PODCAST

Q&A: How to Stake Out Your Territory in the Online Ad Migration

Paul Martino, CEO of Aggregate Knowledge, describes three categories for online advertising: Rich media, video and traditional display.

Based in San Mateo, Calif., Aggregate Knowledge provides technology for online advertising and search.

In an ECT News Network exclusive interview, Martino discusses the present and future of the online advertising market.

Economic Slump


Listen to the podcast. (18:05 minutes)


Online advertising trends that he sees developing now include a downturn in online advertising related directly to the slowdown in the U.S. economy and the movement of ad dollars from traditional media sources to online video.

Martino predicts that the slowdown in online ad spending will continue through the fourth quarter of 2008 and into 2009.

Firms like Microsoft, with its Atlas Institute, and VideoEgg, with its online video ad technology, are fostering innovation in the online ad space. Technologies such as Flash, Flex and Silverlight are also helping to facilitate the growth of online advertising.

At the moment, a fast-growing all-purpose device, the mobile phone, has not yet reached a critical mass of ad dollars. But early players such AdMob are creating some early success in that niche.

Blurred Lines

One key trend Martino sees developing for the future is the blurring of lines between media. For instance, if IP content is displayed on a television, is it Internet or is it TV? Or, if a widget contains a full Web site experience, is it an ad or is it content?

Finally, with the rapid movement of dollars to the online space, Martino believes it’s just a matter of time before online advertising dollars will overtake traditional media.

Here are some excerpts of the interview:

E-Commerce Times: What is the current state of online advertising?

Paul Martino:

We’re definitely seeing a downturn related to the overall economic condition in the United States here. Certainly in the U.S., we’re expecting to see some slowdown in spending in Q4 and through much of ’09. We think that that’s going to be counterbalanced by the continuing trend of moving television advertising online.

So the real question for ’09 is going to be who’s going to be the winner, the downturn that we’re seeing or the movement of video online? One will win, and that will have a very interesting effect on people who are pure-play Internet advertisers.

ECT: What trends do you see in the next two to three years in terms of online advertising?

PM:

One of the big things that I think we’re going to see happen — and it might not be ’09 because of the overall trend — but I think that by 2010, we’re going to see a lot more focus on the display side. So much of the online advertising has been direct response oriented, search-term oriented.

And in many ways there are clear leaders with a very good offering there, and the space that hasn’t had a lot of innovation is around display, around dynamic creatives, around personalized ads, around telling the story in a way that they used to be able to do on television. So I expect to see a whole lot of investment in the brand-oriented side as opposed to the direct-response side, which to some extent is now, I think, getting saturated.

ECT: What do you see as being the definition of online advertising right now?

PM:

I think that online advertising can definitely have many different formulations, but to some extent the way we see it here at Aggregate Knowledge is, there are really two primary classes of online advertising. There’s the direct response — very much like DRTV: “I’m gonna buy a search word and I expect to get a conversion on the click and I’ll pay you for it.” And on the other side of the fence, we have much more the display side, and that encompasses more the brand impressions: “I’d like to do a new product launch where you don’t know my product exists.”

That also includes a lot of things in the video space as well as the branding-oriented areas. And I think that that is to some extent my taxonomy of the world between those two big buckets. Obviously, on the display side, there’s gonna be plenty of sub-buckets, whether it be, say, display brand awareness, etc. We can go into a lot more detail on those sub-categories.

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Piecing Together the Supply Chain Puzzle

supply chain

Supply chain issues have haunted businesses during the past several months. Given the status of the pandemic and other challenges, they probably won’t be resolved any time soon.

The best e-commerce businesses can do to mitigate these issues is to adjust their own practices, timelines, and needs to ensure that they can continue serving customers and being profitable.

The E-Commerce Times spoke with several experts to get their perspective on what’s going on with supply chains and how online sellers can adapt to the disruptions.

“There is an unprecedented volatility and disruption in the end-to-end supply chain,” said Lisa Anderson, president of LMA Consulting Group.

“Manufacturers cannot keep up with demand. Material shortages are common. Transportation issues and delays plague the system, and consumers’ expectations continue to rise. With volatility in both demand and supply, service and profitability suffer,” she explained.

Reasons for SC Disruptions

There are a variety of causes for the disruptions in supply chains, and all together they’ve had a domino effect.

“Since the onset of the global pandemic, e-commerce businesses have been faced with a turbulent supply chain,” Mitchell Bailey, COO of Kaspien, told the E-Commerce Times.

“Even Fulfillment by Amazon, which was long considered a gold-standard for e-commerce fulfillment, was challenged under the pressure. The supply chain has slowed due to worker shortages and increased demand for e-commerce, among other issues brought on by the pandemic,” he observed.

The supply chain disruptions are attributable primarily to the pandemic, but other challenges in the manufacturing, economic, and business landscape have contributed to the situation, as well.

“There is definitely a widespread labor and talent shortage,” said Anderson. “Partly due to Covid, partly due to the extension of unemployment benefits, partly due to the retirement of scores of workers, and then due to the increasing need for talent, there are shortages throughout the supply chain.

“The end-to-end supply chain got out of balance during Covid. China shut down when the U.S. was still robust; then the U.S. shut down when China started to come back online. Certain industries shut down completely while others were in high demand. There wasn’t enough flexibility in the supply chain to move the resources to where they were needed the most.”

Demand for specific products, too, has changed, and the effects of other unexpected events have added up.

“Covid also created significant demand for certain types of products such as computer chips,” noted Anderson. “That created further unbalance. In addition to Covid, the Texas freeze caused additional disruption in the supply chain. The ship that got stuck in the Suez Canal also created further supply chain disruption. With supply chain issues occurring around the world, backup plans are no longer valid.”

Alternative Fulfillment Options

Because supply chain challenges are currently par for the e-commerce course, businesses must adapt and be agile to stay afloat. One answer, according to experts, is to diversify.

“Supply chain breakdowns happen more frequently than most companies expect, and the impact of these disruptions is growing,” said Bailey.

“Businesses must concentrate on restoring the supply chain in the short term and strategically diversifying over the long haul. Political, economic, climate, and cyber hazards are the most common external risks that supply chains face.”

“In these aspects,” he added, “organizations must identify and understand their vulnerabilities. These occurrences can raise raw material prices, make shipment more complicated, lengthen customer lead times, and increase supplier risk. Although any business can be affected by these factors, some are more vulnerable than others.”

Making use of alternative fulfillment choices is another strategy that e-commerce businesses can employ.

“Alternative fulfillment options are one way to deal with supply chain challenges,” Guy Bloch, CEO of Bringg, explained to the E-Commerce Times.

“By expanding pick-up options, such as curbside pickup and buy online and pick up in store (BOPIS), businesses can manage e-commerce fulfillment costs at scale and provide the convenient options customers expect to see at checkout.”

Changing logistics plans can help ease the burden of supply chain disruptions.

“Another solution is to work with multiple delivery partners, which allows retailers the flexibility to alter loads according to the peaks and drops in demands,” said Bloch.

“Finally, consider introducing a hybrid model that incorporates employees, internal fleets, and even third-party fleets. This allows for retailers to manage orders based on the individual business logic and operational needs of the company,” he suggested.

Ultimately, better use of supply chain data can also help.

“For many e-commerce operators, strategies around how assortments are adjusted to the supply chain are typical,” Randy Mercer, VP of global product management at 1WorldSync, told the E-Commerce Times.

“Beyond this, a deeper focus on the acquisition of thorough supply chain data should be adopted by e-commerce platforms to avoid surprises related to the intended online assortments,” he advised.

Communication all along the supply chain is important and having multiple plans and back-up plans in place is key.

“All merchants need to be in continuous contact with their suppliers in order to foresee potential disruptions and challenges,” said Miva CEO Rick Wilson. “Then they need to start working on Plans B, C, and D, just in case.”

Managing Future Challenges

Supply chain disruptions are likely to continue, and ultimately, controlling the pandemic is going to be necessary to bring supply chain problems to an end, according to Wilson.

“If raw materials are impeded either because there aren’t healthy available workers to get those materials, or they can’t be shipped due to shipping constraints or closed borders, then that supply chain will have constraints and disruptions at some point in the process,” he said.

“So, as long as the pandemic is uncontrolled, we will still see problems. This will eventually fix itself, but the solution lies in pandemic control more than in supply chain innovations, which can only make the best out of a difficult set of variables.

“Returning to a more balanced state is likely to take a few years as we vaccinate more people, get more natural immunity from prior infection, and the pandemic evolves into a more traditional seasonal and less lethal virus,” Wilson noted.

Over time, however, adaptions in business practices might also lessen the effect of unavoidable supply chain disruptions — whether those are caused by the current pandemic, surges in consumer demand, or innumerable unforeseen circumstances in the future.

“The problems are likely to increase,” said Bloch. “In the future, if companies successfully pivot and adapt to the problems seen over the last 18 months, the issues may decrease.”

With help from a variety of new technologies, as well as a certain amount of creativity and ingenuity, e-commerce businesses can find ways to deal with ongoing and perhaps inevitable supply chain disruptions.

“New technologies for better order management, last-mile delivery and inventory management are all promising solutions to current supply chain problems,” Amit Shah, chief strategy officer and U.S. general manager for VTEX, told the E-Commerce Times.

“Whether or not these problems persist, companies of all sizes are realizing that they need the latest technology to help them tackle current issues and anticipate proper solutions for future problems.”

Vivian Wagner has been an ECT News Network reporter since 2008. Her main areas of focus are technology, business, CRM, e-commerce, privacy, security, arts, culture and diversity. She has extensive experience reporting on business and technology for a variety of outlets, including The Atlantic, The Establishment and O, The Oprah Magazine. She holds a PhD in English with a specialty in modern American literature and culture. She received a first-place feature reporting award from the Ohio Society of Professional Journalists, and is the author of Women in Tech: 20 Trailblazers Share Their Journeys, published by ECT News Network in May 2020. Email Vivian.

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Bots Skew Marketing Analytics, Cost Businesses Millions

Bot activity at websites is skewing marketing analytics and costing businesses millions annually, according to a report released Tuesday by a bot detection and mitigation firm.

Netacea maintained in its report that the skewed analytics problem is as costly to businesses as click fraud.

Ad fraud costs businesses US$42 billion annually, or four percent of their revenue, the same percentage lost annually to skewed analytics, noted the report based on a survey of 440 businesses across the travel, entertainment, e-commerce, financial services, and telecom sectors in the U.S. and the U.K.

Of the businesses surveyed, 73 percent revealed they were affected by click fraud, which cost them an average of four percent annually, while 68 percent acknowledged they’d been affected by skewed analytics, with an average loss of 4.07 percent in lost revenue.

The report explained that bots are used by hackers to buy goods before other customers, hack accounts using stolen passwords, check the validity of stolen card details and steal content or prices by bulk scraping.

But even if they do not do damage directly, it continued, bots can skew data that leads marketing teams to make bad decisions. Analytics skewed by bots can hide what real customers are doing, making it impossible to target genuine audiences.

“Bots can skew all statistics because you’re not getting a feel for the real market,” said Rosemary Coates, president of Blue Silk Consulting, a business advisory firm in Los Gatos, Calif.

“It’s not true to the reality of what’s happening in the marketplace,” she told the E-Commerce Times.

Bad Data, Bad Decisions

That can be problematic for marketers who don’t monitor their campaigns on the fly. “They’re going to walk away from a campaign having spent a whole lot of money and getting zero returns,” observed Liz Miller, vice president and a principal analyst at Constellation Research, a technology research and advisory firm in Cupertino, Calif.

“Someone is running up a tab that the brand has to pay for,” she told the E-Commerce Times.

Skewed analytics can lead to bad marketing decisions, the report noted. In its survey, it found that more than half the businesses ran special promotions (54%), ordered new stock (55%), or “burned through” a marketing budget (55%) because of incorrect data caused by bots.

“With bots often accounting for up to half of web traffic, losses from bad business decisions made due to skewed analytics can be significant, ranging from millions to a few billion dollars,” explained Brian Uffelman, vice president and security evangelist at PerimeterX, a web security service provider in San Mateo, Calif.

“Bots skew many KPIs and metrics, including user tracking and engagement, session duration, bounce rates, ad clicks, look-to-book ratios, campaign data and conversion funnel,” he told the E-Commerce Times.

“For e-commerce, travel and media sites, unauthorized scraping bots mimic humans by dynamically checking listings, pricing and content resulting in skewed data,” he added.

Undermining Data Confidence

The report also found that most businesses base at least a quarter of their marketing and other business decisions on analytics that are vulnerable to being skewed by bots.

That threat of skewed data may be steering marketers away from analytics. “What we think is happening is people aren’t trusting their data because when they make decisions based on data it’s not coming out well for them, probably because their data is rubbish,” maintained Matthew Gracey-McMinn, head of threat research for Netacea.

“They’re getting bad data because of the bots,” he told the E-Commerce Times.

Uffelman added that many marketing professionals are under the misconception that Google Analytics is filtering out bot traffic.

“Google Analytics is good at filtering spam and some crawlers, but today’s bots are far more sophisticated and as a result, are not reliably handled by Google’s built-in capabilities,” he said.

“Filtering out sessions within Google Analytics is a complex and time-consuming operation that can sometimes exclude good user traffic,” he continued. “Most companies do not recognize the problem and continue making decisions using polluted data.”

Misplaced Faith

A high number of companies also believe web application firewalls (WAF) and DDoS prevention systems can protect their data from being poisoned by bots, with 71 percent expressing their faith in DDoS prevention systems and 73 percent in WAFs.

“When it comes to bot traffic in particular, WAFs just aren’t sufficient,” Uffelman maintained. “The sophisticated attack techniques of bad bots have far outpaced any incremental improvements in WAF bot management technology.”

Gracey-McMinn explained that WAFs are designed to stop traditional cyberattacks and DDoS prevention is looking for a mass attack.

“Bots are very clever, though, so they’ll test how many requests can be made at a website before DDoS prevention kicks in and stay under that number,” he said.

“Bots exploit business logic vulnerabilities, rather than things like capacity limits and SQL injection that WAFs and DDoS prevention is designed to stop,” he added.

WAFs aren’t totally ineffectual against bots, countered James McQuiggan, a security awareness advocate at KnowBe4 in Clearwater, Fla.

“Some filters can be implemented on the logs to filter out the bots and misrepresented data,” he told the E-Commerce Times.

Filters can include screening by traffic source. ” If there is an increase in direct source connections, that can point to a bot,” he said.

Session length can be another valuable filter. “A number of short sessions can also point to bot activity,” he explained.

Geolocation of IP addresses can be another valuable filter. “If you see a lot of traffic from China, North Korea or Russia for a U.S.-based ad in English, it is a safe bet that it is a bot,” he maintained.

Better Cooperation

A contributing factor to the successful pollution of data by bots is the lack of communication between security teams and marketing. “Quite often, security teams aren’t aware what’s going on,” Gracey-McMinn said.

“We need communication across business functions in order to facilitate proper responses,” he noted.

“What we have to start doing is having the CISO and the CMO looking at cyberattacks and fraud together,” added Miller.

“If security discovers anomalous behavior on the network,” she continued, “it has to let marketing know and ask, is this anomalous behavior, or do we just have a great promotion going on?”

Best Practice Recommendations

To help identify potential issues, Netacea included in its report these questions to ask if there’s reason to suspect that bots are distorting marketing analytics:

Has the number of new sessions to your site spiked? An abnormally large number of new sessions alongside high bounce rate and low session duration is an indicator of automated traffic activity.

Is your average session duration below three seconds? A recurring low session duration may not be due to the speed of your website, but crawlers scraping your site for images and content.

Is your average bounce rate high? Whether it’s site-wide or on a selection of pages, a high bounce rate of between 95 and 100 percent implies the presence of bot traffic.

Has your conversion rate dropped? A spike in new sessions without an increase in conversions will reduce your overall conversion rate.

Has direct and referral traffic increased? These two channels are common sources of bot traffic and where you are likely to see the highest spikes in traffic.

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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