Header Bidding: 5 Videos, 8 Numbers, and 12 Remarks You Should Read

The Industry Index Header Bidding Roundtable Roundup

Every month, Industry Index gathers MadTech leaders to discuss trends, hot topics, and new technology in the industry. We’ve written recently about Header Bidding (see the exchange shakeup and winners and losers) and that was before we decided to to open it up to some key industry players at our recent Roundtable to sort out where it’s all, er…. Headed.

Here We Go…
Header bidding is not a brand new idea, But from all the chatter, it sure seems like it.  Kelvin Pichardo, Director, Product Marketing at PubMatic, thinks the growth is directly related to the functions that header bidding enables, more so than the mechanics behind having a tag in the header. He was kind/smart enough to break it down for us:

The Complexity Is Simple.
Header bidding exposes all inventory to a large cross section of demand simultaneously, and more competition has improved CPMs. But with demand comes a huge pile of problems additional complexities. Latency, cookie syncing… along with the simple complexity of deploying a header bidding solution.

 

Browser-Bashing
According to Maggie Neuwald, VP, Enterprise Accounts at MediaMath, “With browser-side, there is a limitation of the number of calls and, due to second price auctions, it isn’t a unified market.” Yes, browser-based solutions afford publishers a significant level of control, but the highest bids don’t always win thanks to inefficiencies found in putting the auction load on users’ browsers.

What’s interesting is the effect that users are unaware they have in header bidding auctions, as calls are originating from their machines. Doug Lauretano, SVP and GM at Media.net stresses that these are individual calls happening to individual demand sources. “We threw out the word latency…  browsers weren’t made to operate like this. Browsers were made to show content to users – not to do these complicated AdTech calls. Hence the shift – that’s why server-side is important.”

There Is No “I” in Header Bidding
Header bidding cannot be viewed as a, “set it and forget it philosophy,” offered Michael Hannon, VP, Yield and Revenue Optimization at Purch. There needs to be total transparency when it comes to pageviews, bounce rates, demand sources, DFP, and pulling relic data on a daily basis. There should be a proactive acknowledgment of the responsibility that publishers have in implementing header bidding. Stephanie Layser, Director, Advertising Technology at News Corp stated that, “For too long we have been looking at engineering and page experience separately from advertising, and that’s where we have gotten ourselves into a lot of issues. If we start looking at ourselves – on a daily basis – holistically, and getting our teams working closer together, there will be better communication.”

You Lose, SSPs
The consensus from all participants was that SSPs have lost. It will be more than a challenge as they try to differentiate themselves with the supply amongst publishers looking exactly the same from one to another. First “latency” was a trigger word, then “commodity”… SSPs could have used a safeword…

Layser was the first to be predictive: “There is inefficiency in [browser-based] header bidding. I also believe that once you move to server-side header bidding that the SSP model collapses — but I believe that people will have one partner that will have direct integration with different DSPs. But the question is — people used to use one or two SSPs anyways, so are we just collapsing back to just one SSP? I don’t know exactly what it is. I tend to hope that the future has less to do with getting demand from other people and using their third party demand, and  more of it has to do with utilizing publishers first-party demand and the relationship that they have with their users.”

 

Big Cookies
Moderator Jonathon Shaevitz addressed that we cannot have a header bidding conversation without putting Google… (and Whole Foods Amazon) in the middle. The room chattered with recognition, and after a brief pause and some darting eyes across the table, he then noted that Facebook also has to be included to ensure that the conversation stays proactive. More darting eyes. More nodding.

Neuwald stated that when working with a variety of DMPs, there is a loss of data that is related specifically to cross-device, person-based identification… that’s the information of true value. Ahem. Layser added, “The biggest value is the ID, knowing that this is an addressable person. That is the greatest value that they (Google, Amazon, Facebook) can identify and the smaller guys don’t have that as much.”

It seems that the tri-opolies (you read that right) may always be at the forefront of MadTech. This comes up at every single Roundtable, and Layser gets the credit for this field goal: “Everyone’s digital ad growth is 1%, where Google and Facebook is around 40-50%.” Boom goes the dynamite.

I Might Like You Better If We Tech Together…
Data is important, but doesn’t mean anything without cookie matching. Megan Latham, Global Head of Advertising Operations at Bloomberg believes that cookie matching across platforms needs to be addressed and implemented.

Neuwald adds that, “The only limitation is just cookie matching and we see up to 90% matches with our partners… so it’s something that is easily solved. It just requires standards, transparency, trust, and some coopetition (you read that right, too), which this industry is luckily good at. But we need to up the ante on people-based identifiers, and this is a long term strategy.”

 

By the Numbers
Participants were asked to pick a number, any number, they deemed relevant to the current state of header bidding. Here are the highlights… make sure you give proper attribution as you throw these one-liners out at your 4th of July barbeque:

  • “Every 1 second delay in a page load can result in a 7% decline in sales – per second – and 16% decline in consumer experience.” — Maggie Neuwald
  • “Marketers who have adopted a full-funnel approach have seen a 532% ROI increase, based on a Forester Economic Impact Study.” — Maggie Neuwald
  • “There are between 4-6 million queries per second that some DSPs listen to.” — Ari Paparo
  • “When you think that header bidding hit a tipping point about 2 years ago, and the amount of traction it’s gotten, across all forms… it’s really upended an industry in 2 years. Makes you wonder what the next 2 years will look like.” — Doug Lauretano
  • “On average, 385 individual calls are needed to load a single page (of a sample of about 20 different premium publishers’ websites.) That includes images, text… everything.” Doug Lauretano
  • 13% of impressions go to the private auction space. This needs to grow to bridge the gap between the publisher and the buy-side to pull the buyer’s further up the yield curve.” — Matthew Lehman
  • “$45.9 billion is predicted to be spent in programmatic display by 2019, and will count for 84% of US display revenue, which shows why there are 636 vendors out there – because the money is being generated and people are jumping on the wagon.” — Megan Latham

We Don’t Need No Stinking Badges…
Our Roundtable was certain about one thing: Header bidding (despite the valiant efforts of the Roundtable) is still complex, and still evolving. We managed to scratch the surface together, but left a few things on the table. One thing that wasn’t addressed: AdWeek recently reported, ”The IAB Tech Lab announced an initial outline for what it’s calling ‘Standard Header Container Integration with an Ad Server,’ a nine-page document from the Header Tag Task Force.” (Emphasis ours.) Seriously… we hope they get uniforms and badges. That’s our prediction, anyway.


The Header Bidding Crystal Ball


Have a Great Summer, Don’t Ever Change…
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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.

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?

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

The Year of the Micro-Influencer

Our April Roundtable dug into everything Influencer Marketing. We were left with an interesting question – who matters more, the micro- or the macro-influencers?

According to Digiday, “Once a social media influencer reaches a critical mass of followers, audience engagement actually begins to decrease.”

Maybe bigger isn’t necessarily better. Even though a macro-influencer with 2mm+ followers can reach an enormous audience, potency is not a given. Why? A large percentage of a macro’s followers may not be interested in the brand that influencer is promoting. The consensus of our Roundtable: macro-influencers tend to drive brand awareness, while micro-influencers drive action.

A recent survey, produced by Markerly, of two million social media influencers showed:

“For unpaid posts, Instagram influencers with fewer than 1,000 followers have a like rate of about 8%, while those with between 1,000 and 10,000 followers have a like rate of 4%… as following base continues to increase, like rates keep decreasing. Instagram influencers with 10,000 to 100,000 followers see a 2.4% like rate, compared to 1.7% for those with 1mm to 10mm+ followers. Comment rates follow a similar pattern.”

CNBC notes, “Brands have long tapped into the social media ‘influencer’… fashion bloggers, athletes… the Kardashians.” But with the macro drop-off illustrated above, and that, “Famous faces can be costly and impersonal… marketers are now turning to ‘micro-influencers.’”

We all want to think we have a personal reach, but are we all micro-influencers? Not exactly. Expanding on the ‘≤ 100,000 followers’ macro-influencer definition from our Roundtable, CNBC defines micro-influencers as those, “Who have 10,000 to 100,000 followers on social media and the power to reach a niche audience.”

Viacom’s David Berzin, VP of Social Data Strategy,  and Lydia Daly, SVP of Social Media and Branded Content Strategy agree that, “The perfect influencer… isn’t necessarily someone big, but someone who’s about to be big.” Berzin continued, “You really want to look for ebbs and flows, and talent that’s about to peak, as opposed to an inflated follower count.”

Here’s perfect example, offered by Digiday: Last year Trojan wanted to create a campaign targeted to millennials… the influencer on the top of the wish list was YouTube sexologist Shannon Boodram. “Though she didn’t have the tremendous follower count that advertisers craved, her sex-positive social presence was a perfect match for the campaign. And she seemed to be at a tipping point.” To create the leverage that Boodram needed, Trojan also enlisted 2mm-follower-strong comedian Josh Leyva. “The pairing resulted in an avalanche of positive press for Trojan and Boodram,” demonstrating that micro- and macro-influencers have different reaches, and that both can be effective for a brand when used correctly.

What about the ground between micro and macro? Digiday breaks down what agencies are starting to utilize and refer to as “Power middle influencers… typically around 100,000 to 200,000 followers. Creating content for brands is still secondary to their full-time professions, so they post sponsored content less often than social celebrities… thus they feel more authentic.”  Authenticity and the different demographic reaches of micro- and power-middle influencers can result in better engagement when compared to the reach of one or two major celebrities.

Pairing influencers with campaigns is part a matter of feel – which is hard to quantify – and part a matter of reach, where numbers are available and important. Daly explained that for him, numbers come first, helping to “Whittle down from hundreds of thousands of potential influencers in the world to the twenty or so that might make sense for the campaign.” What has to be remembered is that ‘numbers of followers’ is a lifetime count, and that audience may not be relevant for a campaign running now.

Of course, there are three types of lies. We’ll be digging into fraud’s effects on Influencer Marketing in our next blog post… assuming you believe us.

 

Welcome To The Influencer Marketing Era

Big takeaways from our April Roundtable on Influencer Marketing 

At our recent Roundtable, Industry Index gathered MadTech companies, brands, agencies, and influencers to discuss the growing gravitas of Influencer Marketing. While not a new concept, Shade CEO Jacques Bastien stressed the power of influencers — evidenced by brands, all eager to capitalize on this power. Target audiences are likelier to relate, listen to, and trust the familiar faces of influencers.

Jacques Bastien – stresses the power of the influencer

 

Welcome to the era of Influencer Marketing.

PLAYING CATCH-UP
Measurement & Monitoring

Brands recognize that Influencer Marketing is an effective way of getting in front of the right audiences. Understanding, quantifying, and proving success is much less obvious. A major theme at the Roundtable was the need for education through measurement. Influencer Marketing is becoming a bigger part of the media spend, and it’s only going to continue to grow. However, creative agencies aren’t allocating appropriate dollars by treating Influencer Marketing opportunities as media products. Paul Kontonis, CMO of WHOSAY, explained that “Influencer Marketing is a media product. Let’s not kid ourselves – we are making better ads, we are making better performing ads on mobile devices. When you look at it that way you realize it’s becoming a bigger and bigger piece of the media budget.”

Dontae Mears, Supervisor of Influencer Marketing at VaynerMedia, states that a lot of scrutiny comes from the growth of the media budget. Through education and proper measurement, Mears offered, “You will start understanding the real tangible results that are beyond impressions and engagement… how we are affecting real brand health, how are we changing the perception of a band… and that comes with strategy.” There needs to be an infrastructure in place where true impressions can be reported, and pre/post surveys can solidify the understanding of the data pipeline.

PROGRAMMATIC TO THE RESCUE?
Scale & Audience Are Limiting Factors

Is there a way that programmatic can intervene and start measuring the impact of Influencer Marketing? That is a challenge unto itself, as Influencer Marketing relies on, and revolves around, people. Jonathan Chanti, SVP at HYPR Brands stated, “Programmatic isn’t going to work with Influencer Marketing in the near future because you are dealing with people and the error that comes from that.” Proving that Influencer Marketing has a long way to go when relating to the programmatic aspect of technology.

Technology and human error – two main pressure points pertaining to scaling Influencer Marketing. Yuli Ziv, Founder and CEO of Style Coalition offered, “The main challenge in scaling this business is not the technology – you can build this business pretty cheaply – the challenge is you are working with real people and there will always be room for error.” Technology is ubiquitous and platforms are readily available. Anyone can try to be an influencer. In order for Influencer Marketing to scale, the noise has to subside. Ziv continued, “the space has grown to a point where it’s going to have to consolidate – there are too many platforms… too many people doing the exact same thing.”

To continue elevating Influencer Marketing, campaigns have to be delegated and conducted strategically. In order for these three simple steps to be effective, the correct audience has to be determined through the depiction of where an influencer has the greatest pull within a given campaign. Chanti explained that there is a use for everyone, and that pop-culture is about feeding consumption and identifying the correct audience to target a campaign and brand toward. “The hot girl with 80 percent male following is great, but not for cosmetics.” The success of that ‘hot girl’ will thrive in front of a male-dominated audience. Massive reach, wrong audience, wasted dollars, proving the strategy that has to be driven by a brand’s creative brief. The niche audience of an influencer should weigh heavily in controlling the success of a campaign.

AUTHENTICITY, VARIETY, and FAIR MONETIZATION
Grasping Influencer/Audience Relationship

The power influencers have with their hard-won audiences relies on authenticity; their voices cannot be seen as commingled with brands’ messages. Brands must remember that for influencers connect with their users on a human level. With humanity, variety is essential. Influencer Michell Clark explained, “I think we get boxed into fitting in certain small areas of importance – weather that’s music or culture or fashion or whatever else… we have so many things that we do… so just asking the right people and figuring out who else is involved in certain things would be helpful… make new connections and find a new campaign or figure out what [an influencer] can add to a brand.”

Impressions will ultimately drive traffic to a brand, and those impressions are created through influencers’ networks and the conversations they are having. Mears explained some A/B testing conducted by VaynerMedia, “We took influencer-created content, we whitelisted, we promoted it from the brand’s handle and also from the influencer on behalf of the brand, and the engagement was 100% stronger on the influencer handle.”

It’s clear that brands ultimately monetize Influencer Marketing impressions, so how much are influencers directly monetizing their reach? Allan Watson, CEO and Co-Founder of Holr Media Group, predicts that influencers are going to get smarter about monetizing their content, taking more control of the narrative. This cuts both ways, however. Without the product the brand is pushing, there wouldn’t be a narrative to begin with.

Allan Watson predicts – influencer will get smart about monetizing the narrative 

 

THE 360º APPROACH
Micro- vs. Macro-Influencer — Quality Control — Budget

Both micro- and macro-influencers offer different levels of reach and usefulness to brands. According to Chanti, every influencer will have a different spin on how they are going to market the brand and the product.

A micro-influencer was defined, loosely and unscientifically, at the Roundtable, as an individual with 100K followers or fewer (“fewer” was not defined, but we’re guessing it’s more than 100.) This partly defines the reach a brand may have to their given audience, however micro-influencers will cost brands less than the macro-influencers. Laughter broke out around the table we were reminded that agencies often have the same request for macro-influencers, like Kim Kardashian, regardless of budget. It reminds us of a conversation on scarcity and eCPM that we had at a previous Roundtable. Having your cake and eating it, too? Think again, brands.

Talent management agencies may need to aid in defining campaigns based on budgets and influencers’ audiences available within those budgets. Which is better, a slew of micro-influencers or the reach of one macro-influencer? Mears’ prediction is the coming year will feature the growth of micro-influencers as budgets open up and education continues.

Dontae Mears predicts – the growth of micro-influencers

 

This prediction is warranted – many brands simply don’t have the budget sign contracts with major celebrities. Watson, posed the question, “Do you think as the market grows, and micro and macro talent grows, and the cost for macro-talent increases, that brands will be more focused on their own influencers?” The Frankenstein’s monster concept of molding someone into an ideal influencer sent the Roundtable into a flurry of chatter. If an ideal influencer is created (like this guy), the guess work and human error could potentially be minimized or removed entirely. Not exactly Influencer Marketing, but maybe close enough for some, and things like “brand-safe” and “quality control” no longer factor.

Weather a brand is creating the ideal influencer, or working with a micro- or macro-influencer, it’s extremely important to define the quality controls required to achieve brands’ goals. Scale can only be achieved if there is the correct instruction and the correct team. Bastien offered, “It can’t just be like here is the budget and here is the goal and let me know when it is up – because that is 100% the quickest way to fail.” Kontonis explained the importance of everyone playing a part in the process, “The agency needs to make sure that the brand is getting what they need, ” as the influencer shouldn’t ‘just run with it.’ He continued, “… A 360º approach [is needed when] looking at and producing a campaign from start to finish: Monitoring, managing, leveraging audience engagement and conveying a cohesive campaign.

All factors and goals must be discussed at the first strategy meeting. The Influencer Marketing sector is used to influencers being viewed as an afterthought, even though the power of influencer is proven. Mears explains, “In order to generate the amplification needed… the fact that a brand will be using an influencer needs to be on the table.”

ODE TO SOCIAL MEDIA
Platforms and Fraud

Sean Lynch, Marketing Manager at FILA, told the Roundtable that Influencer Marketing is going to continue being the wild, wild west as the industry continues to grow and educate themselves. Brands are going to dictate a lot of the Influencer Marketing landscape through the continued growth of social media. The retail structure of America is depicted so heavily by influencers, and with social media platforms popping up nearly every day, the Influencer Marketing sector continues to take off – but hasn’t gotten above the clouds yet.

“Let’s be realistic,” Chanti states, “social media really changed the game on how you were able to measure how effective your marketing is actually performing. Now it’s how many ‘likes’ did you get? What is the engagement? Who engaged? What’s the ROI?”  With the power that social media platforms have, the lack of measurement and monitoring can create challenges. Mears explains that a huge hurdle is mounting in the proliferation of platforms without standardizations and common taxonomy for measuring Influencer Marketing – Fraud can run rampant.

“Fraud is something you have to look at before you get in bed with someone,” Chanti explains. Through leveraging data and technology, brands and agencies should be able to define and discover influencers’ legitimacy. Through this next growth cycle of Influencer Marketing, how are platforms going to label, prevent, curtail, or amplify fraud? Who controls the metrics?

POWER OF EDUCATION 

Jason Charles, Promotion Manager for Republic Records at Universal Music Group, posed the idea that Influencer Marketing is the old fighting the new. “Anytime there is a change, there is going to be resistance… the budgets need to increase and there needs to be more education.”

Lynch added, “We need education, we need monitoring, but at the same time we can’t lose the authenticity of why [brands are working with] influencers.”