“The Sell Sider” is a column written by the sell side of the digital media community.
Today's column is written by Ken Van Every, senior business development manager, publisher relations, DataXu.
The ad tech ecosystem is diluted with a massively inflated pool of low-quality impressions from bogus sites with little to no proprietary content or services.
Most display networks and exchanges have creative acceptance policies that prevent misleading creative and ads on landing pages. Content recommendation platforms and sponsored stories do not have these safeguards to prevent arbitrage, so sites often put even more ad units on landing pages than usual to maximize the revenue generated by a sourced user.
This is why bogus sites buy up most of the ad slots in content recommendation widgets and sponsored stories from the likes of Taboola, Outbrain, Facebook and countless mimics, such as RevContent, AdBlade, Gravity, content.ad, infolinks, MGID, ZergNet, Earnify and AdBistro, among others.
The Formula: Landing Page Ad Revenue - User Acquisition Cost = Net Profit
Bogus sites go live every day and can be profitable almost immediately. The path to making money is simple: Buy traffic through these platforms at a cost per click (CPC), which is less than the revenue generated from landing page video and banner ads.
These publishers test several different versions of ads with different combos of enticing thumbnails and tantalizing headlines to see which emerge as the best clickbait. Testing gives them predictable click-through rates (CTRs) for each ad, which can then be used to predict the CPC on each platform. The big issue is when they can also predict how much they’ll earn from their landing page on the revenue generated by display and video exchanges and supply-side platforms (SSPs) as well as other content recommendation widgets.
When both the user acquisition cost and landing page revenue are predictable, publishers can rapidly scale to frightening volumes of ad inventory. That inventory floods the programmatic marketplace and competes directly with inventory from legitimate publishers with organic traffic and hundreds of paid staff members, including writers and developers.
It’s not difficult to understand why these bogus sites keep popping up, when a user costs a 25¢ CPC and generates a $3 CPM when they hit the landing page. If the formula stops working or the CPC is too high on a certain platform, they simply try a more provocative ad to increase CTR, throw some more ad units on the landing page or break the post into a 35-page slideshow with each page containing a dozen display ads and an autoplay video ad. Fine-tune this formula and you’ve essentially built an industrial-sized cash printer.
The Solution: Industry Regulations Banning Ads On Outlinking Landing Pages
Banning ads on only outlinking landing pages slows abuse of these platforms yet still allows publishers to utilize them for internal recommendations without ad restrictions. For outlinks, ads can reappear after the user clicks to a new page on the site. Publishers can still use them to buy traffic, but the payoff isn’t as immediate. The intended business model of the content recommendation platform stays intact, but billions of ad impressions suddenly disappear from the marketplace, redistributing marketers’ investment to legitimate publishers and the users engaged with their content.
Publishers utilize these platforms not only because they make their sites stickier but also because they earn revenue from the outlinking clicks. What they may not realize is that the small amount of revenue generated from the outlinks is hurting them in the back end, due to how much arbitrage-driven scale exists in the programmatic marketplace. The CPMs they’re generating from their exchanges and SSPs are lower than they should be, thanks to the oversaturation of supply.
What’s The Problem?
If the content recommendation platforms are working, publishers are making money and ads are being served to humans, what’s the big deal?
The problem is the outright abuse of this loophole. Many publishers have made this their primary business model and generated millions of dollars under the radar without creating any proprietary content. They use generic WordPress templates to throw together a site and plaster it with slideshows, using content that they don’t own or have the rights to use.
To maximize the revenue from a new user, many sites have different user experiences when a user is referred from one of these platforms compared to when they visit organically. They have posts that organic users see condensed to a single page and have three to five ad units, while that same post when visited through Facebook, Taboola or Outbrain will be broken into several pages, each with a dozen ad units, including autoplay video ads. The name of the game is profiting off of that user’s single click to the site, and nothing else matters.
Most of the sites that are buying this traffic are faceless with generic “About” and “Contact Us” pages. They have hundreds of millions of monthly impressions but no presence on LinkedIn or Glassdoor. You’d think that if they have that many impressions, they’d have people working in ad sales, accounting and HR, but that isn’t the case.
Make no mistake, several mainstream household-name publishers have also exploited this loophole to launch their impression levels into the billions-per-month strata and higher. Enforcing the ad ban on landing pages would bring those levels closer to earth, but the financial pain should be softened a bit by higher CPMs generated by tightened supply. Those publishers will survive. The real impact will be felt by the hundreds of websites that spawn every day with the sole intention of buying traffic and monetizing it profitably, by any means necessary.
A ban on outlinking landing pages would lead to the programmatic inventory pool shrinking and CPMs rising, especially for video ads. Advertisers will get closer to getting what they pay for with audiences engaged in the content they’re marketing on. Ad tech revenue will stay with the platforms that provide a viable product for their clients instead of trying to generate cash while ignoring the health of the industry. Finally, revenue from advertising will flow to the content producers and services that we love, instead of being siphoned by parasites into the shadows.