Stop Buying Video on the Open Exchange: Part II

Read Part I of this two-parter here.

If you recall from Part I of this series, we'd been talking about how arbitraged video impressions are bad. There are a number of reasons why arbitraged video impressions suck from the buy-side perspective:

1. Most obviously, they make the same ads cost more than they ordinarily would. If you’re a buyer or trader, you're buying a $7 ad for $10. You're getting ripped off.

2. Arbitraged impressions are often bought and resold a few times before an actual ad gets served. This takes a long time in the digital advertising world and makes the user sit and wait while an ad loads, which makes the user less receptive to a marketing message.

3. The most premium ad slots—those on good sites, going to unique users or users that haven't seen many ads—are usually purchased in advance and are running 100% fill tags from legitimate agencies and advertisers. The ads that can be arbitraged in the first place are the remnants’ remnants, real bottom-of-the-barrel stuff, not in great ad slots.

So, in one sentence, if you’re buying arbitraged video, you're paying more money for crappy ads that are less likely to work. Not a good use of marketing budget.

DSPs are not able to differentiate between arbitraged video impressions and normal open exchange inventory taken directly from publishers. Therefore, if you're buying video ads on the open exchange, you're getting at least some resold, arbitraged impressions. Sad!

Fraudulent Video Ads on the Open Exchange

In-banner video and VAST arbitrage ads, at least theoretically, are being sent to real human beings. But what you'll also find on the open exchange is that a significant portion of video inventory is completely fraudulent ad impressions sent to non-humans (bots) that have no chance to make a real purchase.

Evidence of the fact of bot fraud abounds, but perhaps the highest-profile piece that came out recently was Methbot.

Methbot is a bot farm developed by Russian hackers that created artificial video ad inventory, which was then sold on the open exchange to programmatic ad buyers. The total haul was up to $3 million to $5 million USD per day.

The Methbot hackers created thousands of domains, over 250,000 URLs, that looked like they should belong to genuine premium publishers. They didn’t—the only thing those pages could host was a video ad. But buying algorithms couldn’t tell, and they bought up the Methbot inventory on behalf of major brands.

Simply put, if you were a media trader running an online video campaign specifically targeting premium publisher slots, chances are some of your media spend went to these hackers.

It’s a near-certainty that other such bot farms exist, but the advertising and security industry has yet to find them, making the open exchange even more vulnerable. That’s a major strike against buying programmatic video online.

Major Media Buyers Exiting Open Exchanges

While Methbot was a high-profile example, there’s been mounting evidence that open exchange inventory was of poor quality and didn’t give advertisers the return on investment they were looking for. Once such example is GroupM, one of the largest media buyers in the world, starting to move away from open exchange buying. GroupM was concerned by the prevalence of fraud in the exchanges and the fees they had to pay from exchanges and other third parties—downsides that GroupM decided outweighed how cheap that inventory was.

That happened in 2014. Inventory quality has been a concern for years. With more and more money being shoveled into the programmatic ecosystem, the number of media buyers as target for fraudsters has gotten bigger.

Ad Verification Vendors Are Not Enough

What if you're a media buyer, and you say, "We use a big-time ad verification vendor for all of our impressions, and that keeps us free from fraud?" Using pre-bid segments is a very good step, and by using them, you filter out the worst of the worst crap on the open exchange. But putting 100% of your faith in these tools would be a mistake.

In 2016, fraud researcher and consultant Shalin Dhar performed an experiment to test how well major ad verification services were able to root out fraudulent traffic. The methodology was as follows:

  1. Buy a website that hasn't been flagged on the open exchanges, put up some stolen content, ad tags, and the pixels from several ad verification vendors.
  2. Buy a ton of fraudulent botnet CPC traffic from a shady vendor and send that traffic to the newly purchased site.
  3. See what vendor was able to catch the crap.

To put it in clickbait terms, the results were shocking. One of the best-known vendors in the space was only able to catch 14% of bot traffic, meaning that most of what they analyzed, in their opinion, was safe for advertising. Other vendors fared slightly better, but on a whole, the experiment showed verification companies aren’t to be completely trusted.

All of these incidents demonstrate if you’re buying video ads on the open exchanges, you’re opening yourself up to fraud.

How Buyers Can Protect Themselves

So what can media buyers with an appetite for digital video do to access good quality video inventory? You have a few options.

A. Go direct to the publisher and set up programmatic deals.

The best and easiest advice I can give is that if you’re buying media programmatically, set up direct programmatic deals with individual publishers. If you want legitimate large-sized video inventory, sites like Weather, CBS, NBC and AOL all have it. With a direct-to-publisher deal, the likelihood of in-banner video, arbitraged video, or fraud all go way down.

Using third-party verification tools, in addition to working directly with publishers, will drastically reduce the amount of fraud/waste your spend is exposed to, making overall media spend much more efficient.

You don’t have to be a huge advertiser to take advantage of this. Many of the premium sites have PMPs set up already that anyone can bid on--you just need to get a deal ID. Reach out to the publishers themselves for more details on this.

All of these ads will be more expensive than buying the bottom of the barrel stuff on the open exchanges, but the chances that they provide a better return should make them worth the cost.

B. Learn to love the duopoly.

There’s wisdom in crowds. In late 2016, Facebook and Google took up almost 100% of incremental ad spend in digital media. That means fewer and fewer dollars were spent in the comScore Top 250 or with the companies that make up the Lumascape.

While that might be distressing to people working outside of the duopoly, the dollars don’t lie--marketers are getting more return out of spending with Google and Facebook than they do elsewhere.

Facebook just recently rolled out ads in their video products, and Snapchat has been opening up their video product to more third parties to execute programmatic media buys. Those would be decent choices to start, Facebook’s issues with video view counting notwithstanding.

But YouTube (Google’s flagship video publisher) has been around for a while, providing advertisers with fraud-free video environments and ad formats such as TrueView, which only cost the advertiser money if the user watches for at least 30 seconds. Those ads are more expensive, but provide a great environment for marketing messages. Google also has a robust programmatic video marketplace that connects buyers and sellers.

C. Seek out guaranteed makegoods.

Several DSPsoffer proactive makegoods when there’s evidence of fraud. This is great thing--it incentivizes suppliers to police their own inventory and protects buyers from fraud. When combined with PMPs and pre-bid fraud verification, it can almost eliminate the financial risk of ad fraud.

But for all partnerships, buyers would do well to seek out proactive, guaranteed makegoods when evidence of fraud is substantial and overwhelming.

How Can Sellers Protect Themselves or Use This to Their Advantage?

Again, there are a few ways.

A. Start creating high-quality, larged sized video content.

There is a tremendous amount of demand for online video ad inventory, so much so that buyers are willing to purchase the worst of the worst inventory in the hopes that some of it resonates.

For publishers, this is a huge opportunity to create terrific video content. I know of one medium-sized publisher in the home and garden vertical that started producing large-sized video and putting it on all of their sites and articles. The response from advertisers was incredible, and said publisher was getting very high fill rates (90%+) and $15 CPMs exclusively through the open exchange. With the growth of the site, some effort in the programmatic marketplace and an improvement in the quality of the videos, there’s no doubt that they are doing $20 CPMs with seven-figure revenue, all from a revenue source that didn’t exist two years ago.

B. Start pushing video buyers to buy inventory through direct relationships.

That gets to my second point: There are many buyers that are accessing publisher direct inventory through the open exchange, but the chances that these ads are mixed in with IBV and arbitraged video is high. Using what you’ve learned here, push your buyers to transact with you on a direct programmatic basis--that way they know they’re getting the good stuff right from the source, and performance should improve in kind. Hell, send them this article, and they should know everything they need to know.

C. Hold your SSP partners accountable.

IBV and VAST arbitrage don’t happen without the SSPs. If you find that in-banner video is happening on your property, work with your development team, third-party vendors and SSPs to determine where it’s coming from and stamp it out. Likewise, if you are testing a video monetization partner and they have abnormally low CPMs or fill rates, it might be an indication that VAST arbitrage is occurring.

Hold your partners accountable, and be willing pull inventory from them if they don’t give you the responses that you want.

As a side note, in-banner video does not monetize particularly well, so unless you’re so hard up for money that you’re willing to alienate your user base, I would steer clear.

In Conclusion

To eat from the tree of knowledge costs one their innocence, which means now that you’ve read this, there are no more excuses. If you persist in buying video on the open exchanges, you are willfully wasting your client’s dollars, and you should be admonished.

Publishers, send this out to your brand clients and teach them how to do the right thing. Agencies, use this as an impetus and guide to improve your practices. Brands, use this to hold your agencies account, or if you have the stomach for it, do the media buying/trading yourself.  

But whatever you do, please, for the love of God, don’t buy online video on the open exchange.

Related Event: 
OPS VIII


Will Rand is a long-time digital ad veteran who has worked on the sides of buyers, sellers and middlemen.

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