Showing posts with label Targeted advertising. Show all posts
Showing posts with label Targeted advertising. Show all posts

Friday, September 15, 2017

Facebook's Advertising Algorithms Targeted "Jew Haters"

Facebook is having a rough couple of weeks...


Last week, Democrats and progressives who had once praised the company for promising to eradicate “fake news” on its platform were outraged by revelations that it had sold at least $100,000 in advertising to a Russian troll farm – an allegation that Facebook had initially denied when it first surfaced in the spring. Lawmakers, including Democratic Senator Mark Warner demanded more information from the company, even speculating that Congress may need to pass legislation to “protect Americans” from malicious foreigners dedicated to subverting the American Democratic process by…purchasing targeted ads.



Now, ProPublica is reporting that Facebook"s advertising algorithms inadvertently created a series of targeted-ad categories directed at anti-semites and racists. To test if these ad categories were real, ProPublica paid $30 to target those groups with three “promoted posts” — in which a ProPublica article or post was displayed in their news feeds. Facebook approved all three ads within 15 minutes.





“Last week, acting on a tip, we logged into Facebook’s automated ad system to see if “Jew hater” was really an ad category. We found it, but discovered that the category — with only 2,274 people in it — was too small for Facebook to allow us to buy an ad pegged only to Jew haters.



Facebook’s automated system suggested “Second Amendment” as an additional category that would boost our audience size to 119,000 people, presumably because its system had correlated gun enthusiasts with anti-Semites.


Instead, we chose additional categories that popped up when we typed in “jew h”: “How to burn Jews,” and “History of ‘why jews ruin the world.’” Then we added a category that Facebook suggested when we typed in “Hitler”: a category called “Hitler did nothing wrong.” All were described as “fields of study.”



Now, the company’s advertising business is facing another scandal. According to ProPublica, the world’s largest social network enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of “Jew hater,” “How to burn jews,” or, “History of ‘why jews ruin the world.’”





The company had continued with the targeted pitches until earlier this week, when ProPublica reporters shared their findings with Facebook’s communications team.  





“Until this week, when we asked Facebook about it, the world’s largest social network enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of “Jew hater,” “How to burn jews,” or, “History of ‘why jews ruin the world.’”



Unsurprisingly, the company blamed the anti-Semitic ads on one of its algorithms and promised to fix the problem and make sure it never happens again.





“There are times where content is surfaced on our platform that violates our standards,” said Rob Leathern, product management director at Facebook. “In this case, we’ve removed the associated targeting fields in question. We know we have more work to do, so we’re also building new guardrails in our product and review processes to prevent other issues like this from happening in the future.”



Most internet users prefer to conveniently ignore how platforms like Facebook and Google can afford to provide so many free services while still operating profitable businesses.


Of course, they’ve managed to do this by dominating the global market for advertising. Facebook and Google essentially hoover up user data and feed it through to their algorithms, which perform complicated analyses to help develop a users’ demographic profile. The company’s platform then uses this information to target advertisements that might be more relevant to their interests. The purported efficacy of these tactics has allowed Facebook to muscle out traditional purveyors of advertising – like media companies – with whom it is now attempting to formulate an uneasy partnership.



Following the attack in Charlottesville, Va. last month, when a young woman was killed and dozens were injured after an Ohio man who had attended a White Nationalist rally on the campus of the University of Virginia rammed his car onto a crowd of counter-protesters.


Facebook CEO Mark Zuckerberg wrote at the time that “there is no place for hate in our community” and promised to purge such speech from Facebook.





“It’s a disgrace that we still need to say that neo-Nazis and white supremacists are wrong - as if this is somehow not obvious,” he wrote.



But, as ProPublica points out, the company, while it may have deleted a some questionable posts, it didn’t apply any scrutiny to its ad-buying platform. The ad categories that ProPublica spotted were likely generated after scraping data from profiles featuring anti-Semitic themes - either as an interest, an employer or a “field of study.” Facebook’s algorithm automatically transforms people’s declared interests into advertising categories.


ProPublica has been scrutinizing Facebook’s advertising business for years. Last year, it collected a list of 29,000 ad categories from Facebook’s ad system — and found categories ranging from an interest in “Hungarian sausages” to “People in households that have an estimated household income of between $100K and $125K.”


The report didn"t appear to have much of an impact on the company"s share price, which was flat in early trading.


Tech companies’ advertising businesses are generating billions of dollars in revenue, and yet – as the ProPublica investigation demonstrates – there’s little transparency surrounding how the Facebooks, Amazons and Googles of the world repurpose user data for commercial purposes.


Perhaps when he is done cracking just how an (allegedly) Russian $100,000 ad campaign changed the course of US election history. Mark Warner can look into this.

Hey Advertisers: The Data-Mining Emperor Has No Clothes

Authored by Charles Hugh Smith via OfTwoMinds blog,


When a big advertiser pulls its online adverts and its sales remain unchanged, that tells everyone who"s paying attention something important.


It"s an article of widespread faith that data-mining enables advertisers buying online adverts to target consumers with laser-like precision. Vast warehouses of servers grind through billions of records of consumer profiles and transactions and with a bit of algorithmic magic, distill all this data down to the prime target audience for whatever good or service you"re selling: probiotic goo, battery-powered back-scratchers, Zombiestra(tm), investment newsletters based on darts tossed by monkeys, etc.


And everybody knows online media is the place every advertiser wants to be and needs to be. By some measures, online advertising exceeded television advert spending in 2016 (around $70 billion each). Unlike traditional media advertising, which is stagnating or declining, online advertising is still expanding smartly--especially in mobile media.


Combine the promise of god-like targeting via data-mining with fast-growing online platforms, and you"ve got advertisers falling over themselves in their rush to spend billions more on online advertising.



As if that wasn"t enough to get advertisers salivating, the time consumers spend online continues to expand as well:



There"s one little problem with this narrative: online adverts don"t work as well as they"re advertised. Proctor and Gamble recently announced that a significant reduction in their online social-media advert spending had no measurable effect on sales.


The only possible conclusion (unless you"re selling online adverts for a living) is: online adverts don"t work.


There"s another little multi-billion-dollar fly in the ointment of online advertising known as click-fraud-- the clicks on adverts may not be humans actually interested in the product being advertised but automated bots skimming money from advertisers or competitors.


So all those clicks aren"t from actual consumers; they"re bots clicking on click-farm sites which send a small fee for every click to the owner of the site, which just so happens to be the owner of the bots clicking on the adverts.


Or an advertiser finds they owe $100,000 in click-fees for the tens of thousands of clicks their adverts garnered--but most of the clicks were generated by competitors seeking to bleed the advertiser of revenues and introduce false data points.


Click-fraud is the industry"s dirty little secret, and the numbers are kept secret lest the reality that the Emperor has no clothes gets out. Despite all the hoopla about mobile adverts, fast-growing market, blah blah blah, there is precious little real-world evidence that online adverts actually do the intended job of generating new sales and attracting new loyal customers.


Just look at the online advertising you"re being served. Do you get adverts promoting airline tickets to destinations you"ve just been to and that you"ll never return to, adverts promoting wrenches after you"ve just bought the only wrench you"re going to need in this life, etc.?


If this contextual advertising is the best that data-mining can do, it"s pathetically ineffectual. Assuming you haven"t installed ad-blocking software (another industry reality that is rarely mentioned), have you ever clicked on any of the adverts in the sidebars of your social media or email websites--except by accident?


But what about all those thousands of data-points Big Data has collected on us all? All our purchases, all our credit history, how much time we spend online, the sites we visit most often, and all the rest of the mind-numbing details of every day life.


All of this data-mining is predicated on a false assumption: that my past purchases predict my future purchases. Other than the most brain-dead conclusions--yes, I will buy gasoline again somewhere in the near future, probably at Costco, using either the Costco credit card or an airline mileage credit card--this data has little or no effective predictive value because our spending is tightly limited, controlled and prioritized, so there"s near-zero leeway for impulse buys or unplanned purchases.


Spending can be constrained by modest levels of disposable income (i.e. cash left after paying all the essential bills, existing debt, etc.) or by budgeting.


As for enticing me to buy gasoline elsewhere than Costco, or switching credit cards--you"re wasting your money. Giving me $1 off each gallon would work, but only as long as I got this enormous discount--a discount that will bankrupt the issuer in short order.


As for enticing me to switch credit cards--I tear up multiple card offers every week, and have done so for years. So the card offers are batting zero despite literally thousands of pitches via mail, print and online adverts. No "targeted ad" based on data-mining is going to change that.


I might switch if you give me back 10% of all purchases in cash, but that"s an offer that will bankrupt the card issuer.


The fantasy that"s repeated in every account of the staggering effectiveness of mobile advertising is this: I"m walking past a pizza shop and my mobile phone displays a coupon for that very pizza shop. Wow! Imagine the power of combining location with all the treasure trove of big-data-mining about little old me!


Here"s a credit card purchase from three years ago for a pizza shop--this guy is a pizza fan, no doubt about it. This advert is a statistical winner.


Nice, except that 1) I rarely eat pizza, and when I do, it"s generally at home; 2) I never buy meals on impulse, since that ruins my diet/fitness regime (and I"m too thrifty to buy meals on impulse anyway) and 3) my phone is often not with me, off or otherwise disabled.


What this tired narrative never includes is my dismissal of the advert as a matter of habit, and the possibility the advert alienates me in longlasting ways. Most of us never look at ads, and the more you make them intrusive, the more we hate the website, the advertiser and whatever product/service is being pitched.


Advertisers may have unwittingly poisoned themselves and their product/service. The net result of the data-mined, contextual, statistically targeted advert may well be a consumer who blacklists the pizza shop from then on.


This alienation is of course completely opaque to the data-mining software: there are no data traces left by blacklists/ alienation.


But the flaws in data-mining-yields-advertising-success are much, much deeper than this: human behavior is contingent on events that have yet to happen, and the decision process is completely invisible to data mining and algorithms.


Here"s some examples from my recent purchase history.


I recently bought an airline ticket to Switzerland. Whatever inferences the data-mining software might extract from this will necessarily be false, as the motivation was completely contingent and unpredictable: my brother was in a motorcycle accident, and he needed my help as his wife was hundreds of kilometers away caring for the grandkids.


Whatever inferences the data-mining software extracted from the meal I purchased at an Italian cafe a week later would also be intrinsically useless/ false as the only reason we went to that cafe was it was the only restaurant my brother could reach on foot with his cast and cane.


What inference could any software extract from this that would be useful because it was accurate? None. The situation, the motivation, every single part of the decision was intrinsically opaque to any data-mining software.


As for what else I bought in town--groceries, paid in cash--another zero for the data-mining software.


The only item of any value that I did buy, I bought through my brother"s account--another layer no software could possibly penetrate. Software will wrongly attribute the purchase to his profile, not mine, a totally false projection.


Virtually every inference that automated software attempted to extract from my spending would be worse than useless, as it would be misleading. The only inferences with a shred of accuracy--here is a consumer who randomly buys an airline ticket to Europe--is utterly useless to advertisers.


The only adverts that have any chance of working are the traditional variety that assume only one in 10,000 people will have a contingency-based need or desire for the product or service being advertised. So the adverts attempt to reach 1 million people in the hopes that a hundred might be interested and a handful might proceed further.


What advertisers who are shaking themselves out of the online-advert trance are discovering is that the data-mining advert Emperor has no clothes. The industry as it stands can"t identify which clicks are fraudulent or accidental, which ads actually trigger a sale, or which ads actually alienate potential customers.


When a big advertiser pulls its online adverts and its sales remain unchanged, that tells everyone who"s paying attention something important: the industry isn"t doing a very good job for the billions it"s being paid.


*  *  *


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

Tuesday, September 12, 2017

A Startling Anecdote About Online Ad Spending From Restoration Hardware

Category 1 storm clouds are gathering over what has traditionally been one of the most lucrative, and perhaps only profitable, sectors to come out of Silicon Valley in decades: online advertising.


Two months ago, it was P&G which fired the first shot across the "adtech" bow when not long after it announced it was slashing its digital ad spending because it thought it was not getting the kind of return on investment it desired, it made a striking discovery: “We didn’t see a reduction in the growth rate.” CFO Jon Moeller said “What that tells me is that that spending that we cut was largely ineffective.”


Speaking to the WSJ, P&G CEO David Taylor echoed Moeller when he explained that cuts on digital ads are part of a larger strategy to more quickly halt spending on things – from ad campaigns to product development programs - that aren"t working: “we got some data that said either it was in a bad place or it was not effective,” Taylor said of the digital cuts. “And we shut it down and said, ‘We’re not going to follow a formula of how much you spend or share of voice. We want every dollar to add value for the consumer or add value for our stakeholders.”


Previously P&G"s CFO had said that “the reduction in marketing that occurred was almost all in the digital space. And what it reflected was a choice to cut spending from a digital standpoint where it was ineffective: where either we were serving bots as opposed to human beings, or where the placement of ads was not facilitating the equity of our brands."


Moeller also touched on the two most common complaints about digital advertising scams: advertisers are paying for ads that are viewed and clicked on by bots, not humans; and ads are placed by thousands of automated “ad exchanges” that are out of control of the advertiser on sites and pages that don’t match the advertiser’s products.


Commenting on this, in late July, Wolf Richter summarized the state of affairs as follows:





Marketing executives of other companies too have long riled against the murkiness of digital advertising, the false promises, the intractability of the Internet, the clicks and views by bots on which advertisers are wasting their money, and the billions of dollars that get blown without results. But getting a grip on what works and what doesn’t is hard.



There’s a larger issue: Retail spending (not adjusted for inflation) has grown on average 2.4% per year in the US over the past five years. Over the same period, digital advertising nearly doubled to $72.5 billion in 2016. Clearly, even digital advertising – despite the lure of Facebook and the like – cannot induce consumers overall to spend more and increase the size of the overall pie for advertisers. It can only, at best, divide up the pie differently.



And when one of the most sophisticated high-tech advertisers in the world decides it is overspending on digital advertising and is able to very carefully remove the rot, thus bringing down its cost without hurting its revenues, other companies will follow, with some consequences for the relentless but often ineffective surge of digital advertising dollars.



Of course, the implications to this admission that online advertising was either being gamed by bots, or generally underperforming were significant, as it jeopardized the future revenue streams of two of the biggest companies in the world, Alphabet (aka Google) and Facebook, both almost entirely reliant on online advertising. How long before other anchor names decided to similarly cut back on their online ad spending?  In short: slowly but surely, chronic buyers online advertising space, are slowly waking up to the fact that "adtech" may be one of the biggest hype (and hope) bubbles in history. Not all of it, but a material, substantial portion: one that may be responsible for a significant chunk of Google"s or Facebook"s cash flow and market cap.


A separate, if just as concerning problem emerged last month, when the WSJ reported that online ad giant, Google, would issue refunds to advertisers for ads bought through its platform that ran on sites with fake traffic, and generated no actionable advertising "clicks." Just how much of Google"s ad revenue (and thus profits and market cap) had been inflated over the years by said "fake ads"?


* * *


So fast forward to last week, when during Thursday"s Global Retailing Conference organized by Goldman Sachs, Restoration Hardware delightfully colorful CEO, Gary Friedman, divulged the following striking anecdote about the company"s online marketing strategy, and the state of online ad spending in general (courtesy of @parsimony16). What Friedman revealed - in brief - was the following: "we"ve found out that 98% of our business was coming from 22 words. So, wait, we"re buying 3,200 words and 98% of the business is coming from 22 words. What are the 22 words? And they said, well, it"s the word Restoration Hardware and the 21 ways to spell it wrong, okay?"


Stated simply, the vast, vast majority of online ad spending is wasted, chasing clicks that simply are not there.


Here is the full must read excerpt from the conference (full link here):





I"ll share a little anecdote with you on this point.



We had our marketing meeting in the company several years ago and the online marketing team was pitching to double their budget, right, and at the time, say, look, nobody in the company is doubling their budget. But tell me why you believe that"s the right thing to do. And they said, well, look, our customer acquisition cost and our ad cost is the lowest in the company. And I said, well, tell me about the data, show me how. And they said, well, people who click through the words that we buy on Google, the ad cost was lowest. And I said, how do you know that they"re clicking on the word and going to the website because of the word you bought versus they saw a store or they received a source book? They said, oh, we know.



I said, well, how many words do you buy? They said 3,200. 3,200 words. I said, well, what are the top words? How are they ranked, the ranking of the words? Oh, we don"t have that, right. And I was getting the look at like, oh, Gary is kind of one these old brick-and-mortar guys. He just doesn"t get it.



And I said, well, what are the top 10 words? And they didn’t have the information. I said, why don"t we cancel the meeting and come back next week when you have the data? I"m sure that Google sales representatives who are taking you to the expensive lunches and selling you the 3,200 words have that data. So why don"t we get the data and then let, review the data?



And they came back the next week and we sat in a meeting and all of a sudden, I can tell you there"s a little change in the faces. They had to wear it kind of down. Everybody kind of came in. I said, so what did we find out?



And they said, well, we"ve found out that 98% of our business was coming from 22 words. So, wait, we"re buying 3,200 words and 98% of the business is coming from 22 words. What are the 22 words? And they said, well, it"s the word Restoration Hardware and the 21 ways to spell it wrong, okay?



Immediately the next day, we cancelled all the words, including our own name. By the way, we are paying for the little shaded box above our words and said, oh no, we have to hang on to that because Pottery Barn might squat on top of us. I said, excuse me? I said, if someone goes to a mall or a shopping center and they"re going to Restoration Hardware and there"s a Pottery Bam there, they"re already squatting, okay? It doesn"t mean they"re going to go into their store. If somebody wanted to buy a diamond from Tiffany and just because Zale"s is sitting on top of them in a shaded box doesn"t mean they"re going to go to Zale"s and buy a diamond.



I mean, I can"t believe how many companies buy their own name and they"re paying Google millions of dollars a year for their own name, like maybe if this is webcast, right, a lot of people are going to go, holy crap. They"re going to look at their investments. They"d go, maybe we don"t need to buy our own name. Google"s market cap might go down...



One wonders how long before all retailers - most of whom are notoriously strapped for revenues and profits courtesy of Amazon - and other "power users" of online advertising, do a similar back of the envelope analysis, and find that they, like RH, are getting a bang for only 2% of their buck? What will happen to online ad spending then? And what will happen to the online ad giants, if the vast majority of ad spending that justified their hundreds of bilions in market cap is exposed as "bloat"? As Friedman politely, yet sarcastically put it, "Googles market cap might go down"...

Saturday, July 29, 2017

P&G Slashed Digital Ad Spending, This Is What Happened Next

Submitted by Wolf Richter of WolfStreet


Tired of feeding an opaque, slimy industry of bots and fake clicks


Procter & Gamble, one of the largest and most sophisticated advertisers in the world, reported on Thursday that sales were slightly down in the fourth quarter and for the fiscal year, despite consumer price inflation. It’s the epitome of corporate revenue stagnation: only price increases keep revenues from declining. An activist investor – formerly called “corporate raider” – is breathing down its neck. So cost cutting to raise profits is the trick.


When a corporate giant cuts costs, it cuts the revenues of other companies.


And it did. Its “selling, general, and administrative expenses,” which include advertising and marketing, fell 7% in the quarter. Net income jumped 12%. And digital advertising took it on the chin in P&G’s earnings report:





Digital ad spending was lower versus a high base period and due to current period choices to temporarily restrict spending in digital forums where our ads were not being placed according to our standards and specifications.



Back in the day before digital ads, advertisers lived by a rule of thumb: Half of our advertising doesn’t work and is wasted; we just don’t know which half.


Digital advertising with all its consumer tracking technologies and direct micro-targeting promoted by now withering “adtech” companies or booming Facebook was supposed to have changed that equation. But it hasn’t. The hard part still is figuring out which half is wasted. But P&G is working on it.


When P&G speaks about cutting digital advertising, people listen, other companies follow, and the advertising industry quakes in its boots.


In April, P&G announced some details of its $12 billion or so cost-cutting binge over five years. This includes slashing $2 billion in advertising expenditures – among them $1 billion in media and $500 million in agency fees.


A year ago P&G announced that it would move away from ads on Facebook that micro-target specific consumers. Facebook is trying to leverage its enormous trove of consumer data to enhance its income. This has been its big promise. But P&G found that this micro-targeting of specific consumers based on the data Facebook has collected on them reduced reach and wasn’t working.


During the earnings call with analysts on Thursday (transcript via Seeking Alpha), CFO Jon Moeller explained the gist of it:





“In the fourth quarter, the reduction in marketing that occurred was almost all in the digital space. And what it reflected was a choice to cut spending from a digital standpoint where it was ineffective: where either we were serving bots as opposed to human beings, or where the placement of ads was not facilitating the equity of our brands.”



He touched on the two most common complaints about digital advertising scams:


  • Advertisers are paying for ads that are viewed and clicked on by bots, not humans.

  • Ads are placed by thousands of automated “ad exchanges” that are out of control of the advertiser on sites and pages that don’t match the advertiser’s products.

The entire vast space between legitimate advertisers and legitimate publishers is populated by a murky slimy world of often invisible entities, usually automated, that try to extract their cut and in the process further dilute the effectiveness of advertising expenses.


So P&G cut over $100 million out of its digital advertising spend in the fourth quarter, and this is what happened, according to Moeller: “We didn’t see a reduction in the growth rate.” And he added, “What that tells me is that that spending that we cut was largely ineffective.”


These spending cuts on digital ads are part of a larger strategy to more quickly halt spending on things – from ad campaigns to product development programs – that aren’t working, CEO David Taylor told the Wall Street Journal:





“We got some data that said either it was in a bad place or it was not effective,” Mr. Taylor said of the digital cuts. “And we shut it down and said, ‘We’re not going to follow a formula of how much you spend or share of voice. We want every dollar to add value for the consumer or add value for our stakeholders.”



P&G didn’t say if it would shift its ad spend from digital to other media, such as television. TV networks have long been clamoring that much of digital ad dollars disappear without trace in the opaque world of the Internet. But back in the day when we lived by the rule that half of ad spending was wasted and that we just didn’t know which half, there was no digital advertising – and TV networks got a big part of the pie, and still, half of the ad money just disappeared without producing results. So TV isn’t going to be the solution.


Marketing executives of other companies too have long riled against the murkiness of digital advertising, the false promises, the intractability of the Internet, the clicks and views by bots on which advertisers are wasting their money, and the billions of dollars that get blown without results. But getting a grip on what works and what doesn’t is hard.


There’s a larger issue: Retail spending (not adjusted for inflation) has grown on average 2.4% per year in the US over the past five years. Over the same period, digital advertising nearly doubled to $72.5 billion in 2016. Clearly, even digital advertising – despite the lure of Facebook and the like – cannot induce consumers overall to spend more and increase the size of the overall pie for advertisers. It can only, at best, divide up the pie differently.


And when one of the most sophisticated high-tech advertisers in the world decides it is overspending on digital advertising and is able to very carefully remove the rot, thus bringing down its costs without hurting its revenues, other companies will follow, with some consequences for the relentless but often ineffective surge of digital advertising dollars.


Investors who bought the hype of “adtech” in the world of digital advertising are left holding the bag.