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LUMA Digital Brief 008 - Scape of Cards

LUMA presents Digital Brief 008 - Scape of Cards

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Digital	advertising	is	doing	great.	Revenue	from	this	channel	grew	20%	in	2015	and	is	set	to	surpass	TV	
advertising	next	year	as	the	largest	category	of	ad	spend.	But	you	wouldn’t	know	it	from	the	press.	Everywhere	
you	look	from	trade	publications	to	industry	conferences	and	now	the	general	media,	all	you	hear	about	are	the	
problems	with	digital	advertising.	It’s	no	secret	that	the	sector	suffers	from	a	fragmented	ecosystem	of	
intermediaries	(as	depicted	by	our	eponymous	LUMAscapes)	and	such	a	convoluted	supply	chain	has	been	blamed	
for	a	series	of	issues	that	plague	the	sector.	These	issues	have	implications	for	all	the	key	constituents	from	
marketers	to	agencies,	tech	intermediaries,	publishers	and	consumers.	It’s	a	scape	of	cards!
We	force	ranked	the	issues	based	on	their	impact	on	the	ecosystem	as	a	whole	with	increasing	importance	from	
serious	to	critical	to	existential.	The	first	four	issues	are	either	between	constituents	(Transparency,	Header	
Bidding)	or	are	universal	problems	that	will	eventually	get	solved	via	technology	or	consolidation	(Measurement,	
Latency).	The	Privacy	/	Tracking	issue	is	a	big	one	with	consumer	groups,	especially	in	Europe.	It	is	critical	to	treat	
consumers’	data	fairly	and	so	far	the	industry	has	not	exactly	delivered	on	its	promise	of	a	better	user	experience	
from	increased	ad	relevancy.	Mostly,	we	see	retargeted	ads	of	the	product	we	already	purchased!	The	industry	
needs	to	do	better	and	as	closed	loop	attribution	becomes	more	pervasive,	this	problem	should	improve.
Then	there’s	the	bottom	half	of	the	list.	These	issues	are	critical	if	not	existential.	Let’s	take	a	
closer	look	at	these.
To	assess	the	impact	of	Viewability,	Fraud	and	Ad	Blocking,	consider	the	lifecycle	of	a	media	
impression.	Every	load	of	a	web	page	or	video	creates	an	ad	opportunity	(denoted	in	blue).	
However,	ad	blocking	(now	estimated	at	22%	in	North	America)	prevents	ads	from	being	served	
to	a	person	(a	“consumer”	in	our	nomenclature).	Of	the	ads	served,	some	are	seen	by	bots	
(machines	that	record	fraudulent	impressions)	and	another	portion	is	delivered	to	humans	but	
not	seen.
Whether	an	ad	is	“viewable”	or	not	depends	on	the	viewability	standards	that	vary	by	platform.	
For	example,	in	video,	YouTube	counts	4 seconds	as	a	view	whereas	Facebook	is	3	seconds	and	
Snapchat	one	second.
Of	the	ads	actually	viewed,	a	small	portion	of	these	instigates	engagement	by	consumers	and	
an	even	smaller	portion	results	in	a	conversion to	a	purchase.	These	last	two	elements	are	
primarily	relevant	for	direct	response	advertising	(demand	fulfillment)	whereas	brand	
advertising’s	objective	is	to	help	build	demand	generation	or	preference	over	time	and	may	
benefit	from	an	impression	alone.

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