Ad Wreck

VC-backed ad tech firms have arguably inflicted one big mess on digital advertising

Regardless, there’s been a backlash against the promise of online targeting, which boasts of scientific precision and perfect lookalikes. Andy Atherton, svp, strategic accounts, AppNexus (and co-founder of the former branding-oriented network argued that a slew of advanced targeting firms have become experts at packaging solutions that don’t actually address real problems. But busy 24-year-old media planners are susceptible to their simplicity. He used the example of an ad tech firm promising a peanut butter advertiser the ability to reach millions of customers who only use peanut butter for recipes, rather than sandwiches. This projection, according to Atherton, was based on a very small data sample. “Why not just target women?” Atherton asked. “This is all about a tech push rather than a customer pull.”

It seems nowhere is the disappointment and distrust more acute that in the ad exchange space. According to Piper Jaffrey, 70 to 80 percent of ads sold in exchanges such as Google’s AdEx are not even viewable because they are delivered below the fold, meaning they don’t actually appear on a user’s screen. (Some claim the figure is closer to 90 percent). Then, comScore recently reported that non-human traffic on the Web jumped from 6 percent to 36 percent this year. Surely the bots have found a way to exploit the ad exchanges. According to buyers, companies such as AlphaBird create bogus content sites like, or other fraudsters build sites like, then flood the SSPs and exchanges with millions of robot-generated impressions over short bursts of time. Yet neither the exchanges nor VC-backed verification companies like DoubleVerify ($46.5 million in funding), are able to detect the bogus activity.

Google, which labels its exchange as “premium,” has introduced its own verification tools. The company has also become very active in pushing the viewable impression cause, working closely with groups like the Association of National Advertisers the IAB and the American Association of Advertising Agencies the Making Measurement Make Sense initiative) to promote a new Active View standard—all part of the industry’s Making Measurement Make Sense initiative.

Says a Google spokesperson: “We've been fighting this fight since we acquired DoubleClick in 2007 and have invested a significant amount of time and money to do so. The truth is that the exchange industry has made huge leaps forward over the past couple of years both in terms of what is possible and how well it performs for buyers and sellers. It works as a model, this is why we've seen the huge shift --both by publishers and marketers -- towards programmatic buying. Through our platforms alone, the DoubleClick Ad Exchange and DoubleClick Bid Manager (formerly Invite Media), we've seen the number of impressions double over the past year."

Then there’s the recent dustup over Sambreel, a malware company that sneaks software onto user’s desktops, then places ads from the likes of Ashley’s Furniture and American Express on unwitting sites like and YouTube. Sambreel maintains over 20 corporate identities on the Web, including Blankbase and mySuperCheap, blasting 50 to 100 billion impressions into the ecosystem via ad tech firms PubMatic and Rubicon Project—as well as via Google’s own Invite Media platform (indirectly, as Invite doesn't work directly with publishers). Both Rubicon and PubMatic have cut Sambreel off, but only after buyers cried foul. What’s to stop this from happening on the exchanges? Well, according to a case study conducted with the firm Media6Degrees, Google has a handle on such issues. “Google actually has a very clean exchange,” says Andrew Pancer, COO, Media6Degrees. "But buyers need to be extremely diligent in the space.”

Sure, but the upshot is that all the ad tech safeguards in the world seem to be falling short. “This [incident with Sambreel] was obviously not a healthy thing for the ecosystem,” admits PubMatic’s CEO Rajeev Goel. “But we think this was a small, isolated thing. We only work with premium publishers.”

Not everyone would characterize the problem as small or isolated. “Digital marketing is really ripe with fraud, bad actors and other sorts of pestilence,” says Digilant CEO Ed Montes. “Big brands know this, as do publishers, and that is why the money isn’t matching the time spent on the medium. What happens if ad supported models can’t sustain real content producers?”

Naturally, others disagree with this point of view, and about the value of ad tech. Says Luma partners CEO Terence Kawaja, “Brand dollars might not be coming, but instead of aiming for that billion-dollar branding market, publishers can and should focus on the trillion-dollar commerce opportunity.”

Others think publishers should stop decrying ad tech and start embracing it. Mark Westlake, CEO of TechMediaNetwork, urged publishers to see exchanges as testing grounds.

“Publishers have to be more clever,” says David Kenny, CEO of The Weather Co., who points to a recent campaign for the retailer Burberry that delivered ads based on current weather conditions.

“There will be winners and losers in this space,” adds Ned Brody, CEO of AOL’s “But we absolutely have publishers in our company where the yield is going up from RTB.”

Vivek Shah, CEO of Ziff Davis, tends to agree with that Darwinian take. “This is an incredibly liquid market,” he says. “And not all content has marketing value.”

The fact is, some publishers are becoming more open to ad tech. For example, The Wall Street Journal Digital Network just launched a private exchange with Rubicon. “We’re dipping our toe,” says the Journal’s digital sales head Mark Fishkin. “More and more impressions are being sold this way, and we’re getting business form accounts that normally wouldn’t’ give us a look.”

And naturally, there are VCs who defend the investment wave, arguing that this is how it works: You make a lot of bets, and a few hit. Others pivot or perish.

“VC has a history of flooding areas that have value with a lot of money,” says Joe Medved, partner at Softbank Capital. “But if we didn’t see businesses growing, if brands didn’t see value, we wouldn’t see that in ad tech.” Medvev expects still more investment, as video and particularly mobile heat up.

Moving forward, one can expect the industry to continue to rally around the idea of selling only viewable impressions. Many believe that will reduce supply and make it tougher on all the cheaters. “If the market responds as it should and buys fewer shitty banners, publishers will get pressure from buyers to create more ad spaces that get seen for longer,” says Greg March, media director at Wieden + Kennedy. “Hopefully some will.”

What happens to the growing crop of ad tech firms? “The investment we saw in ad technology was critical over the last five years,” says Eric Picard, CEO of Rare Crowds. “But the pace was too fast, dumping massive amounts of money into too many companies in the space over too short of a timeframe. So we’ll see significant consolidation over the next few years of lookalike investments, probably not at great investor returns.”

Jeremy Hlavacek
, vp, strategy and business operations at Varick Media Management, concurs: “A lot of familiar names are going to reappear in this environment to make buys. Think Google, Yahoo, Microsoft and AOL.”

When the dust settles, one player looks to be the big winner in all this—the one company to which everybody in Web publishing balks at giving still more power. The VC-funded ad tech space will have been essentially free R&D for Google.

As Spanfeller sees it, “They probably win in the end.”