Villains

Thanks to everyone who has written. As a letter writer, I need to be a more faithful correspondent. Thanks to Zephr, which is the presenting sponsor for today’s newsletter. Zephr provides to publishers and media brands personalized paywall management software to drive revenue growth.

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Heroes and villains

For six months in 2010-2011, when I was the digital editor at Adweek, I worked for Michael Wolff. I took away some important lessons from working for him. One that stuck with me is that every story needs heroes and villains.

Stories are how we make sense of the world. We tell stories about ourselves and about the world as we perceive it. We cast heroes and villains. Over the years, the narrative of digital publishing has been that the duopoly is strangling the life out of publishers. Facebook lured publishers endlessly with promises of turning those rented audiences into actual sustainable revenue, only to pull the football away at the last minute time and again. BuzzFeed is still out there touting a big deal with Facebook to produce short videos. Good luck with that.

Google was always a more complicated character. On the one hand, publishers depend on Google by default. It accounts for 50% or more of most publishers' traffic. This traffic tends to be high margin, particularly with evergreen content that can live on for years with the occasional glow up. Yet Google also saw the opportunity to consolidate the digital advertising supply chain piece by piece over the years to the point where its control was, more or less dominant. After all if Google directs the traffic on the open web, it might as well take a piece of the action. From a pure common sense standpoint, it was hard to understand how Google could operate on all sides while also being a leading exchange. This was papered over with the typical ad tech gobbledygook to hand wave around clear conflicts. Years ago, I was told, “Google is not the competition, it’s the environment.” And it has wielded that power.

Now, the DOJ is focused squarely on Google as the villain. The lawsuit it dropped this week is catnip for the ad tech crowd, laying out what many suspected all along: The game in many ways has been rigged. House always wins. Google will likely tie this case up for years, and by the time any resolution is reached, the fight will probably be less important, just as the Microsoft antitrust battle reached an unsatisfying conclusion. The case is more evidence that the government isn’t crazy about how the digital ad industry is working, considering the FTC has already gone after location ad targeting player Kochava.

In truth, the government now is left trying to thread a needle with a proposed remedy when it whiffed at its chance to avoid this back when Google bought DoubleClick in 2007. That deal breezed by regulators and set in motion the situation that the government is now trying to belatedly unwind.

What was striking to me is the lawsuit was dropped right as the IAB annual leadership meeting was convening in Florida. I’ve been to the IAB event several times over the years, although my invite was lost in the mail this year. The most memorable moment for me was when Wenda Harris Millard issued a call in 2008 to stop treating ad inventory like pork bellies. Wenda decisively lost that one. The IAB itself saw which ways the wind was blowing and evolved from its original charter to serve the interests of publishers to advocate for the entirety of the media and marketing industries. That’s hard to square since the interests of publishers is often not those of platform companies.  Needless to say, when Google and Facebook are half the digital ad-driven digital economy, their interests are going to be well represented.

And so for many years the IAB swatted away calls for more stringent regulation. Business groups tend to do that. It was awkward timing for an industry event with Google as presenting sponsor. IAB chief David Cohen continued his predecessor’s tradition of using the opening keynote to lay into villains, in this case privacy “extremists” and… Apple. I can understand the casting of privacy activist types who seem to revel in the minutiae of GDPR to the point where you’re wondering if this is all worth the effort when we’re just talking about cookies. Apple’s sin is its move to fundamentally change how digital advertising works by zeroing in on what Tim Cook has called the “data industrial complex based on surveillance.” You know people are coming for the cookies when they go to surveillance. Cohen didn’t mince his words: “Apple exemplifies the cynicism and hypocrisy that underpins the prevailing extremist view.”

At the risk of being a cynic, I couldn’t help but notice that Google and Facebook were presenting sponsors of the event, and Apple has not joined the IAB. Weird how that works.

There is a disconnect here between the story the industry tells itself and how it is perceived. The rampant collection of data has for years been dismissed as the concerns of self-interested “extremists.” The makers of ad blocking software were memorably described by Cohen’s predecessor as an “immoral, mendacious coven of tech wannabes.” The blithe dismissals of critics of digital ad practices has been a constant over the years. The privacy panel has long been the proverbial “last thing standing between you and cocktails,” The topic is now more business critical but still dismissed as “boring.” Privacy was always something to keep the lawyers busy.

Targeting Apple as the villain du jour is both understandable and foolhardy. Apple’s privacy moves are obviously self-serving. But Apple is on the top of every single most trusted brands list I’ve seen. People love Apple. I have a hard time believing that ad tech companies operating in the shadows are going to win this narrative battle – even though what Apple is doing is another racket. If it’s a battle of Apple vs data brokers, I can guess which side people and the politicians they elect will take.

Years ago, I remarked to a colleague that Apple was the only company who could force profound change on how the industry operates. The industry’s self-regulatory bodies were mostly captured by entrenched interests who wanted the status quo. Publishers were powerless with their businesses cratering, forcing them to scramble to find bits of revenue in various places before they dried up. Brands could force change, but they had no interest. “It’s a conspiracy, not a fraud,” as I was told years ago.

But Apple can remake this industry for a few reasons. One, it has the scale. Mark Zuckerberg probably doesn’t live with many regrets. He probably regrets not being able to make a phone operating system. Now he’s left with Apple decoupling it and throwing its business into what’s likely temporary disarray. Two, it is not invested in the Old World. Apple doesn’t have a legacy ad business to protect. It tried and failed with iAd and mostly dislikes how digital advertising works. Three, it has a clear interest in reorienting advertising to its preferred course. And finally, Apple still has convictions, I believe. It’s clearly lost a lot of that under the supply chain guy, but it can take a long view and is willing to destabilize massive companies like Google and Facebook. All decisions involve tradeoffs, and Apple has fewer tradeoffs if the digital ad system blows up. That said, pinning the wave of tech layoffs on Apple making it harder to target and measure ads is a step too far. Jerome Powell would like a word.

For publishers and independent ad tech providers, this is scary. These are massive companies fighting massive battles over billions of dollars and power. Everyone else risks being collateral damage. The search for the replacement of the third-party cookie drags on. The great hope of alternative identifiers is pretty much email. There’s a reason everyone wants to collect your email. Guess who is going to obscure those emails you’re forced to submit? Meet the new boss, same as the old boss.

The end result could end up marginally positive, although it will wipe out some companies. It’s hard for me to see a model where display advertising drives many original content publishing businesses. Working the display ad game for SEO arbitrage is a different story. The market has spoken on the generation of big digital publishers that were, more or less, build on display advertising. Vice is primed to be chopped up in a fire sale, Vox is scrambling for more money after it laid off 10% of staff while pondering spinning off assets it acquired with the Group Nine deal, and BuzzFeed is languishing close to the pink sheets. Other ad-dependent digital publishers will follow suit with their cutbacks now that they have the cover of Vox. It’s not a very pretty picture.

So maybe it’s time to start over. I’d rather not be in the position of throwing good money after bad and trying to make a display ad business work as a publisher. Transitions are never painless or fair. We tend to notice that more often when we’re the ones who get the short end of the stick.

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Thanks so much for reading. Send me a note with your feedback by hitting reply, or email me directly: bmorrissey@therebooting.com

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