Justifying the Weird

What’s the success rate for people trying to evade marketing surveillance on the web?

I think it’s zero. Check out the story of Ross William Ulbricht AKA “Dread Pirate Roberts” of Silk Road infamy. He was alleged to be responsible for the sales of over $1 billion in heroin on the dark web. He had very good reason to cover his tracks–a long stint in Federal Maximum Sercurity–and was, by all accounts, very computer and security literate. Yet he couldn’t do it. There’s other stories of sophisticated cyber-criminals getting tripped up by basic OpSec lapses.

So what’s the chance that a normal person like you or me is going to perfectly:

  • Always use their VPN?
  • Have a  perfectly-configured ad blocker and always use it?
  • Keep Google’s mitts off our location?
  • Never log in to a site that shares anonymous login data?

It’s zero. It’s much safer to assume that some of our digital ephemera, whether it’s some login or log of an IP address, or device ID, is available to match or “onboard.” That means that it’s likely that we can be matched anonymously to some data that can, at the very least, say “hey, there’s a real human here.”

But when we attempt to advertise online and can’t match the cookie/mobile ID/etc. to an identity graph–after applying tons of (lousy) ad tech and mar tech solutions– we tend to do the stupidest thing possible. We look for yet more data to try to match that thing into an audience. Somehow the concept of “match rate” has overwhelmed good common sense in marketing.

Given that you can reach over 4 billion MAUs on the top 50 publishers in the US, and over 2.3 billion MAUs via the top 25 ad networks, William of Ockham suggests it’s more likely the weird isn’t human. Work with what you have. There’s more than enough MAU on any reputable publisher to hit your objectives, whether they are lower-funnel or pure reach/frequency.

Toss away the weird and focus on the impressions that you’re pretty sure are being served to some human. Ads served to and seen by any humans will always out-perform ads served to bots.

My alternative for digital marketing is to use a Zero Trust or operations security method of operations. When something looks weird, i.e. you have any doubt that it might not be a person, it’s not an outlier. Throw it away. Adding more data to something weird won’t turn it to normal, particularly when you start spending money on tertiary data and another sketchy vendor.

Weird gets noticed. That’s the way we tend to identify criminals, tax cheats, and terrorists. If it works for those categories, it should work for your digital marketing.

Takeaway: If it’s weird, it’s wrong. Don’t fixate on more data or match rate. Don’t try to fix weird and work with what’s real. And win.

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Dealing With Dump Money

I love the holidays, but as a buyer, I hate this time of year. Media sales people and vendors are calling constantly looking for that use it or lose it “dump money.”

If you have dump money, only two things are true:

  • Your money will be wasted.
  • Your budgeting process is nonsensical.

Somehow inventory will be found and contracts will be amended. But the marginal ROI on inventory will suck and, come January 2nd, you’ll wonder whether you bought technology X after a particularly liquid holiday party.

I don’t have dump money (although I’ve spent it for others, with predictable results) because I practice proper, zero-based budgeting. If you budget correctly, when the vendors call this month you can confidently say “no, I’m good.”

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Déjà Vu: The Partner Curse

Screen Shot 2017-11-30 at 8.32.17 AMI’m sure you’ve read about Hyphbot, but if you haven’t, here’s a good piece at The Drum which you should read. In the article, this line from Jay Stevens, the Adform CRO, hit me:

“Premium publishers, like the FT are hyper-sensitive to this and they only have two trusted exchanges they allow [to resell their inventory],” he says.

“But then you go to other premium publishers [look through their ads.txt file] and it’s like a whole laundry list of every SSP and their brother, and their dog, that’s allowed to sell their inventory.”

It’s the “partner” curse, which marketers seem to constantly fall for. The pitch is that with more partners (heaven forbid, not “vendors”), you’ll collaboratively and more easily get more coverage of the market and sell more stuff.

That approach works in retail and B2B-type goods, such as networked printers. There are problems and channel conflict is a constant headache, but the actions of all the players are in the open. You can usually see when a channel partner isn’t playing by the rules, or is doing something tricky to game your MDF allocations.

In digital you can’t see or understand who’s touching your marketing and you don’t even know who’s got their hand in your pocket until it’s too late.

We’ve seen these problems with “partners” for years, going back to the early days of affiliate marketing. Remember the pay-for-peformance links? Yuck. I was also reminded yesterday of the old problem of letting partners bid on your branded keywords in search.

The theory in search is that, by allowing your affiliates to bid on your terms, you can move to a pure CPA model.  Collectively, you’ll all get your fair share of market demand and at a known cost. But after you’ve brought on a few partners you realize they all have a fiduciary responsibility to maximize their profits. Your “partners” are in the business of pulling as much out of your pocket as they can, and you have no idea how to fix or optimize it, short of taking all marketing back in house.*

I think the partner curse is driven by laziness. We’d like to believe that we can reap the benefits of sales, revenue, and profit maximization without having to do much real work, aside from business development and contracts. We can forget the blocking and tackling of segmentation, targeting, and checking every ad for consistency and quality. Maybe only marketers fall for this. We’d have never gone to the moon on Apollo with a supply chain like we have in digital media.

Takeaway: The larger the number of “partners,” the more careful you have to be. Track everything and trust no vendor or partner. Tighten your supply chain. And win.

*And you probably should, as I wrote on the topic a few years back.

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Your Holiday Season Mission: Customer Acquisition

Screen Shot 2017-11-29 at 8.44.18 AMWe’re in peak marketing season, with under 30 days to go. Digital CPMs are rising, clearing spots at acceptable CPA is getting harder, email in-boxes are more cluttered than ever, and sales promotion is off the hook.

Nothing we haven’t seen before. But what should you–a multi-product retailer–be focused on? The answer is the same as it’s always been.

Customer acquisition. Not increasing repeat purchase rates, although that’s important. Not in increasing average order size, although that’s important. Customer acquisition is king if you want to grow. You’ve read–and have mastered–Byron Sharp’s “How Brand Grow,” right?

If not, stop right now, buy yourself an early holiday gift and read it tonight. At a bare minimum, read Dr. Sharp on the fallacy of the leaky bucket theory or this quick overview of some of the criticisms of his and the Ehrenberg-Bass Institute’s works.

The Double Jeopardy law says that you’ll build loyalty (repeat purchase) as you grow and get more of the category buyers. Pour your money into customer acquisition*, spread across as many channels as possible. But do the math first.

I stumbled upon a great presentation by Kevin Hillstrom, president of MineThatData, which shows you the kind of analysis you need to do. It makes clear why customer acquisition is so important. Read his presentation, available at SlideShare. You might want to hire him to look at your performance and assess your strategies and tactics.

Takeaways: Don’t get caught up in loyalty, NPS, and other things until you’ve got your customer acquisition strategy and tactics running full-speed, on many channels. Acquire customers to grow. Acquire customers to increase loyalty. And win.

*Decide where you want to cutoff acquisition at a source level. It could be break-even, at some minimally-acceptable ROI above your hurdle rate, or whatever. But make sure you understand and agree to those metrics with your executives, your marketing team, and your agencies.

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Data-driven?

When somebody claims they’re a data-driven marketer, generally that means their actions are driven by cursory analysis of biased data sets, and that they lack a coherent strategy.

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Another Day, More Digital Fraud

Screen Shot 2017-11-22 at 8.46.37 AMHow many of your ad tech and mar tech technology providers called you in September and October and said “Hey, we’re seeing some odd things happening and we think maybe there’s some new fraud taking place. Maybe you should cut back your buys at X, Y, Z.”

Yeah, I thought it would rhyme with “hero.”

Turns out that yet another scheme to defraud advertisers, HyphBot, was spun up in August and which was stealing maybe $500K per day. You have to ask yourself–why didn’t any of your technology providers alert you? Either they’re complicit or they’re stupid.

My money’s on both. Your technology “partners” don’t want to tell you about the fraud, because that means you’d spend less on digital advertising and that’s less fees. Less fees means less avocado toast, and that’s a bad thing. That makes them complicit.

A digression: If your technology provider only provides technology for a fee, and always gets the upside (the fee) while not participating in the downside, they’re a vendor. Never let them use the word “partner.” When you hear the word “partner” in that case, grab your wallet.

What makes them stupid is that they’re protecting the upside (the fee) and not willing to have skin in the game on the downside. In other words, all the risk for fraud and waste is on the client. And that’s just dumb, long-term. Why? Because somebody else is going to look out for the best interest of the client. As much as I hate to say this, ultimately it’ll be the big consulting firms that look out for the client. Your CEO will ask his buddy– a partner at Deloitte, Accenture, or PwC– if there’s a problem he should be thinking about.

The sound you just heard was that of ad tech and mar tech hucksters getting double-tapped by an engagement manager who won’t hesitate to tell your CEO that the “..aaS” API-based, transactional service offers no value, and it easy to game.

So the technology geniuses on the west coast are complicit in stealing your money, and too stupid to look out for you. What should you do about it, as you enter peak season? A few tips:

  • Read and understand Adform’s paper on HyphBot
  • Ask your digital marketers and ad agencies to prove how they did/did not get caught by this (plan 3 hours for the meeting and demand details)
  • Hire Shailin Dhar or Augustine Fou (two bright and ethical guys) to look at what you’re doing and then implement what they say
  • If you’re mucking in the programmatic cesspool (and you probably have to), hire Wayne Blodwell (a bright and ethical guy) to set up your programmatic strategy and process correctly
  • Don’t trust anybody in ad tech or mar tech until proven otherwise

Takeaway: Your ad tech and mar tech vendors, who insist on calling themselves “partners” aren’t on your side. Hire your own independent auditors. Demand accountability. Assume fraud in digital.

By the way, Happy Thanksgiving!

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Black Friday Narrative: The Retail Apocalypse (The Data Says…)

Screen Shot 2017-11-21 at 8.52.39 AMI was searching Linkedin last evening and read a comment from somebody about how “Black Friday sales have been down the last few years.”

The comment came with no facts to back the assertion, and it fit neatly into the “e-commerce is causing a retail apocalypse” narrative that we’re seeing and will see when the weekend sales are written up on Monday morning. I thought the comment might have been lazy acceptance of a story, so I thought it was time to do my own research.

Screen Shot 2017-11-21 at 8.58.23 AM
First, retail holiday season retail sales are continuing to increase, per the NRF with their forecast for this year pegged at a gain of 3.6 to 4% as compared to last year. OK, maybe the NRF has an agenda, as they are an association of retailers who generally stand to lose if online sales continue to grow.

If you’re going to grow the quarterly sales, you’re going to do it on Black Friday, when a substantial fraction of all Q4 sales are made.

I figured that online sales were probably growing a lot more quickly than offline sales, if my own household’s expenditures are any indication. (Of course, that’s n=1, always a red flag.)

So I took a look at the data from the U.S. Census bureau, which tracks seasonally adjusted retail sales, and splits up those sales between e-commerce and traditional retail. Do they have the breakdown perfect? No, but it’s probably directionally correct. Here’s what the quarterly data looks like. I’ve highlighted the traditional retail Q4 sales in green.

Screen Shot 2017-11-21 at 8.50.29 AM

You’ll notice that that the size of the red bar–the online sales–is indeed increasing rapidly, particularly in the last few years. Going back to Q4 2011, here’s maximum, minimum and average QoQ growth rates:

  • All retail:  Max 2.4%, Min (1.0%), Average .9%
  • Offline: Max 2.3%, Min (1.3%), Average .7%
  • E-commerce: Max 6.0%, Min 1.7%, Average 3.5%

Over the same period (going back to Q4 2011), the YoY changes for ecommerce have averaged 14.7% and been as much as 17.6% (Q4 2011 vs Q4 2010). There is no question that ecommerce sales (Amazon) will continue to grow dramatically, aided by Amazon’s increasing ability to cross-subsidize from the AWS business and the advantages of not needing to collect tax in many municipalities.

But there’s something about rapid growth from a small (zero) base. Here’s how much of your retail dollar is spent online for the holiday quarter, going back to 2011:

  • Q4 2016: $0.08
  • Q4 2015: $0.07
  • Q4 2014: $0.07
  • Q4 2013: $0.06
  • Q4 2012: $0.06
  • Q4 2011: $0.05

Different than the “sky is falling” narrative, isn’t it? My guess is that the share of holiday spending spent online this year as compared to last year will increase once again by 14-15% as it has the last several years. But that still means that >90% of everything sold in the U.S. will come out of a brick and mortar store in Q4 2017.

Black Friday isn’t dying, even if it’s becoming less important. Retail isn’t dead, even if the narrative says so. And customers still like to touch a lot of what they buy, before they buy it, even if that doesn’t fit the tech narrative.

Takeaway: When you see easy stories, question them. Do primary research. Run your own numbers. Draw your own conclusions. And win.

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Thanksgiving Project: Security and Privacy

Screen Shot 2017-11-16 at 8.29.00 AMNext week, as you’re doing your annual IT work for parents, in-laws, aunts and uncles, take a few minutes and talk about protecting privacy and improving their cybersecurity.

This Motherboard article, recommended by Bruce Schneier, is a great place to start. Will it provide perfect privacy and security? No, but it’s a good start for your loved ones.

At a bare minimum I recommend:

  • Installing an ad blocker (yes, I’m a marketer and yes, I use one)
  • good paid VPN on both desktop and phones
  • Removing personal information from social media such as birthdays and “likes” of topics which can de-anonymize you (which means everything)
  • Change social media default post settings to friends only
  • Encrypting the hard drive
  • Update the OS and applications
  • Install (or use) a password manager

You can do the above during the end of the Lions game and still be finished in time to catch the Cowboys.

Happy Thanksgiving!

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GroupM Shines Light on Middlemen

Screen Shot 2017-11-15 at 8.01.55 AMBravo to Group M for starting to shine the light on the adtech middlemen who reduce our working media to, at times, a pittance. Advertisers need to demand more of this behavior from our agencies. Here’s the report I want for every publisher and every placement, for a hypothetical $100 spend:

Net to publisher*                   $30   30%
Agency fees, variable            $10   10%
Agency fees, fixed                  $ 2     2%
Ad tech 1                                  $10   10%
Ad tech 2                                  $10   10%
etc.

Summing to 100%. Once you, as the advertiser, understand this exactly, you can begin looking at the best ways to slim the ad tech fees through a testing program. I’ll bet some of the tech you’re using either doesn’t work or can be renegotiated to a significantly lower rate.

Takeaway: If the supply chain isn’t transparent to you, you’re being taken. Demand proper accounting of how your dollars are being spent. Study the reports and test to see what value is added by each vendor. And win.

* Your agency agreement provides for no kickbacks to your agency, right?

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Want Salient Fake News? Next Gen TV is the Ticket

Prediction: If you think it’s easy to use social media advertising to–I don’t know–sway elections via (small) bags of rubles, wait till you see what we get pumped into our homes via Next Gen TV.

Full-motion, beautiful imagery, and powerful, targeted messages. Very profitable, of course, totally fake, and basically unregulated by anybody.

Takeaway: I’m not sure anymore.

 

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