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Smart cookie Microsoft fails to keep track with advertisers

June 11, 2012

Microsoft stirred up a hornet’s nest among US advertisers a couple of weeks ago when it introduced a new version of Bing. Why? Because version 10 of its internet Explorer browser in Windows 8, which accompanied the Bing relaunch, has apparently gone soft on the civil liberties lobby, and set up a nasty precedent for restraint of trade.

Need a bit more unpacking? Fair enough. It’s our old friend behavioural targeting – sometimes called behavioural analytics – that’s causing advertisers’ pulses to race. BT is the new frontier, allowing advertisers to plot an accurate path through our internet interests via specially implanted cookie files (more on this in my earlier post here). Without it, they are flying blind, or rather they are dependent on old-fashioned demographics-based contextual advertising, which is a bit like trying to find your bearings from a soggy map in the open-air cockpit of a pre-war biplane.

Anyway, back to Microsoft. It has embedded a ‘Do Not Track’ functionality in its highly popular browser, with a default setting in the ‘On’ position. And the Association of National Advertisers, the US equivalent of  our Incorporated Society of Practitioners in Advertising (ISBA), is very angry about it:

“Microsoft’s decision, made without industry discussion or consensus, undercuts years of tireless, collaborative efforts across the business community — efforts that were recently heralded by the White House and Federal Trade Commission as an effective way to educate consumers and address their concerns regarding data collection, targeted advertising and privacy. We reject efforts by any provider or other group to unilaterally impose choices on the consumer in this critical area of the economy…”

…. says Bob Liodice, president & CEO, of ANA. Just why ‘imposing choices on the consumer’ is such a bad thing is not immediately apparent. Surely choice is at the core of the consumer society? But we know what he means: Microsoft hasn’t exactly been helpful to the cause.

I have yet to discover whether Microsoft will be inflicting a similar burden of choice on consumers in Europe. UK  advertisers have been breathing a collective sigh of relief now that the tireless efforts of ISBA, the Internet Advertising Bureau and EASA (European Advertising Standards Alliance), which had been arguing for a laissez allez approach to BT, have finally borne fruit. Privacy regulator The Information Commissioner’s Office (director-general, Chris Graham, pictured) has, after much havering, decided that what the new EU ePrivacy directive actually means is “implied consent” to carry on cookie-tracking. Which comes as a huge relief to thousands of website owners, let alone advertisers, who feared they were going to have to bombard users with innumerable trade-impairing pop-up warnings every time they wanted to activate a cookie. “Implied consent”, in other words, firmly shifts responsibility in law from the advertiser and website owner to the consumer.

Not unnaturally, the industry has praised Graham – former director-general of the Advertising Standards Authority – for his “pragmatism”. But doubts remain about what will happen to the British position – which is, shall we say, a unique interpretation of the ePrivacy directive – once it is tested by case law elsewhere in the Community. Doubtless Microsoft’s decision back in the Land of the Free will not be considered helpful.

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Ad industry puts the boot into ‘treacherous’ Chartered Institute of Marketing research

June 8, 2012

An amusing industry spat has broken out between the Chartered Institute of Marketing and just about everyone else over the way the industry has been handling the vexed issue of marketing to children.

One year into the Bailey era, the CIM has released research that apparently shows 85% of parents are unaware of the Government-sponsored and industry-sanctioned ParentPort website – a forum that enables parents to vent their spleen at the way marketers have been commercialising and sexualising childhood. This, from one of its own, is an unforgivable undercut to the belly of the industry, which claims to have made Stakhanovite progress in grappling with an issue in which David Cameron has taken a highly personal interest.

The result has been uproar, with other industry bodies jostling to put the boot into the CIM research.

First to weigh in with apoplectic energy was the Incorporated Society of British Advertisers (ISBA), the principal trade body for clients.

The riposte from ISBA’s director of public affairs Ian Twinn was masterly in its use of cutting irony: “ISBA is an active supporter of the industry pledge on the use of peer-to-peer marketing, along with many leading advertisers and media, but sadly the CIM remained aloof from the collective efforts of the wider industry.” Which was very silly of it, because now it’s going to enjoy zero support for its views.

Next up, and in similarly sarcastic frame of mind, is the Advertising Association, which represents clients, agencies and media. This week’s newsletter thunders:

“Thank goodness that advertising think-tank Credos has already done some far more thorough work on the same topic. Are advertising and marketing of concern to parents? Yes. But are they the biggest concern? Not by a very long shot. Are parents less concerned when rules and real life ads are explained in context? Yes they are. Should advertising respond? You bet – and we have. Ask (former AA chairman) Mark Lund.”

Industry regulator the Advertising Standards Authority has confined itself to a more diplomatic rebuke: “The work that regulators, including the ASA, continue to undertake in responding positively to the recommendations in the Bailey review (Letting Children Be Children) has been welcomed by government as well as family and parenting groups.” Subtext: ‘So what in God’s name do you people over at CIM think you are playing at?’

I’m beginning to feel sorry for David Thorp, CIM’s director of research. Just trying to help, eh, David?


Will Ofcom media-buying probe lift the lid on a can of worms?

April 6, 2011

Good luck to Ofcom as it attempts to prise the lid off the £3.5bn TV media-buying market and explore the wriggling multi-form life within. It really is a can of worms, and one most people in the business, most of the time, would prefer to keep firmly closed.

Their motives differ. Clients, despite the high-minded calls coming from their trade body ISBA for greater industry transparency, tend to find the subject stultifyingly boring. One indefensible reason for this is their personal unwillingness, or inability, to grasp the Byzantine complexities of the trading system. You might as well ask them to brush up their Latin as describe in detail the iniquities of media-owner  rebates. More pragmatically, they argue they have better things to do with their time – such as steering the strategy of their brands. Media negotiation is a matter for experts (on all sides) who understand the language, is it not? All you need to do is put a lesser amount on the table every year, screw down the terms with your agency even further, and get an auditor to establish that, at the year end, you have achieved still greater value for money (spuriously expressed in “media currency”  terms, not ROI) than the year before. If you haven’t, well maybe it’s time to fire your agency.

Media owners and agencies, on the other hand, are intimately aware of distortions in the system caused by such recondite issues as “pooled buying”, “agency deals” and “rebates”. And so they should be: these distortions, and the cloud-cover (or lack of transparency to the outsider and the regulator) that accompanies them, are what allow them to game the system.

Would a more open system be more effective than the present regime, for all its imperfections? Not necessarily. Better regulation does not inexorably lead to better business.

The fundamental criticism of the current system is that ads/spots end up going to the media owner who offers the best agency incentive rather the best fit for the client’s brand. The fundamental problem facing any reformer attempting to redress the balance is agency remuneration.

It might seem that media-buying agencies are in an incredibly powerful position. Indeed, in some ways they are. Ten buyers owned by six international agency groups – WPP, Publicis Groupe, Omnicom, IPG, Aegis and Havas – are responsible for about 80% of the money spent on UK commercial television. A comparable oligopoly dominates press, magazine and (under the guise of agency specialists), outdoor buying. The concentration of their market power is now, arguably, greater than that of the clients they serve, or the media owners they negotiate with.

Not surprisingly, these media buying groups are critical to the profitability of the agency groups that own them. As a recent article in The Guardian pointed out, something like £43bn a year passes through WPP alone (admittedly the largest global operator) on its way to media owners – which is more than the GDP of Ecuador. The treasury and cash-flow advantages cannot be overestimated. Equally, let’s not forget profitability. A media buying house on song has an operating margin of up to 25% which, given the scale of its operations, makes it the single most important component in any of the big agency groups.

But with power comes a surprising vulnerability. When agency network bosses promise their shareholders – as they do every year – enhanced performance, the first place they come looking for it is in their media-buying cash cows. Yet that profitability is built on foundations of sand. The days of 5% commission are long since gone; the equivalent of 2-2.5% would now be nearer the mark, as client procurement tightens the noose. And then there are complications, like a part of the deal being based on payment by results. The net result is greater reliance on financial compensation from the media owner: in effect, the use or abuse of market power to screw down the ratecard.

Most notorious of these Spanish practices is the discount, and the easiest way of looking at how it operates is with national newspapers. Agency media buyers are bonused on achieving a set reduction (10% for argument’s sake) not from the ratecard itself, but from the per page mean figure of all titles established in the last audit. Clearly it’s easier to negotiate a discount with a weaker player. The danger, from the client’s point of view, is that the ad ends up not in the title with the best audience profile or which boasts the most robust circulation, but in the title that has offered the best deal to the media buyer (which then collects its bonus). This market distortion has an ironic multiplying effect, given that most national newspapers are in the grip of structural circulation decline: the strong get punished, while the weak get weaker.

Murkier still is the incentive, a media-owner inducement which is often offered in addition to the negotiated discount. It may come in the form of cash, or free insertions/airtime. Strictly speaking, it should be remitted to the client, although that is far from always the case. Airtime barter may be illegal in the UK, but it is often difficult to audit who has used this extra airtime/pagination and for what purpose. An extreme example of what can go wrong when the client and senior agency management let their eye slide off the ball is provided by the Aleksander Ruzicka affair. Ruzicka was the president of Aegis’ German operation; but he is now spending 11 years in jail. The reason? He and several co-conspirators clandestinely siphoned TV airtime credits, which should have been remitted to the client Danone, into their own television sales house – where they were sold on for their own profit.

However, many clients are milder than Danone, which eventually decided to extract its pound of flesh in court: they simply take the view that incentives are a perk of the job, and would rather not know what is going on. They are not necessarily wrong to do so. As long as the system broadly delivers value, why worry about its flaws? Besides, it’s often difficult to determine the difference between what, from a media owner’s perspective, is simply a “loyalty payment” lubricating the wheels of business and an unvarnished bribe. The belief seems to be that the auditing system will expose any systematic skew in buying behaviour, and therefore acts as an effective suppressant of corruption.

As it happens, Ofcom’s terms of reference do not seem to encompass the principle of the discount. Siobhan Walsh, who is leading the 6-month investigation, will instead concentrate on whether pooled buying by the big operators (“share deals”) restricts choice for planners (who select the best audience profile for their client) and shuts out the smaller buying specialist.

The danger is that the investigation finds sufficient cause for concern to warrant involving the Competition Commission. Who knows what worms will crawl out if the CC launches a full TV ad market review? Nor, I suspect, will the repercussions be restricted to the TV market.


ITV’s new broom Crozier fails to sweep CRR under the carpet

November 3, 2010

It’s always refreshing to see a new broom sweeping clean, and Adam Crozier, recently installed chief executive of ITV, did not disappoint as he squared up to a House of Lords select committee this week.

Among the invigorating insights he privileged us with was an admission that ITV programmes were crap. Sorry, I’ll rephrase that in commercial media-speak. ITV has been driven into a “ratings rat race” by burdensome regulations that force it to produce low-quality, cheap-to-produce, popular programming (such as The X-Factor?). When what it should be doing is investing in high-quality but low-ratings programmes about the arts (such as Lord Bragg’s recently disbanded South Bank Show).

Crozier’s agenda, is of course, to blame the woeful quality of ITV’s current schedule on Contracts Rights Renewal (CRR), which ITV lobbying has so far failed to repeal. He reckons it has cost the broadcaster £262m in lost revenue since its introduction in 2003.

That kind of argument may play well with people on the Lords communications committee (like Bragg himself) but it will be received with hollow laughter at ISBA, the advertisers’ trade association.

If ITV isn’t about building mass audiences for advertisers, then what is it about? Excuse my cynicism, but Crozier’s argument is precisely the one usually wheeled out by commercial broadcasters to batter the overmighty, “ratings obsessed” BBC. Isn’t the BBC the broadcaster which is supposed to concern itself with piddly arts programmes that cater to a minority audience – leaving the commercial boys to graze unmolested on the sunlit prairies of popular fare?

Crozier will have to do better than that if he is ever going to convince advertisers of the need for a CRR rethink.


Nestlé makes the case against social media usage by brands

March 23, 2010

Feeling bored? In need of stimulation? Then turn to Nestlé’s corporate Facebook page to find out just what a pig’s ear the global brand is making of its social media usage.

In Nestlé’s case “fools” and “angels fear to tread” comes to mind. Given its history of ill-inspired corporate communications, I would have been extremely wary of handing critics any kind of social platform at all, let alone one as popular as Facebook with its claimed audience of 400 million. Here’s why.

Call it the curse of Ernest Saunders if you like (except Guinness, much worse afflicted, has entirely recovered). Saunders was at one time a senior Nestlé executive involved in what can only be described as a corporate cover-up of deaths in the Third World which had occurred after consumption of the corporation’s infant milk formula. It should be said the formula itself had little to do with these deaths, which were caused in the main by the toxic water it was mixed with. And it should be added that this product was never for sale in the UK or Scandinavia, where for a generation students and the sons and daughters of these students have kept aflame the “black history” of Nestlé poisoning babies, much to the bafflement of local management teams who, in all probability, have never had anything to do with the product.

Now I’m sure you can guess where I’m going with this. Yes, once upon a time campus malcontents had to restrict themselves to the student demo, the rag and various forms of samizdat based on John Bull printing technology to propagate their message. But now they’ve  got a global internet platform expressly made for their requirements. That, at least, was the specific intention of Mark Zuckerberg when he launched Facebook in 2004. In the event, it has found a much wider application than the student common room, but let’s just say 18-25 year old ABC1s remain a core audience.

Things have moved on for Nestlé’s corporate reputation as well, but not in a positive direction.

I may, judging from the abundant criticism, be naively unique in believing that Nestlé’s behaviour is no worse than than that of most other multinationals. It’s not ITT subverting the Allende regime in Chile; it’s not BP overthrowing Mossadeq in Iran. And it’s certainly not IG Farben supplying the Third Reich with ZyklonB. You’d never believe it, though, after visiting Nestlé’s Facebook wall. Here’s just one piece of highly representative “fan” mail bobbing about in a welter of unremitting criticism:

Laurence Donoghue: “We don’t want a Q&A session, Nestlé, about how you think what you’re doing isn’t criminal. It is and you are a nasty, immoral stain on humanity. We want you to stop buying palm oil not only from Sinar Mas, but from third party companies as well. Frankly I’m sick of Nestlé exploiting and degrading the earth and the people who live on it.”

Palm oil plantations, by the way, are the new infant milk formula scandal. Thanks, it seems, to Nestlé’s wicked connivance with loggers and planters, the orang-utan is threatened with extinction; and all in the name of tawdry commercial advantage. This one should run and run.

I also note in passing that “fans” – in a final two-fingered salute to Nestlé’s revered brand values – have been making light of its logos. “Killer”, done à la Kit Kat, is one of the more eye-catching examples. And there’s not a thing Nestlé can do about it. After all, removing it will only make matters worse. As for legal action…don’t even think about it.

I leave it to Louise Greeves, consultant at social media agency NixonMcInnes – recently quoted in NMA – to pass measured judgement on Nestlé’s venture into social media:

“It should be about empowering the community and being honest about mistakes. This exposes a real need to train staff in social media and not see it as something that brands can put junior staff in charge of.” Junior – I suspect – no longer, Louise.

Now, I know what some of you might say. We’re all missing the point here. Actually, Nestlé’s comms team is being fiendishly clever by drawing the poison from all this juvenile ire and confining it to a relatively small “space” where it can be harmlessly dissipated. Come again? Nestlé’s doing what? No, Louise is right first time: Nestlé simply hadn’t thought through the corporate implications of what it was doing.

All of which moves us neatly on to one of the main motifs of the annual ISBA conference, held in London last week. Should advertisers ever tangle with social media?

There are examples of timely first aid out there. ISBA director Debbie Morrison mentions one in Pitch, featuring Dell. The PC manufacturer was able to turn around an irate blogger, complaining about poor service, by using Twitter as a customer service and sales platform.

But these edifying examples are few and far between. Social media have a proven track record – placed in the right hands – of virally advancing causes. It was a point eloquently driven home during the presentation given at the conference by Thomas Gensemer, the new media comms expert who helped to get Barack Obama elected. It is less obvious how brands can monetise these sites, or indeed what they are doing there in the first place. No one wants a spammer.

Don’t just take my word for it though. Here’s Nigel Walley, founder of Decipher, in his splendid peroration at the conference:

“The greatest thing you can ever do with new media is to say: No. It’s time – and the recession is a backdrop to this –  to call  “emperor’s new clothes” on 50% of what has happened in new media in the last 10 years. Stop being diverted by the fluff. What you’ve got to ask yourself is this: would firing your digital agency do anything to your business other than reduce your costs?”

And if you don’t feel inclined to believe Walley, then take another look at the case of Nestlé.


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