Lack of Transparency in Pay-Per-Click Ads and TV Ads: A Tale of Two Ad Councils

What does it say about an advertising format when an industry “council” has to be formed in order to arbitrate the problem of advertisers not knowing whether they are getting what they paid for? That’s what happened to both pay-per-click advertising and TV advertising this past week, and the similarities between these two ad councils says a lot about the future of both advertising formats.

Pay-Per-Click Ad Council
(From CNET)

The Interactive Advertising Bureau (IAB) and the nonprofit Media Rating Council said they are teaming with Google, Yahoo, Microsoft, Ask.com, LookSmart and others to form the Click Measurement Working Group.

The group’s mission is to establish guidelines for what constitutes valid clicks and invalid clicks on ads. Guidelines can help the industry measure how prevalent click fraud really is. Third-parties who sell click-fraud-combating services to advertisers claim that click fraud rates are as high as 30 percent. Google and Yahoo counter that click fraud rates are minimal.

TV Commercial Ad Council
(From MediaPost)

IN THE WEEKS SINCE NIELSEN revealed plans to begin providing ratings for TV advertising minutes significant problems have emerged in the way those ratings are processed. Now a coalition of influential buyers and sellers wants to put the brakes on that process before and is planning a meeting to rethink how the so-called commercial ratings should be manufactured. The meeting, which is expected to take place next month, before the launch of the new TV season, and before Nielsen begins doling out the new ratings, will likely lead to a new round of discussions on what data should – and should not – go into the commercial ratings, how they should be processed, disseminated and used in TV advertising deals. “I don’t think there’s anyone out there who thinks that Nielsen has a full grip on this,” acknowledges Alan Wurtzel, president of research and media development at NBC, who is one of the executives trying to organize the summit. We need to find a forum in which the industry can get together and start to deal with some of these details.”

In both instances, the problem is a lack of data transparency. Greg Stuart, chief executive of the Interactive Advertising Bureau, who is part of the click council, said (from BusinessWeek):

Media need to operate with transparency. There’s marketers and agencies who are paying money for things. They need to know, what are they paying for? What does that look like? What is the standardized way in which that’s being counted? And also ultimately, is that audited? Can we validate that (using a third party)? And so, in an industry that is now going to be close to $16 billion this year, it should be relatively obvious that we need to operate with the principles that all media operate under.

The problem is that the current pay-per-click and TV ad systems both make it difficult, if not impossible, to provide data transparency. For clicks, it’s the ad networks, e.g. Google AdWords and Yahoo Search Marketing, that can’t provide all the the data. For TV ads, the problem is Nielsen, who acts as the data proxy for the TV networks.

Pay-Per-Click Ads
(From the Tuzhilin report)

An operational definition [of click fraud] cannot be fully disclosed to the general public because of the concerns that unethical users will take advantage of it, which may lead to a massive click fraud. However, if it is not disclosed, advertisers cannot verify or even dispute why they have been charged for certain clicks.

TV Ads

One of the chief problems surrounding the new ratings is that the commercial ratings are processed by using a relatively shaky system for identifying when the commercial minutes actually air. That system, Nielsen’s Monitor-Plus service, was designed as a competitive advertising monitory system, which apparently does not have the same level of detail or rigor as the systems Nielsen uses to compile and process TV ratings.

I can’t fault the formation of these ad councils because, given that they can’t fix the real problem of data transparency, it’s the only way that all of the interested parties can address the problem. Of course, having interested parties like Google, Yahoo, ad agencies, and TV networks on these councils turns them into a tug of war between deeply entrenched economic interests.

Advertisers will begin to get wise to the similarities between the lack of transparency in pay-per-click ads and TV ads. Although pay-per-click is a leap forward in measureability and accountability, it still falls far short of a truly transparent system. You can see it in how Greg Stuart talks about pay-per-click ads (i.e. “search” ads):

Search produces results. End of story. It produces results. My guess is that these advertisers would like to see any concern that might seep into the view that their management has, or anybody else. Because they know in their heart of hearts that this really works. It’s in everybody’s interest to clean this one up.

“They know in their heart of hearts that this really works” — old media companies have been using such language for years to describe advertisers’ ostensible faith in poorly-measured and unaccountable TV and print advertising.

Wouldn’t it be great if there were an advertising system that was fully transparent and thus didn’t require advertisers to form industry councils and adopt articles of faith to prop it up?

That’s why we will we soon see the transition from clicks to actions and conversions.