact that a large number of participants take performance enhancing drugs requires anyone who wants to remain competitive to take them as well. The same applies to influencers inflating their online presence, and this is just getting worse.

II: Where do you see fraud most prominently in the Influencer Marketing sector? Why this platform?

GE: Number inflation is prevalent across the board. Instagram is particularly susceptible to violations as brands have very limited tools to measure campaigns – there are no outgoing links to track and limited information on actual views. Vanity metrics like ‘shares’ and ‘likes’ are easy to manipulate, and influencers do it intentionally and unintentionally.

II: Through the growth of Influencer Marketing, how are platforms going to label, prevent, or simplify fraud?

GE: Social networking platforms haven’t shown any inclination to take action. They have enough to worry about with traditional advertising, and one can argue that they aren’t doing a great job of preventing fraud there either.

Influencer networks or marketplaces share the incentive for bad behavior. They want the biggest influencers making the most money.

Third party platforms that focus on data and analytics like HYPR will have to do the job for them.

II: Do you think programmatic is a pressure point when it comes to measuring Influencer Marketing? What is the most effective way to track and monetize Influencer Marketing?

GE: There currently is no efficient Influencer Marketing solution that truly operates programmatically. The industry might be moving that way, and if it does, those platforms will be the first to suffer from fraud unless they can develop ways to identify fraud effectively. Like traditional digital marketing, it will be a never-ending race because fraud results in significant amounts of money changing hands with limited risk to the perpetrator.

A proper solution (programmatic or otherwise) will ensure that payment is only made after results have been verified against fraud. There are multiple technologies that can do it. We take an audience sample and look for red flags – significant lack of activity, following of other accounts that are known to be bots or fraudulent, odd locations (a huge audience in a random country), and specific language analysis algorithms that identify out-of-context or grammatically-incorrect behavior.

II: How has fraud muted the impact of Influencer Marketing? How will the industry move past this friction?

GE: Influencer marketing is in its infancy, and as a result, brands are unaware of the scale of fraud taking place. As they become more familiar, they will demand evidence to support validity of audiences and campaigns. Tools are being built in anticipation of these requirements, and we see with our clients that they are changing the business model to ensure payment is made after results are delivered.

For the industry to survive the massive levels of fraud, it will need to develop tools that measure true value and shift away from vanity metrics – tools that speak in the traditional digital language. Cost per click, conversion rates and ROI, as opposed to ‘likes’, ‘shares’ and ‘comments.’

 

Gaming vs. Taming the System

At the end of April, we held a Roundtable at which industry professionals gathered to talk everything Influencer Marketing – a main pressure point: Fraud.

In our recent post, “The Year of the Micro-Influencer”, we described how bigger isn’t necessarily better – an influencer with a refined following may yield the greatest engagement. Despite this insight, the ‘size matters’ fallacy persists: more followers = more engagement.

Fraud is running rampant.

What enables this fraud? Click farms and bots that generate fake followers and stimulate fake engagement rates. And, according to Forbes, “The growing emphasis on search engine optimization incentivizes people to game the system – creating an entire industry centered on boosting page rank.”

As marketing budgets move more dollars into social media, these inorganic ways to grow followers are becoming prolific. According to Fullbottle, “…recent studies show that over 8-11% of social media accounts are fake.”

Gina Lee, an Instagram-based influencer, states, “While it might be an easy game to play, in the end, it not only hurts the purchaser, but it hurts the entire social community… in order for influencer marketing to be effective for brands, the influencer behind the promotion needs to remain genuine.”

With so much fraud available for so few dollars, the honor system alone won’t cut it. Influencers must adhere to higher standards by shaping better business practices. To ensure reputable engagements, Lee advocates for using, “…sophisticated tracking methods for monitoring and analyzing activity in real time, providing alert notifications when suspicious activity is detected.”

Brands have to be much smarter, too. CEO and Founder of Hypr, Gil Eyal, explains*, “Before you choose an influencer, make sure you do your due diligence. Checking and clicking on the follower list and sampling some of the followers can give you a general idea. Looking at posts and seeing who engaged and whether the comments make sense or seem automated also sends a signal.”

More ethical behavior, more due diligence, and a dash of tech to automate the tedium will go a long way toward creating a brand-safe, integrity-driven Influencer Market ecosystem. Bye bye, click farms.

* Still hungry for more? We talk with CEO and Founder of Hypr, Gil Eyal – here’s Your Second Helping