Advertisers waste 23% of programmatic ad dollars, ANA study finds

The open web is still mired in wasteful ad spending, according to the Association of National Advertisers, which issued its report on the digital ad ecosystems during the Cannes Lions International Festival of Creativity. Ultimately, the report revealed, the digital ad ecosystem continues to contend with low-quality inventory and opaque mechanics that send money to suspect websites.

The industry trade group released the first part of its programmatic media study today and found that brands often lack the expertise to navigate online advertising supply chains—when money goes from advertisers through online ad exchanges to the publishers. The programmatic ad industry has been under scrutiny for years by advertisers and publishers, who are worried about how much money is siphoned off from ad tech intermediaries.

Among the findings, brands send a big chunk—15% of their ad spend—to clickbait websites instead of premium inventory. These websites, known as “made for advertising” sites, “usually feature low-quality content, such as fake news, conspiracy theories, or spammy links, and may use tactics such as pop-up ads, auto-play videos, or intrusive ads to maximize ad revenue for the site owner,” the ANA said in its report.

Bill Duggan, group executive VP at the ANA, said marketers largely have themselves to blame for continued waste and fraud in the programmatic supply chain, due to not having staff with sufficient knowledge about the market and seeking lower costs without understanding the quality tradeoffs.

“It’s déjà vu all over again, because we saw some of this stuff with the transparency study back in 2016,” Duggan said. “Marketers need to lean into media.” Some fixes to improve quality and eliminate waste are quite simple, he said, such as reducing the number of websites bought in campaigns to well below the 44,000 average found in the study. Some will be harder, such as crafting contracts with demand-side platforms (DSPs), supply-side platforms (SSPs) and agencies to provide full log data.

The amount of spending on made-for-advertiser (MFA) sites “was definitely one of the big shocks in this report,” Duggan said. That was clear from the looks on the faces of members of the ANA Media and Measurement Leadership Growth Council on a Zoom call when the numbers were revealed, he said.

Although, despite their reputation, MFAs tend to deliver viewable impressions to real people, even if there are questions about the quality of those impressions, Duggan said.

The report found that 23%, or about $20 billion out of $83 billion in open programmatic ad spend, was wasted going to ineffective ad placements on bad websites. The ANA commissioned its transparency report in 2021, one of several that have been conducted over the years to try to make sense of internet advertising. There are growing concerns about the limited visibility brands receive about how ads flow through the supply chain. Publishers are concerned, too, that for every dollar a brand spends on ads, only a portion of it goes to the publisher.

ANA released the first installment of its study, which required access to “log-level” data from ad tech providers to trace the path of ads and calculate where the money goes. “Log-level” data is the information that can show the ultimate destination of an online ad at a granular level, but many ad tech providers are reluctant to share that data, since it could raise privacy concerns and touches on information that is proprietary for publishers.

The report was timed to hit during the Cannes Lions International Festival of Creativity, which kicked off today in France. Ad tech is one of the most popular subjects of debate at the conference, which is attended by major ad platforms, including Google, Meta and Amazon. Advertisers are dealing with rapid changes to online advertising: Google is deprecating cookies on Chrome; Apple is developing a closed ecosystem, with less granular data, to sell ads; there has been a rise in the adoption of data clean rooms and marketing cloud services that power ad targeting and measurement in the absence of cookies. The changes have had a major impact on programmatic advertising, which is the subset of ads that go to the open web rather than sent to media properties in direct ad deals with publishers.

The open web is fighting for its very existence as more power goes to “walled gardens.” Smaller publishers worry they won’t get enough of the ad flow. 

Advertisers, though, face tough decisions about supporting the open web, where ads can be cheaper but also less certain. The advertisers want to have control over where ads run to avoid placements on unsuitable websites. The advertisers also want to know where the money goes.

Last year, Google, whose parent Alphabet is the largest internet ad company in the world, implemented new transparency tools showing both sides of the ad ecosystem how much money it makes from advertiser to publisher. Last week, Google rolled out the “confirming gross revenue” tool to all publishers that use Google Ad Manager and advertisers on Display and Video 360, Google’s demand-side platform.

Read more about the transparency tools here

ANA’s programmatic transparency report was meant to give guidance to advertisers about the complex ad tech landscape. ANA advised advertisers to demand more granular data from ad tech providers to independently check that money goes where it is supposed to go. “While brands appear to have more access to data today than previously, data gaps and lack of transparency still plague the programmatic space,” the report said. “The most common explanation is simple: If brands don't own their supply contracts attached with specific data rights, then they are blocking themselves from turning data into valuable information to maximize transparency.”

The ANA identified “information asymmetry” as a major problem, saying the ad buyers have incomplete information, giving the sellers an advantage. “Sellers typically have more or better information than buyers, causing buyers to overpay for inventory,” ANA said.

In one of the more surprising findings: Even private marketplace deals, ones that theoretically provide more control over where ads run, the ads still went to low-quality websites. ANA found that 14% of ad spend on private programmatic went to the “made for advertising” sites.

ANA’s study also touched on the environmental impact of ad tech, which is blamed for carbon emissions over high computing demands. The carbon footprint of ad tech also is a top topic for discussion at Cannes. ANA claimed that ad campaigns that support “made for advertising” sites tend to consumer more energy. The longer the supply chain, the higher the carbon emissions; so consider where reductions in your supply chain can be made. Reevaluate the use of Made for Advertising websites.

The ANA is working on a second installment of the transparency report that will explore all these subjects further.