Digital’s Dirty Little Secret

A few days ago, the media trades (especially the digital media trades) were filled with self-congratulatory fervor over  the

Kakashi And Yamato

(Photo credit: lyk3_0n3_tym3)

achievement of a milestone.  This story from Cynopsis is typical:

For the first time, digital ad revenue is surpassing traditional TV revenue. According to new research from Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers, online advertising revenue climbed 17 percent to $42.8 billion in the U.S. last year, compared to the $40.1 billion generated from TV advertising. Although mobile ad spending increased by 17 percent to $7.1 billion, it was still just about 10% of the $74.5 billion cable and broadcast spending reached last year. Variety reports that digital video alone produced $3 billion in ad rev, while search reeled in 43 percent of the total online rev at $18.4 billion.

Woo hoo!  Way to go digital ad sellers – even you robotic ones.  The folks at Venture Beat did a really good overview of what has occurred and I’d encourage you to spend a minute and check it out.  Of course, there was one thing at the end that intrigued me:

Interestingly, performance-based pricing models are down slightly from the previous year. CPM, or cost per thousand views, was up slightly to 33 percent, while performance-based models like CPA (cost per acquisition) dipped slightly to 65 percent. CPM pricing is at its highest point since 2010, the IAB said.

Why is that of interest?  CPM pricing is impression based.  Now let’s look at digital advertising’s dirty little secret.  This is from the Wall Street Journal:

About 36% of all Web traffic is considered fake, the product of computers hijacked by viruses and programmed to visit sites, according to estimates cited recently by the Interactive Advertising Bureau trade group. So-called bot traffic cheats advertisers because marketers typically pay for ads whenever they are loaded in response to users visiting Web pages—regardless of whether the users are actual people.  The fraudsters erect sites with phony traffic and collect payments from advertisers through the middlemen who aggregate space across many sites and resell the space for most Web publishers.

In other words, between $6 billion and $18 billion is stolen every year in the US  because of ad fraud.  So while there is no question about the impact digital has had in the advertising landscape, it probably has a ways to go to catch broadcast TV.  The bad news is that a lot of that catching up involves breaking up criminal enterprises. The good news is that imagine how much better off the legitimate business will become with those ill-gotten gains redistributed to the legitimate players.

It’s always good news, bad news, isn’t it?


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