A growing number of advertisers have recently pulled their advertising business from Google's video service YouTube after their ads ran with offensive and extremist content.
But how did those ads even wind up near such content? The answer: programmatic advertising.
Programmatic advertising is an automatic software-driven system for advertisers to pay in advance for ads to run across all manner of online content including social media, websites and video on computers and portable devices.
Much of the $83 billion expected to be spent on U.S. digital ads this year by research firm eMarketer -- more than is spent on TV or any other media -- is executed via programmatic.
"Everything is done instantaneously, billing and transactions are done in milliseconds across a massive ecosystem and trillions of impressions are delivered," said Chris Loretto, executive vice president at Digital First Media, which participates in programmatic ad sales across the sites and apps of its 106 newspapers including The Denver Post and San Jose Mercury News. DFM also has Adtaxi, a digital marketing agency, that buys programmatic ads as well as delivers ads across search, social and email.
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Google is tops in digital ad revenue, due to attract nearly 41% of all spending this year. Coming in at No. 2 is Facebook, expected to generate $16.3 billion, compared to the $33 billion Google is expected to get.
And YouTube is a growing digital ad sales generator for Google, expected to account for more than 10% of its total revenue, eMarketer estimates.
But YouTube faces a growing boycott — JPMorgan Chase was among the latest to join others including AT&T, Verizon, Johnson & Johnson — that could leave it and other major digital ad recipients scrambling for fixes to prevent major brands' ads running on videos featuring white supremacists or the Islamic State. More than 250 organizations including McDonald's, Toyota and the British government have halted their advertising on YouTube in the U.K., according to The Times, whose investigation triggered the boycott.
"Brands want to see some kind of accountability on their audience and they have this second issue that their ads are being seen in places they would prefer not," said Miro Copic, a marketing expert at San Diego State University and co-founder of BottomLine Marketing.
How does programmatic advertising work?
Think of the system as akin to computerized trading on the stock market, it happens in milliseconds. Rather than, as in traditional media, with an advertiser choosing a particular network TV show or time block — or newspaper or magazine — a digital advertiser can tweak delivery of their ads to certain consumer demographics (age, sex, location), behaviors and other characteristics. "So this technology takes all the data and automates it, matching the buyer and the seller at prices that everybody is agreeable," Loretto said.
How does an ad wind up on an offensive or extremist site?
Advertisers can target destinations for their ads based on topics and keywords already. But sometimes the customer demographics overlap with online content that can be offensive and a programmatic ad will be delivered to such a site. "Right now all the algorithms they have cannot guarantee to an advertiser that their ads won’t be on some kind of site that is problematic," Copic said.
How can they fix it?
YouTube is working on the problem; it and other sites have technicians manually monitoring video content to prevent problem match-ups. But even as the boycott grows daily, its automated system continued to place ads from major brands, which has led to more companies including Coca-Cola, GM and Starbucks to pull ads from YouTube, The Wall Street Journal reported Friday.
Part of the problem? YouTube is a network that showcases user-generated content, so the volume grows infinitely. When someone reports a problem, that video or content can be flagged and will automatically not have ads displayed. "It's a very manual process," Copic said.
The major players in the growing digital ad industry are "very focused around improving the ad ecosystem," Loretto said. "But it’s not an easy answer to what might seem like an easy question.
Who wins in this situation?
Eventually, consumers will win because better ad delivery mechanisms will be developed. In the short term, competitors to Google and Facebook could have an opening to gain some digital ad sales. Yahoo, which delivers ads via search, mobile and video, or Microsoft, which offers search ads through its Bing network, "can go to those guys and say, 'Look, we can provide you this information and this guarantee," Copic said. "So it provides an opportunity for the other players."
Possible losers?
The biggest players, Google's YouTube and Facebook, have the most to lose. And they are already suffering lost revenue in the short-term. However, "if Google comes back quickly and says, 'This is what we’re doing to do: A, B and C,' I think the advertisers come back," Copic said. "Maybe they don’t spend as much in the short-term, but they will get back to that spending level if Google is able to address the problem."
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