This is the 2nd part of the 3 part blog series and covers how the digital advertisement ecosystem works along with understanding how big is the problem of fraud in that ecosystem.
This 3 part blog series puts a light on relevance of Digital Advertisements in telecom space along with providing a high level understanding of it’s ecosystem and fraud risks it injects. Idea is to give readers a basic knowledge of the digital advertisement space and the inherent risks.
The 1st part of this blog series was published on Jan 21, 2016 and you can read the same here.
Part 2 – Digital Advertisement Ecosystem & the problem of fraud
Advertisement Ecosystem is divided into 9 major components, as shown in the image below:
Advertisers are ‘Brands’. Brands which are the source of promotions for a specific product, service etc. This is the entry point of money into the ecosystem – A demand feeder.
2. Ad Agency:
Ad Agencies are the entities who plans marketing & ad campaigns on behalf of the advertiser. They are, generally, also the ad creators, or outsource the creative bit to a media agency.
Ad Agency designs the ad strategy and works with publishers, ad networks and other industry participants making the demand meet the rest of the ecosystem.
Demand side platform. These are the demand side aggregation platform solution providers. They may be part of an Ad Exchange or maybe separate entities. They allow buyers of digital advertising inventory to manage multiple ad exchange and data exchange accounts through single interface.
4. Ad Exchange:
Like the stock exchanges we all are aware of, Ad Exchanges act as a advertisement digital marketplace that enables advertisers and publishers to buy and sell advertising space, often through real-time auctions/bidding.
These are the points where the demand side generally meets the supply side.
Similar to DSP, the Supply Side Platform are the aggregation platform solution providers at the supply side who enable publishers to manage their advertising impression inventory and maximize revenue from digital media.
6. Ad Network:
The Googles and InMobis of the world, Ad Networks connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand.
The Ad Networks are commonly known to manage most of the data exchange in the ecosystem, while earning most of the revenues.
The ad space owner. This is an entity which owns the medium (website, app, content service etc.) to deliver ads to intended end consumers/ad viewers. Commonly known as the consumer touch point.
More touch points, better touch points, better the ranking of the publisher.
The ad consumers. Customers. Us. The target entity for the whole Ad Ecosystem.
9. Data Aggregators:
The data crunchers of the ecosystem, Data Aggregators serve as the independent measurement entities for the other players in the ecosystem. Aggregators collect and compile data from individual sites to derive big picture and sell to others.
The Payout Models
There are 3 main payout models in the advertisement ecosystem:
1. Pay Per Click:
Pay per click, also called cost per click (CPC), is a payout model in which advertisers or ad network pays the publisher when the ad is clicked by the consumer. It is defined simply as the amount spent to get an advertisement clicked.
2. Pay Per Impression:
Pay per impression (CPI), or “pay per thousand impressions” (CPM), refers to the payout model where advertisers or ad networks pays a publisher each time an ad is displayed on its inventory. CPI is the cost or expense incurred for each potential consumer who views the advertisement, while CPM refers to the cost or expense incurred for every thousand potential consumers who view the advertisement(s).
3. Pay By Lead:
Cost per Lead (CPL), also known as cost per conversion, is a payout model where the advertiser pays for each specified action which the advertiser can consider as a business ‘lead’ with verified interest – for example, a form submit (e.g., contact request, newsletter sign up, registration etc.), feedback, double opt-in, sale etc.
The influencer of each payout model, which governs the actual payout while governing the quality rating of a publisher, is CTR (Click Through Rate).
Click through rate is defined as the rate of consumer taking the intended action – click, form fill, registration etc. over the advertisements being displayed to him.
In simple terms, higher the CTR of a publisher, higher is its quality rating. This when mixed with volume of ad traffic, directly influences the revenue for a publisher.
CTR also helps gauge the quality of ads itself – in terms of its creativity, contextuality & relevancy.
Role of a Telco
While traditionally Telcos have been playing a role of an advertiser, they have been slowing growing as publishers too, utilizing their web portal space for the purpose.
But, as I wrote in the first part of this blog series, Telcos are now riding on a significant ‘ad capable’ inventory being generated by their next generation product & services, specially content related.
This significant inventory at their disposal has a capability of turning Telcos into a small or mid sized Ad Network, while setting up advertisements as one of the key revenue source or service adoption enabler over the coming years.
Fraud Risk Levels in Advertisement Ecosystem
Before we move to the 3rd part in this blog series, let’s look at the existing fraud levels in the Advertisement Ecosystem.
Let me tell you, if you are all concerned about the 1-3% fraud loss levels against traditional telecom services, the fraud levels in the advertisement domain is going to give you sleepless nights.
To give you an example, one study by MediaPost reveals that, if a company has an online display ad budget of $100,000, then only $8,000 of that ad spend has the “chance” to put advertisements in front of human eyeballs.
That means, if you are paying $0.10 per impression, then the $10,000 that you will pay for 100,000 impressions will result in “chance” of only 8,000 human views—meaning that the effective Cost per Impression will actually be $1.25.
Pushes an organization’s ad investments of the track completely, isn’t it ?
Below are some industry statistics around existing levels of advertisement frauds published by the likes of SunTrust Robinson Humphreys, Ad-fraud prevention firm Pixalate & Forensiq:
Now, if a Telco’s Fraud Management team were to analyse frauds in the digital advertising domain, it will need to focus on 3 different areas:
- Safeguarding your organization’s marketing investments & sales targets: It is more relevant when you see the Telco you are working for, as an advertiser or a brand.
- Protecting the revenues from AD business & also safeguarding your publisher rating: This is relevant when a Telco acts as a Publisher or an Ad Network
- Lastly, your own subscriber’s satisfaction & security levels: Now, this one is a bit confusing. But, to understand how advertisement frauds affect Telco’s end subscribers directly, let’s watch a short video courtesy Forensiq:
As shown in this interesting video by Forensiq, advertisement frauds not only impacts a Telco’s investments and expected revenues, but also influences customer satisfaction directly.
Recently Three, a leading telecom operator from the UK & Italy, decided to install network level ad-block solution with the below mentioned intent:
“Irrelevant and excessive mobile ads annoy customers and affect their overall network experience. We don’t believe customers should have to pay for data usage driven by mobile ads. The industry has to work together to give customers mobile ads they want and benefit from.”
If Three are successful, I can only imagine similar actions becoming widespread over the coming years or the sane players of the advertisement ecosystem gearing up to counter the problem of fraud like never before.
Clearly, there are two sides of the coin – while advertisements open up new exciting revenue avenues for Telcos, the fraud problem in the ecosystem is so widespread that it has potential to disrupt the whole revenue model built upon it.
In the next part of the blog, we will cover the most interesting bit and understand the presence of digital advertisement fraud risks in the ecosystem along with looking at a few case studies. You will not have to wait far too long, that I promise!