Who's To Blame For the Advertising Technology Trust Gap?

Advertisers are growing increasingly anxious about whether their digital spending is having any impact - when it is not simply victimized by outright fraud, especially with regard to audience metrics.

As so often happens with new ventures that have gone awry, the answer may be that early assumptions about incentives and talent favored a technological mindset bent on 'disruption' or 'revolution' rather than understanding customer needs now that convergence across platforms is clearly the optimal solution. JL

Judy Shapiro reports in Advertising Age:

VCs favored engineer CEOs who often lacked understanding of what marketing customers really needed. It created a misaligned incentive structure that rewarded low quality digital deliveries instead of high quality audience interactions.Advertisers were pitted against publishers in a zero-sum game where advertisers "win" by getting the best inventory cheaply as possible, and publishers "win" by selling the worst inventory possible at the highest price possible.
Recently, PluggedBD held an executive-level roundtable titled "Transparency, Measurement and Viewability in the Digital Age," which began with a discussion about what Procter & Gamble Chief Brand Officer Marc Pritchard meant when he called for "… new [transparency] rules for agencies and ad tech to get paid."
Not one of the panelists, representing every aspect of ad tech, could exactly answer the question, which prompted moderator Jonathon Shaevitz, CEO of Industry Index, to ask a second question: "Who's to blame for the 'trust' mess we're in?" That's when the conversation got really interesting because solving marketing biggest "whodunit" is how we start down the road to redemption.
Who's really to blame?
The angst in the room was palpable as the group struggled to solve this "whodunit," with panelists assigning blame in equal measure to agencies, publishers and CMOs -- all the while acknowledging they weren't really sure whom to blame.
But to me, the culprit is clear. Without hesitation, I'd have raised an accusing finger at the one group not in the room: venture capitalists (VCs).
What's the evidence?
The case against VCs starts with the basic fact most VCs tinkered in an industry they knew little about. As a result, they applied their typical investing formula -- 1) "cool team"; 2) "cool tech"; and 3) "cool SaaS Model" -- indiscriminatingly to marketing, with unfortunate consequences:

1. "Cool team": VCs overwhelmingly favored engineer CEOs (often young) who often lacked any understanding what their marketing customers really needed.
2. "Cool tech": Ad tech is now a fragmented, dysfunctional ecosystem because of VCs predilection for "cool" tech (versus useful tech), which heavily burdened the industry with so many similar startups that advertisers struggle to distinguish one from another. The knock-on effect is that most advertiser attempts at frictionless marketing management are doomed to end in failure. A most unhealthy outcome all around.
3. "Cool, SaaS business model": This is possibly the most damaging ingredient in the VC formula because it created a misaligned incentive structure that rewarded low quality digital deliveries instead of high quality audience interactions.

The real crime

It's clear in hindsight that a lot of damage was done by the VC investment formula because it steamrolled marketing's own, albeit "uncool," formula that is equal parts art, science and execution. This fundamental mismatch directly led to ad tech becoming a toxic, adversarial brew that undermined long-term and trusted relationships across the marketing ecosystem:

• Advertisers were pitted against publishers in a zero-sum game where advertisers "win" by getting the best inventory as cheaply as possible, and publishers "win" by selling the worst inventory possible at the highest price possible. No wonder everyone is twitchy.
• Agencies and ad networks fight to deliver profitable media buys because too many people have their hand in the arbitrage cookie jar.
• Everyone is playing a perverse metric, hot potato game whereby SaaS businesses are quick to pass the metric buck to anyone, ad networks blame other platforms, and everyone blames agencies for whatever they can get away with. Everyone loses.

The road to redemption
Blame is useful to help us to adapt a new attitude that gives us the fortitude for the long and arduous journey ahead. The place to start is for advertisers and agencies to fully appreciate that every dollar spent in advertising doubles as an investment for ad tech ventures. The VC model was not kind to marketer-led ventures, which is part of why there is such a lack of transparent, process-driven ventures. With this new consciousness, though, advertisers can wrestle control from VCs to determine which ventures thrive with these "investment" guiding principles:

• Funnel marketing dollars to ventures that deliver a system level solution that integrates the art, science and execution of great marketing versus narrow point or SaaS solutions.
• Reward platforms that develop pre-campaign proformas with business-centric KPI's like Cost Per Visitor (CPV) to create transparency and trust.
• Rethink the scale equation with a new sensitivity towards the realities of quality digital scarcity. Move away from tonnage metrics towards smaller and meaningful metrics that can be traced to revenue-generating activities.
• Go the extra mile to hear new ideas in ad tech, especially from marketer CEOs. The effort has profound implications in reshaping the ad tech landscape of tomorrow.

It's taken marketers over five years to get smart enough to challenge the black boxes that ad tech packaged itself in. The next five years will look quite different, as marketers create ad tech where trust is the norm, not the exception.