#MediaSnack Ep. 34: Advertising is funding organised crime - a podcast by ID Comms

On this week's ID Comms #MediaSnack things are getting serious in the US as Democrat senators, Mark Warner and Chuck Schemer, have co-written a letter to the Federal Trade Commission (FTC) asking for clarification on what the FTC is doing to tackle the menace of ad fraud, which is expected to exceed 10% of the US digital market this year. They suggest that means some $7 billion annually is being siphoned off to fund organised crime. No wonder there is now serious political and FBI interest in the advertising industry, the concern is that ad-fraud will be the second largest income stream for organised crime, behind drug trafficking.
Tom Denford and David Indo discuss what might be the implications of political interest into ad fraud, and whether this will force a change in the industry. Will this provide the pressure needed to clean up this mess and giant loss of value from client budgets. We also consider what happens when these interested and proactive Senators get round to reading the ANA (Association of National Advertisers) report into US media rebate practice, also known as #RebateGate.
Some of the very questions the Senators ask in their open letter include:
Is the FTC observing a trend that favors one particular type of advertising fraud over another? If so, what factors are leading to the prevalence of that particular type of fraud?
What is the projected economic impact of this degree of data and revenue leakage amongst media owners and publishers?
What steps is the FTC taking to protect consumer data and mitigate fraud within the digital advertising industry? What regulatory agency currently provides oversight of mobile advertising platforms?
What steps can be taken to reform opaque advertising exchanges?
What can be done more closely align the incentives of ad tech companies with publishers, advertisers and consumers?
To the extent that criminal organizations are involved in perpetuating digital advertising fraud, how is the FTC coordinating with both law enforcement (the Department of Homeland Security or FBI) and the private sector to formulate an appropriate response?
Next in this epic episode, we quickly review news that Walmart has handed a bunch of marketing service duties to Publicis group, consolidating a lot of their roster into one group. However this is only bitter-sweet as Publicis US (MediaVest agency) lost $1bn of Walmart's media account earlier this year. Nobody seems to know who is managing it now... It's not easy to hide (or lose) a billion dollar media account so someone must know where it went. Please let us know.
Finally, we tackle a thorn in the side of media agencies around the world. E-auctions (software which requires media agencies to input competitive media pricing guarantees) have become a more common feature of new business pitches in recent years and this week a media agency leader, Mediacom global CEO Stephen Allan blew his top over the impact these auctions can have. Mediacom recently lost long-standing client Volkswagen Group ($2bn+ global media billings) which was handed to rival PHD. Stephen Allan's complaint was that VW ran a "blind" auction for media pricing which required agencies to bid ever-lower without knowing what target they were trying to hit. Now, if you're the incumbent agency like Mediacom you already know the existing pricing levels and so your bids should be more accurate, however, according to Allan, VW's methodology encouraged agencies to undercut each other in a race to the bottom on media price. His suspicion was that the business was awarded to the winning agency based on unrealistic pricing being input to the client’s blind e-Auction system.

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