The Perfect Storm - Part 2

And The Story Continues
There was a link in the comments from from Part 1 of this post pointing to a brief blurb on TMZ where Barbara Walters tweets her disassociation with banners / sites using her likeness to promote Exilatrol and similar pills containing Resveratrol. As ad watchers know, she is not alone in being used on an and/or landing page. Almost any credible celebrity that has discussed Acai or Resveratrol has become an unwitting endorser on behalf of marketers looking to promote pills with those ingredients. The issue of course isn't a site showing the segment talking about the ingredient (assuming the clip exists online with permission in the first place). The issue is the association implied by the site that because this product contains the ingredient discussed, the product carries the endorsement of the on-screen personality

Coincidentally, and perhaps not surprisingly, when I visited the TMZ page containing the Barbara Walters mention, it had the following ad (not contextually driven) running in proximity:

Celebrities Get Cellulite
But How They Get Rid of It Will Shock You! Its Simple Try It For Free.
www.CelebrityReportsWeekly.com

Clicking on the ad, takes you to a landing page for a new type of fake news site, the fake celebrity gossip page. Considering the source, TMZ, it's not a bad idea and presumably more effective than the standard fake news page. Given the context of the page, i.e. celebrities complaining of being used in this fashion, you might think it bad for the bad, but we won't know.

 

The fake gossip site above is quite clever. The pictures of celebrities indicate who they might be from their captions and have that captured on camera look, but they don't show any faces. The "quick poll" on the bottom half of the page does show face, and it even returns results (real or not) to aid in the experience. Whether it infringes on copyrights by using pictures it doesn't have license to use is one thing, but compared to many of the flogs and other fake news sites, it has greater disclosures with "Advertisement" written on the top-left and above the pictures it says, "*This publication is an advertisement for Body Solution - Cellulite System and is not affiliated with any newspaper publication." On the bottom you will find the now more common, still confusing, still shared too late language, discussing how the site is not real, e.g., "THE STORY DEPICTED ON THIS SITE AND THE PERSON DEPICTED IN THE STORY ARE NOT REAL."

Perhaps fake celebrity sites are the new fake news site, because one of the sites I've been tracking has switched over its content from a standard fake news site to a fake celebrity site (albeit not quite as well done as the Celebrity Reporter above). Here is the new Detroit Tribune News:

 

I Convert Therefore I Am - Fakevertising
The question that ended Part 1 was why these sites - from fake blogs, fake news, to now fake celebrity sites - exist. What is it about the ad economy that has created the perfect storm for their proliferation.  While we could probably list 10 or more good reasons, the following comprise the ones that I find necessary for their for existence.

1. Depressed Prices
The rate of inventory continues to increase almost exponentially. At the same time, the growth in new advertisers that can perform at the lowest level necessary has not. Or, put less eloquently, there is a glut of inventory out there. Not only is there a glut of inventory, the yields on that inventory have dropped steadily since the onset of the credit crisis. We're in a situation not too dissimilar from the bursting of the tech bubble where sites once used to premium cpm's found themselves having to embrace companies they once scoffed - ad networks, performance-based advertisers, and a variety of others pushing unbranded products and services.

When bubbles burst, it isn't the premium sites and premium inventory which open up (although it certainly does to a degree), it was the middle tail - sites with the video-equivalent of advertiser safe, professionally produced content, that up until the collapse enjoyed sold-out status at favorable rates. That's where the majority of high value inventory comes from, as well as non-premium inventory on more premium sites, such as Email, News, Weather, and Horoscopes. The long-tail of sites - profile pages, low end game sites, humor, etc. has lots of impressions but outside of companies who have tailored their model for that inventory, e.g., Gamevance, don't move the needle for the broader set of run of network campaigns.

2. Unfair Economics
It's not as though no alternative advertisers exist. At present though, not enough of them can compete with the performance of the evolving online version of the advertorial. Phrased somewhat as an exaggeration, legitimate guys can't compete with cheaters. It's one thing for companies with a physical presence to try and compete with more nimble players, but when those nimble players also don't have to follow the same rules... you could be the heavy weight champion, but you probably won't win a fight where the other guy has a knife. 

The secret to the unfair economics come from two things - the deceptive nature of the pages which to inflated clicks on the offer and conversions, along with the common bundling of offers. Most success stories on the fake sites rely on the promotion of two products. And, each product carries an enormous bounty for a free trial - $30 to $40. The products themselves charge a high monthly fee, aren't the easiest to unsubscribe from and require fewer months to break even. It's stacking the deck in favor of those promoting deceptively.

3. Publisher Passivity/Ignorance/Control
This one was hard to word, but if you look at Google and certain parts of Facebook, it is clear that certain large sources of traffic have found a way to discourage the running of this style of offers. Do they still deliver some volume? Yes, but disproportionately less than they could if they didn't have restrictions. Other sources of traffic have not followed suit, either by choice, ignorance, lack of controls, or some combination of the above. In other words, there probably is someone at MSN who if they truly understood how the ads worked would not allow them to run on their properties. Then again, they might not because they like the economics, don't believe them to be an issue, and/or assume that anything running has passed proper legal hurdles.

There is a technical hurdle as well. Sites that run ad network tags do not know exactly what runs. I had hoped that one could create a sniffer that monitored all ads, but it doesn't look easy. As I learned, since most ad network tags use iframes, the hosting website can't access the frame; it's an issue of browser security that would do more harm than good if modified.

4. Lack of Self-Regulation / Inertia
At present, there aren't enough companies in the fakevertising food chain who are willing to take a stand against the current practices, or at the very least to define standards by which all must follow in order to receive payment. Then again, there isn't much desire to do so. The hard part comes from the lack of trust and a recurring trend in so many types of business - the race to the bottom. If someone takes a stand to be the clean leader, what do they get? Their has to be a big enough deterrent to make everybody want to fall in line, and as of yet, there isn't.

When Facebook took action against two third-party ad networks for displaying ads the company felt deceptive, other networks and app developers quickly toed the line. In that ecosystem, Facebook has the power to take away their business with a few strokes of a keyboard, but in the broader ecosystem, media is fragmented, and the threat of legal challenges not strong enough. Almost every player knows that some action will ultimately happen, but they will get hit whether they run it or not, and in the past, the most ultimatley profitable action has been to get while gettin' is good. You might pay a fine and have to change your ways, but you're better off having that pool of funds. Those gains then act like an internal VC fund to provide the company a runway for going more legitimate.

Where Does That Leave Us
The truly complex part of the problem comes from the size of the un-branded continuity program market and just how much it is helping certain companies hit their numbers, along with what happens were it to go away. In so many respects, the current fakevertising trend is the 2008-9 equivalent of the mortgage advertising boom from 2002-2006. The big difference of course is what it means to the consumer. With mortgage, filling out a form didn't have any direct cost. With fakevertising, they enter their credit card number. Mortgage ads weren't perfect, and those promoting them arguably contributed to something much greater of a problem, but they didn't do so knowingly or willingly. In other words, there is nothing inherently wrong with taking advantage of an opportunity, but there is something wrong in manipulating the market to take advantage of an opportunity.

We've already seen how things will play it. More and more media sources will crack down on the ads; it will happen slowly and in order of those who can afford to take a long-term stance or are forced to. Some of the key players will fade away for the same reasons - product companies shutting down because of investigation and cpa networks chosing to become more strict with respect to how they allow their arbitragers to run the offers. At the same time, media costs will rise as advertisers increase spends, new advertisers come on board, and inefficiencies decreased. Is it six months, one year, or longer? That's hard to say because this event is tied to a macro-event (credit crisis) but not tied to an event in the same way mortgage advertising was. No matter how long, we'll still have those who continue to push the boundary, just like we still have spam, but those playing in the ecosystem will move on until the next Perfect Storm.

Comments

[ssm]

Great post. I'm thinking about Fred Wilson's prediction in late 2008 that mentioned that display advertising would have most of the efficiencies of search marketing by end of 2009. That's because of many of the reasons you list above including the fact that ad exchanges make it easy for more inventory to move around efficiently.

however, in reality, I haven't seen that play out (personally). If you're a search marketer acquiring traffic across a swath of keywords - not just expensive ringtone keywords, say, but a large variety of keywords - its difficult to acquire any traffic for ~10 or 15c a visit. that's about the rock bottom that I could easily pay on Google but would have no chance of getting to with display because of the floor CPMs of couple of bucks. Why do you think that is? Is it simply impossible to wring the same efficiencies out of display arbitrage unless you're "cheating"?

[Steve]

Thanks for bringing some awareness to this issue. We need to make sure that good prevails and evil fails.

[Dave]

Ripping people off through fraud is criminal. Facilitating ripping people off is criminal too. The advertisers are a moving target. Google is not. This scenario seems to offer a perfect opportunity for an ambitious state prosecutor that wants to make a name for himself.

I think all this means some going-bankrupt state is going to go after Google in a civil action for this kind of stuff. Since Google is taking part in defrauding people, someone will smell big time money to be had from a suit on "behalf of their citizens."

Google was able to police YouTube once copyright holders came down on them. They will clean up this stuff a bit when the get their feet held to the fire - i.e. it begins to cost them (fines and reputation) more than the money it earns them.

The criminals actually ripping people off will slink off to find their next scam. And you will likely document its emergence and evolution on this blog.

[Jason G.]

"...but they didn't do so knowingly or willingly"

Do you seriously believe that statement? LOL.

I guess we are still stuck in that paradigm of putting a "halo" on players in the finance community. Gimme a break.

"...manipulating the market to take advantage of an opportunity"

Manupulating what? People's desire to make a quick buck or improve their looks overnight?

People have been seeking "quick fixes" since the beginning of time. How is this different from the "legimate" Hydroxycut ads plastering television and printed media?

Listen, I don't agree with re-bill fraud, but what ever happened to personal accountability?

[Jason Arias]

Hello Jay,

My name is Jason Arias and I am stopping to say thanks.

Not that long ago I joined CPA networks in hopes of making 10k per day and have a Black AMEX card while I don't have that YET! I am on my way of obtaining one. After hearing affiliates making 50k-100k a day 10k a day don't seem like much right?

I am 19 years old so I am really ambitious and I don't want to stay in the rat race and I only been in it for a few months. I am currently 19 years old and I currently work with my dad in a roofing company and I make $12 an hour but forget the pay I should not be working at all! Luckly for me I found a way out an currently I am making $200 a day net online. I will be able to quit my job soon and no longer go to luxury apts to fix a damn leak but to live in one. I know that what I have to do now to get to huge profits is to go the "cheating route" and do WHATEVER I HAVE TO DO TO BECOME A MULTI MILLIONAIRE ONLINE. The top 20 offers from CPA networks are the trial offers which I will get into soon and that will MURDER MY JOB.

Is it wrong for me to get into it? Please tell me. Getting $12 an hour working in the summer on a roof sweating, carrying shit up 40' ladders? When I can make thousands doing what they are doing? You have to live in my shoes to understand that. My reason WHY has propelled me to $200 day and yes I can quit my job yet but I need to make 10k net monthly before I do. You don't have to approve this comment just reply please.

Jason Arias

[Jay]

Jason, you could join a gang or become a drug dealer. I hear you could earn tons of $$$ doing that.

[Jason Arias]

Yea I would but being a drug dealer or a "king pin" would require you to take bigger risks meaning risking your life or the life of your family members. I would rather make money on my pajamas anyways. I would most likely end up dead before I even make my ranks up as a big drug dealer pushing 98% pure kilos of cocaine. And being a drug dealer I wouldn't need a Black Card >< and I want one so I have to charge thousands on it for large scale media buys and paid search instead :). Isn't the internet lifestyle better than making big money in the real world? I would rather make 10k a month online than 20k a month in a "real" business since I can be anywhere in the world and have freedom.

So talk so much about flogs the anatomy, what, where, when, why hell you probably know more about them then me lmao. I wouldn't be surprised if you run them yourself.

[Jason Arias]

Isn't selling drugs illegal anyways lol why would you recommend me to do illicit things. Promoting Flogs is not illegal you just have to have a freaking disclaimer in the bottom saying this is all bull lol. The affiliates from Utah who were subpoenaed to court was because they were using Oprah's image in the creatives and landing pages and she was pissed so her lawyers took action. That is why now its all about Rachael Ray or should I say Rachel Ray. Im only in the biz opp market right now don't have enough cash flow for other markets getting my Amex CC soon then I will be able to scale campaigns and get into bigger markets and my American Express Centurion Black Card will be inevitable.

Peace